Filed
pursuant to rule 424(b)(3)
Registration No. 333-158974
MERGER
PROPOSED — YOUR VOTE IS VERY IMPORTANT
Pulte Homes, Inc. and Centex Corporation have agreed to a merger
that combines Pulte and Centex, subject to approval of
Pulte’s shareholders and Centex’s stockholders and
other customary closing conditions. If the proposed merger is
completed, each outstanding share of Centex common stock (other
than those shares held by Pulte or its merger subsidiary Pi
Nevada Building Company, and other than treasury shares) will be
converted into the right to receive 0.975 of a share of Pulte
common stock. Certain directors and officers of Pulte, including
Pulte’s founder and chairman William J. Pulte, and certain
directors and officers of Centex entered into voting agreements
pursuant to which they have agreed to vote their shares of Pulte
or Centex, as applicable, in support of the transaction.
In the merger, Pulte expects to issue approximately
128.1 million shares of Pulte common stock to Centex
stockholders, based on Centex’s shares of common stock and
equity awards outstanding as of July 10, 2009. Immediately
following the merger, current Centex stockholders are expected
to own approximately 32.1%, and current Pulte shareholders are
expected to own approximately 67.9%, of the outstanding shares
of Pulte common stock. The merger will have no effect on the
number of shares owned by existing Pulte shareholders. The 0.975
exchange ratio is fixed and will not be adjusted for changes in
the stock prices of either company before the merger is
completed. Pulte common stock is traded on the New York Stock
Exchange under the trading symbol “PHM”. On
July 17, 2009, Pulte common stock closed at $9.14 per share
as reported on the New York Stock Exchange.
The completion of the merger is conditioned upon Pulte’s
shareholders approving the issuance of shares of Pulte common
stock to Centex stockholders in the merger and the amendment of
Pulte’s Restated Articles of Incorporation to increase the
total number of authorized shares of common stock, and
Centex’s stockholders approving the merger agreement.
The boards of directors of Pulte and Centex unanimously
recommend that their respective shareholders and stockholders
vote “FOR” the proposals before them.
The proposals are being presented to the respective shareholders
and stockholders of each company at their special meetings. The
dates, times and places of the meetings are as follows:
For Pulte shareholders: August 18, 2009, 10:00 a.m., local time, at
Auburn Hills Marriott Pontiac at Centerpoint
3600 Centerpoint Parkway Pontiac, Michigan48341
For Centex stockholders: August 18, 2009, 11:00 a.m., local time, at
Centex Corporation, 10th Floor
2728 N. Harwood Street Dallas, Texas75201
Your vote is very important. Whether or not you plan
to attend your company’s special meeting, please take the
time to vote by completing and mailing the enclosed proxy card
or voting instruction card or, if the option is available to
you, by granting your proxy electronically over the Internet or
by telephone.
This joint proxy statement/prospectus contains important
information about Pulte, Centex, the merger agreement, the
proposed merger and the special meetings. We encourage you to
read carefully this joint proxy statement/prospectus before
voting, including the section entitled “Risk Factors”
beginning on page 19.
Sincerely,
Richard J. Dugas, Jr.
President and Chief Executive Officer
Pulte Homes, Inc.
Timothy R. Eller
Chairman and Chief Executive Officer
Centex Corporation
Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved of the
transactions described in this joint proxy statement/prospectus
or the securities to be issued pursuant to the merger or
determined if the information contained in this joint proxy
statement/prospectus is accurate or adequate. Any representation
to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated July 17, 2009,
and is being mailed to Pulte shareholders and Centex
stockholders on or about July 21, 2009.
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 18, 2009
To the Shareholders of Pulte Homes, Inc.:
We will hold a special meeting of shareholders of Pulte at the
Auburn Hills Marriott Pontiac at Centerpoint, located at 3600
Centerpoint Parkway, Pontiac, Michigan, on August 18, 2009,
at 10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve the
issuance of shares of Pulte common stock pursuant to the
Agreement and Plan of Merger, dated as of April 7, 2009, by
and among Pulte, a wholly owned subsidiary of Pulte and Centex
Corporation.
2. To consider and vote upon a proposal to amend the Pulte
Restated Articles of Incorporation to increase the total number
of shares of common stock that Pulte is authorized to issue from
400,000,000 to 500,000,000.
3. To consider and vote upon a proposal to amend the Pulte
Restated Articles of Incorporation to change Pulte’s
corporate name to “PulteGroup, Inc.”
4. To consider and vote upon a proposal to adjourn the
special meeting, if necessary, to solicit additional proxies if
there are not sufficient votes in favor of proposal 1 or 2.
5. To transact any other business as may properly come
before the special meeting.
Only Pulte shareholders of record at the close of business on
July 10, 2009, the record date for the special meeting, are
entitled to notice of and to vote at the special meeting.
The Pulte board of directors unanimously recommends that you
vote “FOR” the approval of the issuance of shares of
Pulte common stock in the merger, “FOR” the amendment
of Pulte’s Restated Articles of Incorporation to increase
the number of authorized shares of common stock, “FOR”
the amendment of Pulte’s Restated Articles of Incorporation
to change Pulte’s corporate name and “FOR” the
adjournment of the special meeting, if necessary, to solicit
additional proxies if there are not sufficient votes in favor of
proposal 1 or 2.
A list of shareholders eligible to vote at the Pulte special
meeting will be available for inspection at the special meeting.
Your vote is very important. It is important
that your shares be represented and voted whether or not you
plan to attend the special meeting in person. Instructions
regarding the different methods for voting your shares are
provided under the section entitled “Questions and Answers
About the Special Meetings of Pulte Shareholders and Centex
Stockholders” beginning on page iv.
By Order of the Board of Directors,
Richard J. Dugas, Jr.
President and Chief Executive Officer
Pulte Homes, Inc.
We will hold a special meeting of stockholders of Centex on the
10th floor of our headquarters building, located at
2728 N. Harwood Street, Dallas, Texas, on
August 18, 2009, at 11:00 a.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of April 7, 2009, by
and among Centex, Pulte Homes, Inc. and a wholly owned
subsidiary of Pulte Homes, Inc.
2. To consider and vote upon a proposal to adjourn the
special meeting, if necessary, to solicit additional proxies if
there are not sufficient votes in favor of the foregoing.
3. To transact any other business as may properly come
before the special meeting.
Only Centex stockholders of record at the close of business on
July 10, 2009, the record date for the special meeting, are
entitled to notice of and to vote at the special meeting.
The Centex board of directors unanimously recommends that you
vote “FOR” the approval of the Agreement and Plan of
Merger and “FOR” the adjournment of the special
meeting, if necessary, to solicit additional proxies if there
are not sufficient votes in favor of the foregoing.
A list of stockholders eligible to vote at the Centex special
meeting will be available for inspection at the special meeting,
and at the executive offices of Centex during regular business
hours for a period of no less than ten days prior to the special
meeting.
Your vote is very important. It is important that
your shares be represented and voted whether or not you plan to
attend the special meeting in person. Instructions regarding the
different methods for voting your shares are provided under the
section entitled “Questions and Answers About the Special
Meetings of Pulte Shareholders and Centex Stockholders”
beginning on page iv.
By Order of the Board of Directors,
Timothy R. Eller
Chairman and Chief Executive Officer
Centex Corporation
This joint proxy statement/prospectus incorporates by reference
important business and financial information about Pulte and
Centex from documents that are not included in or delivered with
this joint proxy statement/prospectus. For a more detailed
description of the information incorporated by reference into
this joint proxy statement/prospectus and how you may obtain it,
see “Additional Information — Where You Can Find
More Information” beginning on page 134.
You can obtain any of the documents incorporated by reference
into this joint proxy statement/prospectus without charge from
Pulte or Centex, as applicable, or from the Securities and
Exchange Commission, which we refer to as the SEC, through the
SEC’s website at www.sec.gov. Pulte shareholders and
Centex stockholders may request a copy of such documents in
writing or by telephone by contacting:
Pulte Homes, Inc.
100 Bloomfield Hills Parkway, Suite 300 Bloomfield Hills, Michigan48304
Attn.: Investor Relations
(248) 647-2750
In addition, you may obtain copies of some of this information
by accessing Pulte’s website at www.pulte.comunder
the heading “Investor Relations” and then under the
link “SEC Filings.”
You may also obtain copies of some of this information by
accessing Centex’s website at www.centex.comunder
the heading “Investors,” under the link
“Financials,” and then under the link “SEC
Filings.”
We are not incorporating the contents of the websites of the
SEC, Pulte, Centex or any other entity into this joint proxy
statement/prospectus. We are providing the information about how
you can obtain certain documents that are incorporated by
reference into this joint proxy statement/prospectus at these
websites only for your convenience.
In order for you to receive timely delivery of the documents
in advance of the respective Pulte and Centex special meetings,
Pulte or Centex, as applicable, must receive your request no
later than 5 days prior to the date of your company’s
special meeting.
The following are some questions that you, as a shareholder
of Pulte or as a stockholder of Centex, may have regarding the
special meeting of Pulte shareholders, which we refer to as the
Pulte special meeting, or the special meeting of Centex
stockholders, which we refer to as the Centex special meeting,
and brief answers to those questions. For more detailed
information about the matters discussed in these questions and
answers, see “The Pulte Special Meeting” beginning on
page 28 and “The Centex Special Meeting”
beginning on page 33. Pulte and Centex encourage you to
read carefully the remainder of this joint proxy
statement/prospectus because the information in this section
does not provide all of the information that might be important
to you with respect to the merger and the other matters being
considered at the Pulte special meeting or the Centex special
meeting. Additional important information is also contained in
the Annexes to and in the documents incorporated by reference
into this joint proxy statement/prospectus.
Q:
When and where will the special meetings of the Pulte
shareholders and Centex stockholders be held?
A:
The Pulte special meeting will take place at the Auburn Hills
Marriott Pontiac at Centerpoint, 3600 Centerpoint Parkway,
Pontiac, Michigan, on August 18, 2009, at 10:00 a.m.,
local time.
The Centex special meeting will take place on the 10th floor of
Centex’s headquarters building, 2728 N. Harwood
Street, Dallas, Texas, on August 18, 2009, at
11:00 a.m., local time.
Q:
Who can attend and vote at the special meetings?
A:
Only holders of record of Pulte common stock at the close of
business on July 10, 2009, which we refer to as the Pulte
record date, are entitled to notice of and to vote at the Pulte
special meeting. As of the Pulte record date, there were
258,603,672 shares of Pulte common stock outstanding and
entitled to vote at the Pulte special meeting, held by
1,760 holders of record. Each holder of Pulte common stock
is entitled to one vote for each share of Pulte common stock
owned as of the Pulte record date.
Only holders of record of Centex common stock at the close of
business on July 10, 2009, which we refer to as the Centex
record date, are entitled to notice of and to vote at the Centex
special meeting. As of the Centex record date, there were
125,319,612 shares of Centex common stock outstanding and
entitled to vote at the Centex special meeting, held by
2,893 holders of record. Each holder of Centex common stock
is entitled to one vote for each share of Centex common stock
owned as of the Centex record date.
Q:
What are Pulte shareholders voting to approve and why is this
approval necessary?
A:
Pulte shareholders are voting on a proposal to approve the
issuance of shares of Pulte common stock pursuant to the
Agreement and Plan of Merger, dated as of April 7, 2009, by
and among Pulte, Pi Nevada Building Company, a wholly owned
subsidiary of Pulte, and Centex, which we refer to as the Merger
Agreement. The approval by Pulte shareholders of this proposal,
which we refer to as the proposal to approve the issuance of
shares in the merger, is required by the listing requirements of
the New York Stock Exchange, which we refer to as the NYSE, and
is a condition to the completion of the merger. Based on the
number of shares of Centex common stock and Centex equity awards
outstanding as of the Pulte record date, Pulte expects to issue
up to approximately 128.1 million shares of Pulte common
stock pursuant to the Merger Agreement.
Pulte shareholders are also voting on a proposal to amend
Pulte’s Restated Articles of Incorporation to increase the
number of authorized shares of Pulte common stock from
400,000,000 to 500,000,000. The approval by Pulte shareholders
of this proposal, which we refer to as the proposal to approve
the charter amendment to increase the number of authorized
shares of common stock, is required so that Pulte has sufficient
authorized shares of common stock to issue in the merger and for
other corporate purposes and is also a condition to the
completion of the merger. If the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock is not approved by Pulte’s shareholders, the
iv
merger will not be completed even if the proposal to approve the
issuance of shares in the merger is approved by Pulte’s
shareholders. If the proposal to approve the charter amendment
to increase the number of authorized shares of common stock is
approved by Pulte’s shareholders, Pulte expects to file the
certificate of amendment to Pulte’s Restated Articles of
Incorporation reflecting the increased number of authorized
shares of common stock with the Michigan Department of Energy,
Labor and Economic Growth immediately prior to the completion of
the merger, but if the Merger Agreement is terminated (and the
merger is not completed), Pulte will not file the certificate of
amendment reflecting the increased number of authorized shares
of common stock and the amendment will not become effective. If
Pulte so files the certificate of amendment and the merger is
not completed, Pulte reserves the right to abandon the amendment
in accordance with the provisions of the Michigan Business
Corporation Act, which we refer to as the MBCA.
Pulte shareholders are also voting on a proposal to amend
Pulte’s Restated Articles of Incorporation to change
Pulte’s corporate name from “Pulte Homes, Inc.”
to “PulteGroup, Inc.” Pulte believes that the new
corporate name will better reflect the company’s new
branding strategy, which it expects to implement in the months
following the Pulte special meeting, whether or not the merger
is completed. The approval by Pulte shareholders of this
proposal, which we refer to as the proposal to approve the
charter amendment to change Pulte’s corporate name, is not
a condition to the completion of the merger. Subject to approval
of this proposal by Pulte’s shareholders, Pulte intends to
change its corporate name regardless of whether or not the
merger is completed. Accordingly, if the proposal to approve the
charter amendment to change Pulte’s corporate name is
approved by Pulte’s shareholders, Pulte would file a
certificate of amendment to Pulte’s Restated Articles of
Incorporation reflecting the change of Pulte’s corporate
name with the Michigan Department of Energy, Labor and Economic
Growth at the appropriate time during the implementation of its
new branding strategy.
Pulte shareholders are also voting on a proposal to adjourn the
Pulte special meeting, if necessary, to permit further
solicitation of proxies if there are not sufficient votes at the
time of the Pulte special meeting in favor of the proposal to
approve the issuance of shares in the merger or the proposal to
approve the charter amendment to increase the number of
authorized shares of common stock. The approval by Pulte
shareholders of this proposal, which we refer to as the Pulte
meeting adjournment proposal, is not a condition to the
completion of the merger.
Q:
What are Centex stockholders voting to approve and why is
this approval necessary?
A:
Centex stockholders are voting on a proposal to approve the
Merger Agreement. The approval by Centex stockholders of this
proposal, which we refer to as the proposal to approve the
Merger Agreement, is required by Nevada law and is a condition
to the completion of the merger. Centex stockholders are also
voting on a proposal to adjourn the Centex special meeting, if
necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the Centex special
meeting in favor of the proposal to approve the Merger
Agreement. The approval by Centex stockholders of this proposal,
which we refer to as the Centex meeting adjournment proposal, is
not a condition to the completion of the merger.
Q:
What vote of Pulte shareholders is required to approve the
proposal to approve the issuance of shares in the merger, the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock, the proposal to approve
the charter amendment to change Pulte’s corporate name and
the Pulte meeting adjournment proposal?
A:
In accordance with NYSE listing requirements, the approval by
Pulte shareholders of the proposal to approve the issuance of
shares in the merger requires a majority of the votes cast on
the proposal, provided that the total votes cast on this
proposal represent over 50% of the outstanding shares of Pulte
common stock entitled to vote on this proposal. In accordance
with Michigan law, the approval of the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock and the proposal to approve the charter amendment
to change Pulte’s corporate name each requires the
affirmative vote of a majority of the outstanding shares
entitled to vote on the amendment and the approval of the Pulte
meeting adjournment proposal requires the affirmative vote of
the holders of a majority of the shares
v
of Pulte common stock present in person or represented by proxy
at the Pulte special meeting and entitled to vote thereon,
whether or not a quorum is present.
Q:
What vote of Centex stockholders is required to approve the
proposal to approve the Merger Agreement and the Centex meeting
adjournment proposal?
A:
In accordance with Nevada law, the approval by Centex
stockholders of the proposal to approve the Merger Agreement
requires the affirmative vote of the holders of a majority of
the outstanding shares of Centex common stock entitled to vote
at the Centex special meeting and the approval of the Centex
meeting adjournment proposal requires the affirmative vote of
the holders of a majority of the shares of Centex common stock
present in person or represented by proxy at the Centex special
meeting and entitled to vote thereon, whether or not a quorum is
present.
Q:
How does the Pulte board of directors recommend that Pulte
shareholders vote?
A:
The Pulte board of directors has determined that it is in the
best interests of Pulte and its shareholders, and declared it
advisable, to enter into the Merger Agreement. Accordingly, the
Pulte board of directors has approved the Merger Agreement and
the completion of the transactions contemplated thereby,
including the merger. The Pulte board of directors unanimously
recommends that Pulte shareholders vote “FOR”the proposal to approve the issuance of shares in the
merger, “FOR”the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock, “FOR”the proposal to approve the
charter amendment to change Pulte’s corporate name and
“FOR”the Pulte meeting adjournment proposal.
Q:
How does the Centex board of directors recommend that Centex
stockholders vote?
A:
The Centex board of directors has determined that it is in the
best interests of Centex and its stockholders, and declared it
advisable, to enter into the Merger Agreement. Accordingly, the
Centex board of directors has approved the Merger Agreement and
the completion of the transactions contemplated thereby,
including the merger. The Centex board of directors unanimously
recommends that Centex stockholders vote “FOR”the proposal to approve the Merger Agreement and
“FOR”the Centex meeting adjournment proposal.
Q:
What should Pulte shareholders and Centex stockholders do now
in order to vote on the proposals being considered at their
company’s special meeting?
A:
Shareholders of record of Pulte as of the Pulte record date and
stockholders of record of Centex as of the Centex record date
may vote now by proxy by completing, signing, dating and
returning the enclosed proxy card in the accompanying
pre-addressed postage-paid envelope or by submitting a proxy
over the Internet or by telephone by following the instructions
on the enclosed proxy card. If you hold Pulte shares or Centex
shares in “street name,” which means your shares are
held of record by a broker, bank or nominee, you must provide
the record holder of your shares with instructions on how to
vote your shares. Please refer to the voting instruction card
used by your broker, bank or nominee to see if you may submit
voting instructions using the Internet or telephone.
Additionally, you may also vote in person by attending your
company’s special meeting. If you plan to attend your
company’s special meeting and wish to vote in person, you
will be given a ballot at the special meeting. Please note,
however, that if your shares are held in “street
name,” and you wish to vote in person at your
company’s special meeting, you must bring a proxy from the
record holder of the shares authorizing you to vote at the
special meeting. Whether or not you plan to attend your
company’s special meeting, you are encouraged to grant your
proxy as described in this joint proxy statement/prospectus.
Q:
What will happen if I abstain from voting, fail to vote or do
not direct how to vote on my proxy?
A:
The failure of a Pulte shareholder or a Centex stockholder to
vote or to instruct his or her broker to vote if his or her
shares are held in “street name” may have a negative
effect on the ability of Pulte or Centex, as applicable, to
obtain the number of votes necessary for approval of the
proposals.
For purposes of the Pulte shareholder vote, an abstention, which
occurs when a shareholder attends a meeting, either in person or
by proxy, but abstains from voting, will have the same effect as
voting against the
vi
proposal to approve the issuance of shares in the merger, the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock and the proposal to approve
the charter amendment to change Pulte’s corporate name, but
will not affect the Pulte meeting adjournment proposal. The
failure of a Pulte shareholder to vote or to instruct his or her
broker, bank or nominee to vote if his or her shares are held in
“street name” will have the same effect as voting
against the proposal to approve the charter amendment to
increase the number of authorized shares of common stock and the
proposal to approve the charter amendment to change Pulte’s
corporate name, but will not similarly affect the proposal to
approve the issuance of shares in the merger or the Pulte
meeting adjournment proposal. All properly signed proxies that
are received prior to the Pulte special meeting and that are not
revoked will be voted at the special meeting according to the
instructions indicated on the proxies or, if no direction is
indicated, they will be voted “FOR”the
proposal to approve the issuance of shares in the merger,
“FOR”the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock, “FOR”the proposal to approve the
charter amendment to change Pulte’s corporate name and
“FOR”the Pulte meeting adjournment proposal.
For purposes of the Centex stockholder vote, an abstention or
the failure of a Centex stockholder to vote or to instruct his
or her broker, bank or nominee to vote if his or her shares are
held in “street name” will have the same effect as
voting against the proposal to approve the Merger Agreement but
will not similarly affect the Centex meeting adjournment
proposal. All properly signed proxies that are received prior to
the Centex special meeting and that are not revoked will be
voted at the special meeting according to the instructions
indicated on the proxies or, if no direction is indicated, they
will be voted “FOR”the proposal to approve the
Merger Agreement and “FOR”the Centex meeting
adjournment proposal.
Q:
Can I change my vote after I have delivered my proxy?
A:
Yes. If you are a holder of record, you can change your vote at
any time before your proxy is voted at the special meeting by:
• delivering a signed written notice of revocation to
the corporate secretary of your company at:
• signing and delivering a new, valid proxy bearing a
later date and, if it is a written proxy, it must be signed and
delivered to the attention of your company’s corporate
secretary;
• submitting another proxy by telephone or on the
Internet (your latest telephone or Internet voting instructions
will be followed); or
• attending the special meeting and voting in person,
although your attendance alone will not revoke your proxy.
If your shares are held in a “street name” account,
you must contact your broker, bank or other nominee to change
your vote.
Q:
What should Pulte shareholders or Centex stockholders do if
they receive more than one set of voting materials?
A:
You may receive more than one set of voting materials, including
multiple copies of this joint proxy statement/prospectus and
multiple proxy cards or voting instruction cards. For example,
if you hold your shares in more than one brokerage account, you
will receive a separate voting instruction card for each
brokerage account in which you hold shares. If you are a holder
of record and your shares are registered in more than one name,
you will receive more than one proxy card. In addition, if you
are both a shareholder of Pulte and a stockholder of Centex, you
will receive one or more separate proxy cards or voting
instruction cards for each company. Please complete, sign, date
and return each proxy card and voting instruction card that you
receive.
vii
Q:
Should Centex stockholders send in their Centex stock
certificates now?
A:
No. After the merger is completed, Centex stockholders will
be sent written instructions for exchanging their shares of
Centex common stock for shares of Pulte common stock.
Q:
Who can help answer my questions?
A:
If you have any questions about the merger or how to submit your
proxy, or if you need additional copies of this joint proxy
statement/prospectus, the enclosed proxy card or voting
instructions, you should contact:
The following is a summary that highlights information
contained in this joint proxy statement/prospectus. This summary
may not contain all of the information that may be important to
you. For a more complete description of the Merger Agreement and
the transactions contemplated by the Merger Agreement, including
the merger, the issuance of shares in the merger and the charter
amendment to increase the number of authorized shares of common
stock, we encourage you to read carefully this entire joint
proxy statement/prospectus, including the attached Annexes. In
addition, we encourage you to read the information incorporated
by reference into this joint proxy statement/prospectus, which
includes important business and financial information about
Pulte and Centex that has been filed with the SEC. You may
obtain the information incorporated by reference into this joint
proxy statement/prospectus without charge by following the
instructions in the section entitled “Additional
Information — Where You Can Find More
Information” beginning on page 134.
Pulte, a Michigan corporation organized in 1956, is a publicly
held holding company whose subsidiaries engage in the
homebuilding and financial services businesses. Pulte’s
assets consist principally of the capital stock of its
subsidiaries and its income primarily consists of dividends from
its subsidiaries. Its direct subsidiaries include Pulte
Diversified Companies, Inc., Del Webb Corporation and other
subsidiaries engaged in the homebuilding business. Pulte
Diversified Companies, Inc.’s operating subsidiaries
include Pulte Home Corporation, Pulte International Corporation
and other subsidiaries engaged in the homebuilding business.
Pulte also has a mortgage banking company, Pulte Mortgage LLC,
which is a subsidiary of Pulte Home Corporation. Pulte common
stock is traded on the NYSE under the symbol “PHM”.
Pi Nevada Building Company is a direct wholly owned subsidiary
of Pulte and was formed solely for the purpose of consummating
the merger. Pi Nevada Building Company has not carried on any
activities to date, except for activities incidental to its
formation and activities undertaken in connection with the
merger.
Centex, a Nevada corporation, was founded in 1950 as a Dallas,
Texas-based residential construction company. Subsequently,
Centex expanded its business to include a broad range of
activities related to construction, construction products and
financing, but has more recently refocused operations on
residential construction and related activities, including
mortgage financing to Centex’s homebuyers. Centex’s
subsidiary companies operate in two principal lines of business:
Home Building and Financial Services. Home Building’s
operations currently involve the construction and sale of
detached and attached single-family homes. The land used for the
construction of Centex’s homes is acquired through the
purchase of finished or partially finished lots and through the
purchase of raw land that must be developed. Financial
Services’ operations consist primarily of mortgage lending,
title agency services and the sale of title insurance. These
activities include mortgage origination and other related
services for homes sold by Centex’s subsidiaries and
others. Centex has been in the mortgage lending business since
1973. Centex common stock is traded on the NYSE under the symbol
“CTX”.
Pulte and Centex have agreed to combine under the terms and
conditions set forth in the Merger Agreement, which we describe
in this joint proxy statement/prospectus. Pursuant to the Merger
Agreement, Pi Nevada Building Company, a wholly owned subsidiary
of Pulte, will merge with and into Centex, with Centex
continuing as the surviving corporation and a wholly owned
subsidiary of Pulte. We have attached the Merger Agreement as
Annex A to this joint proxy statement/prospectus. We
encourage you to carefully read the Merger Agreement in its
entirety. We currently expect that the merger will be completed
during the third quarter of 2009. However, we cannot predict the
actual timing.
Merger
Consideration
If you are a Centex stockholder, upon completion of the merger,
each of your shares of Centex common stock (including the
associated preferred share purchase rights granted under
Centex’s stockholder rights agreement) will be converted
into the right to receive 0.975 of a share of Pulte common stock
(including the associated preferred share purchase rights
granted under Pulte’s shareholder rights agreement), which
we refer to as the exchange ratio. The exchange ratio is fixed,
which means that it is not subject to adjustment. Unless
otherwise indicated or the context otherwise requires, all
references in this document to shares of Pulte common stock to
be received in the transaction include the associated Pulte
preferred share purchase rights. We refer to the consideration
to be paid to the Centex stockholders by Pulte as the merger
consideration. The merger will have no effect on the number of
shares of Pulte common stock owned by existing Pulte
shareholders.
Pulte will not issue fractional shares of Pulte common stock in
the merger. As a result, a Centex stockholder will receive cash
for any fractional share of Pulte common stock that they would
otherwise be entitled to receive in the merger, which is the
only merger consideration payable in cash by Pulte in connection
with the proposed merger. For a full description of the
treatment of fractional shares, see “The Merger
Agreement — Fractional Shares” beginning on
page 76.
Centex
Equity Awards
Stock
Options
Upon completion of the merger, each outstanding Centex stock
option granted under a Centex stock plan, whether vested or
unvested, will be converted into a vested option to purchase
Pulte common stock on the same terms and conditions (except for
vesting conditions) as were applicable to such Centex stock
option, with adjustments to the number of shares subject to the
option and the exercise price per share applicable to the option
to reflect the exchange ratio. Pursuant to the Merger Agreement,
if the Centex stock option was granted to an employee with an
exercise price less than $40.00 per share, the converted, vested
Pulte stock option will provide that, if the option holder
experiences a severance-qualifying termination of employment
during the two-year period following the merger, the stock
option will remain exercisable until the later of (1) the
third anniversary of the date of the termination of employment
and (2) the date on which the option would cease to be
exercisable in accordance with its terms (or, in either case, if
earlier, the expiration of the scheduled term of the option).
Restricted
Shares and Restricted or Deferred Stock Units
Upon completion of the merger, each outstanding award of
restricted shares of, or restricted or deferred stock units with
respect to, Centex common stock granted under a Centex stock
plan will vest and be converted into a number of shares of, or
units or deferred units with respect to, Pulte common stock on
the same terms and conditions (except for vesting conditions) as
were applicable to such award, with adjustments to the number of
shares of, or units or deferred units with respect to, Pulte
common stock to reflect the exchange ratio, except for
restricted stock and restricted stock units granted as long-term
incentive awards under the Centex equity compensation plans
after execution of the Merger Agreement and before the
completion of the merger which will not vest upon completion of
the merger.
2
Performance
Units
Immediately prior to the completion of the merger, each
outstanding award of performance units granted under a Centex
stock plan will vest and be converted into the right to receive
from Centex an amount in cash equal to the fair market value of
a share of Centex common stock on the day immediately prior to
the completion of the merger multiplied by the number of shares
of Centex common stock subject to such award (assuming the
achievement of all applicable performance goals at target
levels). Such payments represent settlement of compensatory
awards and do not constitute merger consideration.
At the close of business on the Pulte record date, directors and
executive officers of Pulte and their affiliates owned and were
entitled to vote 44,652,780 shares of Pulte common stock,
collectively representing approximately 17.27% of the shares of
Pulte common stock outstanding on that date. Certain directors
and officers of Pulte, including Pulte’s founder and
current chairman William J. Pulte, entered into voting
agreements pursuant to which they have agreed to vote their
shares of Pulte in support of the proposals to be considered at
the Pulte special meeting.
At the close of business on the Centex record date, directors
and executive officers of Centex and their affiliates owned and
were entitled to vote 2,199,199 shares of Centex common
stock, collectively representing 1.75% of the shares of Centex
common stock outstanding on that date. Certain directors and
officers of Centex entered into voting agreements pursuant to
which they have agreed to vote their shares of Centex in support
of the proposals to be considered at the Centex special meeting.
After careful consideration, the Pulte board of directors
unanimously approved the Merger Agreement on April 7, 2009.
The Pulte board of directors unanimously recommends that
Pulte shareholders vote “FOR” the proposal to approve
the issuance of shares in the merger, “FOR” the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock, “FOR” the
proposal to approve the charter amendment to change Pulte’s
corporate name and “FOR” the Pulte meeting adjournment
proposal at the Pulte special meeting.
For the factors considered by the Pulte board of directors in
reaching its decision to approve the Merger Agreement as well as
the Pulte board of directors’ reasons for, and certain
risks related to, the merger, see “The Merger —
Recommendation of the Pulte Board of Directors and Its Reasons
for the Merger” beginning on page 45.
After careful consideration, the Centex board of directors
unanimously adopted the Merger Agreement and approved the
consummation of the transactions contemplated by the Merger
Agreement, including the merger, upon the terms and subject to
the conditions set forth in the Merger Agreement on
April 7, 2009. The Centex board of directors unanimously
recommends that Centex’s stockholders vote “FOR”
the proposal to approve the Merger Agreement and “FOR”
the Centex meeting adjournment proposal at the Centex special
meeting.
For the factors considered by the Centex board of directors in
reaching its decision to adopt the Merger Agreement and approve
the consummation of the transactions contemplated by the Merger
Agreement, including the merger, as well as the Centex board of
directors’ reasons for, and certain risks related to, the
merger, see “The Merger — Recommendation of the
Centex Board of Directors and Its Reasons for the Merger”
beginning on page 49.
In connection with the merger, Pulte’s board of directors
received a written opinion, dated April 7, 2009, from
Pulte’s financial advisor, Citigroup Global Markets Inc.,
which we refer to as Citi, as to the fairness, from a financial
point of view and as of the date of the opinion, to Pulte of the
0.975 exchange ratio provided for in the Merger Agreement.
The full text of Citi’s written opinion, which is attached
to this joint proxy statement/prospectus as Annex B, sets
forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken. Citi’s
opinion was provided to Pulte’s board of directors in
connection with its evaluation of the exchange ratio from a
financial point of view to Pulte and does not address any other
aspects or implications of the merger or the underlying business
decision of Pulte to effect the merger, the relative merits of
the merger as compared to any alternative business strategies
that might exist for Pulte or the effect of any other
transaction in which Pulte might engage. Citi’s opinion is
not intended to be and does not constitute a recommendation to
any securityholder as to how such securityholder should vote or
act on any matters relating to the proposed merger. Under the
terms of Citi’s engagement, Pulte has agreed to pay Citi a
fee for its financial advisory services in connection with the
merger, a significant portion of which is contingent upon
completion of the merger.
Opinion
of Centex’s Financial Advisor
Goldman, Sachs & Co., which we refer to as Goldman
Sachs, rendered its opinion to Centex’s board of directors
that, as of April 7, 2009 and based upon and subject to the
factors and assumptions set forth therein, the exchange ratio of
0.975 shares of Pulte common stock to be paid for each
share of Centex common stock was fair from a financial point of
view to the holders of the outstanding shares of Centex common
stock.
The full text of the written opinion of Goldman Sachs, dated
April 7, 2009, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached to
this joint proxy statement/prospectus as Annex C. Goldman
Sachs provided its opinion for the information and assistance of
Centex’s board of directors in connection with its
consideration of the transaction. The Goldman Sachs opinion is
not a recommendation as to how any holder of Centex common stock
should vote with respect to the transaction or any other matter.
Pursuant to an engagement letter between Centex and Goldman
Sachs, Centex has agreed to pay Goldman Sachs a transaction fee,
the principal portion of which is contingent upon completion of
the transaction.
In the merger, Pulte expects to issue approximately
128.1 million shares of Pulte common stock to Centex
stockholders, based on Centex’s shares of common stock and
equity awards outstanding as of the Pulte record date, and
assuming that all of the equity awards outstanding as of such
date remain outstanding as of the date on which the merger is
completed. Immediately following the completion of the merger,
Centex stockholders are expected to own approximately 32.1% of
the shares of Pulte common stock outstanding. The merger will
have no effect on the number of shares of Pulte common stock
owned by existing Pulte shareholders.
Pulte believes that none of the executive officers and directors
of Pulte has interests in the merger that differ from, or are in
addition to, the interests of Pulte’s shareholders.
Centex’s executive officers and directors have financial
interests in the merger that are different from, or in addition
to, their interests as Centex stockholders. Centex’s board
of directors was aware of and considered these interests, among
other matters, in evaluating and negotiating the Merger
Agreement, and in recommending to the Centex stockholders that
they vote in favor of the proposal to approve the Merger
Agreement.
4
Certain equity compensation awards held by Centex’s
executive officers and directors will vest in connection with
the merger, except that awards granted after execution of the
Merger Agreement will not vest upon completion of the merger,
although a portion of such awards will vest upon a subsequent
severance- qualifying termination. Based on Centex equity
compensation awards outstanding as of the Pulte record date, and
assuming that the merger is completed on August 18, 2009,
the executive officers and directors as a group, will vest in
502,168 stock options, and 3,478, 12,056, 716,734 and 295,973
deferred stock units, restricted stock units, shares of
restricted stock, and long-term performance units, respectively.
Assuming that immediately after the completion of the merger
each executive officer’s service with Centex is terminated
without “cause,” the executive officers as a group
will vest in an additional 82,617 shares of restricted
stock. Assuming that immediately after the completion of the
merger each executive officer’s service with Centex is
terminated without “cause,” the aggregate value of the
equity awards held by Centex executive officers and directors,
the vesting of which will have been accelerated by the merger or
by such termination, based on the closing price of Pulte common
stock (or Centex common stock, as applicable) as of
July 13, 2009, and valuing all stock options based on the
excess, if any, of fair market value of the underlying shares
over the exercise price, will be $8,781,844.
In addition, each of Centex’s executive officers
participates in the Centex Corporation Plan Regarding Severance
After a Change in Control, which would provide severance and
other benefits in the case of qualifying terminations of
employment following a change in control, including the merger.
Based on compensation and benefit levels in effect on
July 13, 2009 and assuming the merger is completed on
August 18, 2009 and the employment of each executive
officer is terminated by Centex without “cause” or by
the executive for “good reason” immediately
thereafter, the executive officers as a group, will be entitled
to receive $11,701,738 in cash severance payments under the
Centex Corporation Plan Regarding Severance After a Change in
Control.
In addition, Centex maintains the 2003 Annual Incentive
Compensation Plan, which provides for the payment of a target
incentive compensation award to participants for the fiscal year
in which a change in control, such as the merger, occurs, upon
such change in control. Assuming that the merger is completed on
August 18, 2009, the executive officers of Centex who are
participants in the plan, as a group, will receive from Centex
$4,412,800 in respect of the payment of the target award
pursuant to the annual bonus plan in connection with the merger.
Also, Centex maintains the Centex Corporation Executive Deferred
Compensation Plan, which provides for the full vesting of
unvested deferred compensation awards upon a change in control,
such as the merger. Assuming that the merger is completed on
August 18, 2009, the value of the aggregate amounts held by
the executive officers of Centex who have balances under the
plan, as a group, that will vest equals $1,933,141.
Timothy R. Eller, chairman and chief executive officer of
Centex, has entered into a consulting agreement with Pulte
providing for certain payments and benefits to him upon
completion of the merger, and for Mr. Eller to serve as
vice chairman of the Pulte board of directors and as a
consultant to Pulte, in each case, for a period of two years
following the completion of the merger.
Upon completion of the merger, Richard J. Dugas, Jr.,
currently president and chief executive officer of Pulte, will
also assume the position of chairman of Pulte. Mr. Eller
will join the board of directors of Pulte as vice chairman and
will serve as a consultant to Pulte, in each case, for two years
following completion of the merger. The board of directors of
Pulte will be expanded to twelve directors and will include four
members of the current Centex board of directors, namely
Mr. Eller, Clint W. Murchison, III, James J. Postl and
Thomas M. Schoewe, and eight members of the current Pulte
board of directors, namely Pulte’s founder and current
chairman William J. Pulte, Mr. Dugas, Brian P. Anderson,
Cheryl W. Grisé, Debra J. Kelly-Ennis, David N. McCammon,
Patrick J. O’Leary and Bernard W. Reznicek.
Application will be made to have the shares of Pulte common
stock to be issued in the merger approved for listing on the
NYSE, where Pulte common stock currently is traded under the
symbol “PHM”. If the merger is completed, Centex
common stock will no longer be listed on the NYSE and will be
deregistered under the Securities Exchange Act of 1934, as
amended, which we refer to as the Exchange Act, and Centex will
no longer file periodic reports with the SEC.
Under Michigan law, holders of Pulte common stock are not
entitled to dissenters’ rights in connection with the
proposal to approve the issuance of shares in the merger, the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock or the proposal to approve
the charter amendment to change Pulte’s corporate name.
Centex
Under Nevada law, holders of Centex common stock are not
entitled to dissenters’ rights in connection with the
merger.
A number of conditions to each party’s obligation to
complete the merger must be satisfied before the merger will be
completed, including:
•
the approval of the proposal to approve the Merger Agreement by
the holders of a majority of the outstanding shares of Centex
common stock;
•
the approval of (1) the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock by the holders of a majority of the outstanding shares of
Pulte common stock entitled to vote on this proposal and
(2) the proposal to approve the issuance of shares in the
merger by a majority of the votes cast on the proposal, provided
that the total votes cast on this proposal represent over 50% of
the outstanding shares of Pulte common stock entitled to vote on
this proposal;
•
the absence of any temporary restraining order or preliminary or
permanent injunction issued by any court of competent
jurisdiction that prohibits or prevents the completion of the
merger;
•
the expiration or termination of any applicable waiting period
under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, which we refer to as the HSR
Act, which condition was satisfied upon expiration of the
applicable waiting period on May 22, 2009;
•
the approval for listing on the NYSE of the shares of Pulte
common stock to be issued in the merger and to be reserved for
issuance in connection with the merger;
•
the effectiveness under the Securities Act of 1933, as amended,
which we refer to as the Securities Act, of the registration
statement on Form
S-4 of which
this joint proxy statement/prospectus forms a part and the
absence of any stop order or proceedings initiated by the SEC
for that purpose;
•
the accuracy and correctness of representations and warranties
of the other party, subject to certain qualifications described
in the Merger Agreement, and the receipt of a certificate from
the officers of the other party to that effect;
•
the other party’s having performed and complied with its
covenants in the Merger Agreement in all material respects prior
to the completion of the merger, and the receipt of a
certificate from the officers of the other party to that
effect; and
6
•
the receipt by each party of a tax opinion from its counsel that
the merger will be treated as a “reorganization”
within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, which we refer to as the
Internal Revenue Code.
Some of the conditions set forth in the Merger Agreement may be
waived by Pulte or Centex, subject to the agreement of the other
party in specific cases. For a more detailed discussion of these
matters, see “The Merger Agreement — Conditions
to Completion of the Merger” beginning on page 78.
The merger was subject to review under the HSR Act by the United
States Federal Trade Commission, which we refer to as the FTC,
and the Antitrust Division of the United States Department of
Justice, which we refer to as the DOJ. The required
notifications were filed on April 21, 2009 by Centex and on
April 22, 2009 by Pulte, and the statutory waiting period
under the HSR Act expired on May 22, 2009 at
11:59 p.m., eastern time. No other regulatory approvals are
a condition to the completion of the merger.
Centex, its directors and Pulte are parties to multiple lawsuits
filed by third parties seeking monetary damages or injunctive
relief, or both, in connection with the Merger Agreement. Based
on the facts known to date, the defendants believe that the
claims asserted against them in these lawsuits are without
merit, and the defendants intend to defend themselves vigorously
against the claims.
Subject to certain exceptions, the Merger Agreement precludes
Centex from soliciting or engaging in discussions or
negotiations with a third party with respect to a proposal to
acquire a significant interest in Centex’s equity or
assets. Notwithstanding such restrictions, the Merger Agreement
provides that, under specified circumstances occurring before
Centex stockholders approve the proposal to approve the Merger
Agreement, if Centex receives an unsolicited proposal from a
third party to acquire a significant interest in Centex that its
board of directors determines in good faith is reasonably likely
to lead to a proposal that is superior to the merger with Pulte,
Centex may furnish nonpublic information to that third party and
engage in negotiations regarding an acquisition proposal with
that third party.
The Merger Agreement may be terminated at any time prior to the
completion of the merger by the mutual written consent of Pulte
and Centex. Also, subject to certain qualifications and
exceptions, either Pulte or Centex may terminate the Merger
Agreement at any time prior to the completion of the merger if:
a governmental entity permanently enjoins or otherwise prohibits
the completion of the merger;
•
the Centex special meeting concludes without the approval of the
proposal to approve the Merger Agreement by Centex’s
stockholders; or
•
the Pulte special meeting concludes without the approval of the
proposal to approve the issuance of shares in the merger and the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock by Pulte’s
shareholders.
Centex may terminate the Merger Agreement in light of a superior
proposal at any time prior to the approval of the proposal to
approve the Merger Agreement by Centex’s stockholders if
(subject to certain qualifications and exceptions):
•
Centex is not in material breach of certain restrictions on its
ability to solicit alternative proposals, including its
obligation to notify Pulte of the superior proposal;
7
•
the superior proposal continues to constitute a superior
proposal three business days after Pulte is notified of the
superior proposal; and
•
the Centex board of directors determines that recommending that
Centex stockholders vote for the proposal to approve the Merger
Agreement, or failing to change such recommendation, would be
inconsistent with its fiduciary obligations.
In addition, Centex may terminate the Merger Agreement at any
time prior to the completion of the merger if (subject to
certain qualifications and exceptions):
•
Pulte breaches or fails to perform in any material respect any
of its representations, warranties, covenants or other
agreements, which breach or failure to perform would result in a
failure of any of the conditions to Centex’s obligation to
complete the merger; or
•
Pulte’s board of directors changes its recommendation that
Pulte’s shareholders approve the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock and the proposal to approve the issuance of shares
in the merger.
Pulte may terminate the Merger Agreement at any time prior to
the completion of the merger if (subject to certain
qualifications and exceptions):
•
Centex breaches or fails to perform in any material respect any
of its representations, warranties, covenants or other
agreements, which breach or failure to perform would result in a
failure of any of the conditions to Pulte’s obligation to
complete the merger; or
•
the Centex board of directors changes its recommendation that
Centex’s stockholders approve the proposal to approve the
Merger Agreement, or recommends the approval or adoption of any
alternative proposal to Centex’s stockholders.
If the Merger Agreement is terminated, Centex may be required in
specified circumstances to pay a termination fee of
$24 million or $48 million to Pulte, and Pulte may be
required in specified circumstances to pay a termination fee of
$51 million or $102 million to Centex.
The merger is intended to qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code. It
is a condition to the completion of the merger that Pulte and
Centex each receives a written opinion from its counsel, dated
as of the date of completion of the merger, to the effect that
the merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code. In
addition, in connection with the filing of the registration
statement of which this joint proxy statement/prospectus is a
part, each of Pulte and Centex has received a legal opinion to
the same effect. Accordingly, holders of Centex common stock
whose shares of Centex common stock are exchanged in the merger
for shares of Pulte common stock generally will not recognize
gain or loss for U.S. federal income tax purposes, except
with respect to any cash received in lieu of fractional shares
of Pulte common stock.
Tax matters are complicated, and the tax consequences of the
merger to each Centex stockholder will depend on such
stockholder’s particular facts and circumstances.
Centex stockholders should consult their tax advisors with
respect to the federal, state and other tax consequences to them
of the merger.
Pulte will account for the acquisition of shares of Centex
common stock through the merger under the acquisition method of
accounting for business combinations. In determining the
acquirer for accounting purposes, Pulte considered the factors
required under Statement of Financial Accounting Standards
No. 141 (revised), Business Combinations, which we
refer to as SFAS 141(R), and determined that Pulte will be
considered the acquirer of Centex for accounting purposes.
In evaluating the merger, the Merger Agreement or the issuance
of shares of Pulte common stock in the merger, you should
carefully read this joint proxy statement/prospectus and
especially consider the factors discussed in the section
entitled “Risk Factors” beginning on page 19.
The holders of Pulte common stock receive dividends if and when
declared by the Pulte board of directors. On November 24,2008, Pulte discontinued its regular quarterly dividend
effective in the first quarter of 2009. Due to the ongoing
difficult business conditions and Pulte’s expectation that
such conditions will continue for at least the near term, Pulte
does not anticipate paying dividends on its common stock in the
foreseeable future. Pursuant to the Merger Agreement, Pulte has
agreed that, except in the ordinary course of business, it will
not authorize or declare any dividend on or make any
distribution with respect to any shares of its capital stock
prior to the completion of the merger.
Centex
The holders of Centex common stock receive dividends if and when
declared by the Centex board of directors. Centex suspended its
regular quarterly dividend on October 9, 2008. Pursuant to
the Merger Agreement, Centex has agreed that it will not
authorize or declare any dividend on or make any distribution
with respect to any shares of its capital stock prior to the
completion of the merger.
Centex stockholders receiving the merger consideration will have
different rights once they become Pulte shareholders due to
differences between the governing documents of Pulte and Centex
and between Michigan and Nevada law. In particular:
•
Centex’s stockholders may amend Centex’s by-laws with
the affirmative vote of stockholders holding
662/3%
or more of the voting power, whereas Pulte stockholders may
amend Pulte’s by-laws with the approval of a majority of
the votes cast;
•
A Centex stockholder that intends to nominate a director or
bring business before an annual meeting must comply with certain
advance notice requirements, whereas a Pulte shareholder is only
required to do so if he or she intends to nominate a director;
•
Nevada law, to which Centex is subject, limits the voting rights
of shares acquired by certain stockholders that acquire more
than twenty percent of a corporation’s shares, whereas
Michigan law, to which Pulte is subject, does not provide for
such a restriction;
•
To preserve Pulte’s net operating loss carryforwards and
other tax benefits, Pulte’s by-laws provide for certain
transfer restrictions on Pulte’s common stock, whereas
neither Centex’s articles of incorporation nor by-laws
provide for any transfer restrictions to preserve Centex’s
net operating loss carryforwards and other tax benefits; and
•
Pulte’s Restated Articles of Incorporation and by-laws
permit shareholder action by written consent if signed by the
requisite number of holders, whereas Centex’s articles of
incorporation and by-laws generally prohibit stockholder action
by written consent, subject to certain limited exceptions.
These and certain other differences are described in detail
under “Comparison of Stockholder Rights and Corporate
Governance Matters” beginning on page 125.
Generally, all fees and expenses incurred in connection with the
Merger Agreement and the transactions contemplated by the Merger
Agreement will be paid by the party incurring those expenses,
subject to the specific exceptions discussed in this joint proxy
statement/prospectus.
The following tables set forth the selected historical
consolidated financial and operating data for Pulte. The
selected consolidated financial and operating data as of and for
the fiscal years ended December 31, 2008, 2007, 2006, 2005
and 2004 have been derived from Pulte’s audited
consolidated financial statements, which are incorporated by
reference into this joint proxy statement/prospectus. The
selected consolidated financial and operating data as of and for
the three months ended March 31, 2009 and 2008 have been
derived from Pulte’s unaudited condensed consolidated
financial statements, which are incorporated by reference into
this joint proxy statement/prospectus. The results for the three
months ended March 31, 2009 and 2008 are not necessarily
indicative of the results that may be expected for the entire
fiscal year. Pulte’s unaudited interim financial statements
reflect all adjustments that management of Pulte considers
necessary for fair presentation of the financial position and
results of operations for such periods in accordance with United
States generally accepted accounting principles, which we refer
to as GAAP. Historical results are not necessarily indicative of
the results that may be expected for any future period.
This selected consolidated financial and operating data should
be read in conjunction with Pulte’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 and
Pulte’s Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2009. See
“Additional Information — Where You Can Find More
Information” beginning on page 134.
Three Months Ended March 31, (1)
Year Ended December 31, (1)
2009
2008
2008
2007
2006
2005
2004
(Dollars in thousands, except per share data)
OPERATING DATA:
Homebuilding:
Revenues
$
565,343
$
1,398,109
$
6,112,038
$
9,121,730
$
14,075,248
$
14,528,236
$
11,400,008
Income (loss) before income taxes
$
(507,433
)
$
(705,130
)
$
(1,694,711
)
$
(2,509,492
)
$
1,010,368
$
2,298,822
$
1,635,580
Financial Services:
Revenues
$
18,549
$
43,488
$
151,016
$
134,769
$
194,596
$
161,414
$
112,719
Income (loss) before income taxes
$
(748
)
$
15,044
$
28,045
$
42,980
$
115,460
$
70,586
$
47,429
Other non-operating:
Revenues
$
3,528
$
7,222
$
26,404
$
6,595
$
4,564
$
4,885
$
1,749
Income (loss) before income taxes
$
(4,065
)
$
(2,970
)
$
(15,933
)
$
(30,391
)
$
(43,100
)
$
(92,394
)
$
(90,685
)
Consolidated results:
Revenues
$
587,420
$
1,448,819
$
6,289,458
$
9,263,094
$
14,274,408
$
14,694,535
$
11,514,476
Income (loss) from continuing operations before income taxes
$
(512,246
)
$
(693,056
)
$
(1,682,599
)
$
(2,496,903
)
$
1,082,728
$
2,277,014
$
1,592,324
Income taxes (benefit)
2,572
3,088
(209,486
)
(222,486
)
393,082
840,126
598,751
Income (loss) from continuing operations
(514,818
)
(696,144
)
(1,473,113
)
(2,274,417
)
689,646
1,436,888
993,573
Income (loss) from discontinued operations(1)
—
—
—
18,662
(2,175
)
55,025
(7,032
)
Net income (loss)
$
(514,818
)
$
(696,144
)
$
(1,473,113
)
$
(2,255,755
)
$
687,471
$
1,491,913
$
986,541
(1)
Income (loss) from discontinued operations is comprised of
Pulte’s former thrift operation and Argentina and Mexico
homebuilding operations which have been presented as
discontinued operations for all periods presented.
10
Three Months Ended March 31, (1)
Year Ended December 31, (1)
2009
2008
2008
2007
2006
2005
2004
(Dollars in thousands, except per share data)
PER SHARE DATA:
Earnings per share — basic:
Income (loss) from continuing operations
$
(2.02
)
$
(2.75
)
$
(5.81
)
$
(9.02
)
$
2.73
$
5.62
$
3.93
Income (loss) from discontinued operations(1)
—
—
—
0.07
(0.01
)
0.22
(0.03
)
Net income (loss)
$
(2.02
)
$
(2.75
)
$
(5.81
)
$
(8.94
)
$
2.73
$
5.84
$
3.91
Weighted-average common shares outstanding (000’s omitted)
254,578
253,166
253,512
252,192
252,200
255,492
252,590
Earnings per share — assuming dilution:
Income (loss) from continuing operations
$
(2.02
)
$
(2.75
)
$
(5.81
)
$
(9.02
)
$
2.67
$
5.47
$
3.82
Income (loss) from discontinued operations(1)
—
—
—
0.07
(0.01
)
0.21
(0.03
)
Net income (loss)
$
(2.02
)
$
(2.75
)
$
(5.81
)
$
(8.94
)
$
2.66
$
5.68
$
3.79
Weighted-average common shares outstanding and effect of diluted
securities (000’s omitted)
254,578
253,166
253,512
252,192
258,621
262,801
260,234
Shareholders’ equity
$
9.00
$
14.08
$
10.98
$
16.80
$
25.76
$
23.18
$
17.68
Cash dividends declared(2)
$
—
$
0.04
$
0.16
$
0.16
$
0.16
$
0.13
$
0.10
(1)
Income (loss) from discontinued operations is comprised of
Pulte’s former thrift operation and Argentina and Mexico
homebuilding operations which have been presented as
discontinued operations for all periods presented.
(2)
On November 24, 2008, Pulte discontinued the regular
quarterly dividend on Pulte’s common stock effective in the
first quarter of 2009.
Homebuilding interest expense, which represents the amortization
of capitalized interest, and land and community valuation
adjustments are included in homebuilding cost of sales.
The following table sets forth the selected historical
consolidated financial and operating data for Centex. The
selected consolidated financial and operating data as of and for
the fiscal years ended March 31, 2009, 2008, 2007, 2006 and
2005 have been derived from Centex’s audited consolidated
financial statements, which are incorporated by reference into
this joint proxy statement/prospectus. Historical results are
not necessarily indicative of the results that may be expected
for any future period.
This selected consolidated financial and operating data should
be read in conjunction with Centex’s Annual Report on
Form 10-K
for the fiscal year ended March 31, 2009. See
“Additional Information — Where You Can Find More
Information” beginning on page 134.
Year Ended March 31, (1)
2009
2008
2007
2006
2005
(Dollars in thousands, except per share data)
Revenues
$
3,826,530
$
8,275,562
$
11,887,601
$
12,742,666
$
9,842,700
Earnings (Loss) from Continuing Operations
$
(1,440,151
)
$
(2,660,968
)
$
(9,477
)
$
1,212,665
$
898,571
Net Earnings (Loss)
$
(1,388,754
)
$
(2,657,482
)
$
268,366
$
1,289,313
$
1,011,364
Shareholders’ Equity
$
917,814
$
2,298,661
$
5,112,269
$
5,011,658
$
4,280,757
Total Assets
$
5,918,114
$
8,137,332
$
13,199,933
$
21,364,999
$
20,011,163
Total Debt
$
3,223,924
$
3,662,220
$
5,565,157
$
6,055,197
$
4,799,365
Per Common Share
Earnings (Loss) from Continuing Operations Per Share —
Basic
$
(11.58
)
$
(21.71
)
$
(0.08
)
$
9.56
$
7.18
Earnings (Loss) from Continuing Operations Per Share —
Diluted
$
(11.58
)
$
(21.71
)
$
(0.08
)
$
9.13
$
6.79
Net Earnings (Loss) Per Share — Basic
$
(11.17
)
$
(21.68
)
$
2.23
$
10.16
$
8.08
Net Earnings (Loss) Per Share —
Diluted
$
(11.17
)
$
(21.68
)
$
2.23
$
9.71
$
7.64
Cash Dividends(2)
$
0.08
$
0.16
$
0.16
$
0.16
$
0.16
Book Value Per Share Based on Shares Outstanding at Balance
Sheet Date
$
7.38
$
18.65
$
42.61
$
41.04
$
33.51
Average Shares Outstanding
Basic
124,308,846
122,577,071
120,537,235
126,870,887
125,226,596
Diluted
124,308,846
122,577,071
120,537,235
132,749,797
132,397,961
(1)
The selected financial data presented in this table have been
derived from Centex’s audited annual financial statements
and adjusted to reflect Centex’s home services operations
(sold in April 2008), Construction Services (sold in March
2007), Home Equity (sold in July 2006), and International
Homebuilding (sold in September 2005) as discontinued
operations.
(2)
On October 9, 2008, Centex announced the discontinuation of
the regular quarterly dividend on Centex’s common stock.
The following selected unaudited pro forma condensed combined
statement of operations data for the three months ended
March 31, 2009 and year ended December 31, 2008
reflect the merger and related transactions as if they had
occurred on January 1, 2008. The following unaudited pro
forma condensed combined balance sheet data as of March 31,2009 reflect the merger and related transactions as if they had
occurred on March 31, 2009.
Such unaudited pro forma condensed combined financial data is
based on the historical financial statements of Pulte and Centex
and on publicly available information and certain assumptions
and adjustments as discussed in the section entitled
“Unaudited Pro Forma Condensed Combined Financial
Statements” beginning on page 95, including
assumptions relating to the allocation of the consideration paid
for the assets and liabilities of Centex based on preliminary
estimates of their fair value. This unaudited pro forma
condensed combined financial information is provided for
illustrative purposes only and is not necessarily indicative of
what the operating results or financial position of Pulte or
Centex would have been had the merger and related transactions
been completed at the beginning of the periods or on the dates
indicated, nor are they necessarily indicative of any future
operating results or financial position. Pulte and Centex may
have performed differently had they been combined during the
periods presented. The following should be read in connection
with the section of this joint proxy statement/prospectus
entitled “Unaudited Pro Forma Condensed Combined Financial
Statements” beginning on page 95 and other information
included in or incorporated by reference into this joint proxy
statement/prospectus.
Book value per common share outstanding was calculated as
shareholders’ equity divided by the sum of the
258,563,448 shares of Pulte common stock outstanding at
March 31, 2009 and the 121,698,000 pro forma shares of
Pulte common stock estimated to be issued in connection with the
merger.
The following selected unaudited pro forma combined per share
information for the three months ended March 31, 2009 and
the year ended December 31, 2008 reflects the merger and
related transactions as if they had occurred on January 1,2008. The unaudited pro forma combined book value per common
share outstanding reflects the merger and related transactions
as if they had occurred on March 31, 2009.
Such unaudited pro forma combined per share information is based
on the historical financial statements of Pulte and Centex and
on publicly available information and certain assumptions and
adjustments as discussed in the section entitled “Unaudited
Pro Forma Condensed Combined Financial Statements”
beginning on page 95, including assumptions relating to the
allocation of the consideration paid for the assets and
liabilities of Centex based on preliminary estimates of their
fair value. This unaudited pro forma combined per share
information is provided for illustrative purposes only and is
not necessarily indicative of what the operating results or
financial position of Pulte or Centex would have been had the
merger and related transactions been completed at the beginning
of the periods or on the dates indicated, nor are they
necessarily indicative of any future operating results or
financial position. Pulte and Centex may have performed
differently had they been combined during the periods presented.
The following should be read in connection with the section
entitled “Unaudited Pro Forma Condensed Combined Financial
Statements” beginning on page 95, and other
information included in or incorporated by reference into this
joint proxy statement/prospectus.
Net loss per share of Centex common stock exchanged
Basic
$
(2.45
)
$
(9.14
)
Diluted
$
(2.45
)
$
(9.14
)
Dividends declared per common share of Centex stock exchanged
$
—
(2)
$
0.16
(2)
Book value per common share of Centex stock exchanged
$
8.70
—
Pulte historical data:
Loss per share from continuing operations:
Basic
$
(2.02
)
$
(5.81
)
Diluted
$
(2.02
)
$
(5.81
)
Dividends declared per common share
$
—
(2)
$
0.16
(2)
Book value per common share
$
9.00
—
Centex historical data:
Loss per share from continuing operations:
Basic
$
(3.26
)
$
(15.65
)
Diluted
$
(3.26
)
$
(15.65
)
Dividends declared per common share
$
—
(3)
$
0.08
(3)
Book value per common share
$
7.38
—
(1)
Book value per common share
outstanding was calculated as shareholders’ equity divided
by the sum of the 258,563,448 shares of Pulte common stock
outstanding at March 31, 2009 and the 121,698,000 pro forma
shares of Pulte common stock estimated to be issued in
connection with the merger.
(2)
On November 24, 2008, Pulte
discontinued the regular quarterly dividend on Pulte’s
common stock effective in the first quarter of 2009. Due to the
ongoing difficult business conditions and Pulte’s
expectation that such conditions will continue for at least the
near term, Pulte does not anticipate paying dividends on its
common stock in the foreseeable future.
(3)
On October 9, 2008, Centex
announced the discontinuation of the regular quarterly dividend
on Centex’s common stock.
(4)
The pro forma Centex equivalent per
share information is computed by multiplying the pro forma
combined per share amounts by the 0.975 per share exchange ratio
to provide per share information for each share of Centex common
stock.
Pulte common stock trades on the NYSE under the symbol
“PHM”. Centex common stock trades on the NYSE under
the symbol “CTX”. The table below sets forth, for the
periods indicated, cash dividends paid per share of Pulte and
Centex common stock and the range of high and low per share
sales prices for Pulte and Centex common stock as reported on
the NYSE. For current price information, you should consult
publicly available sources. For more information on Pulte and
Centex payment of dividends, see “— Dividend
Policies” beginning on page 9.
The following table presents the last reported sale price of a
share of Pulte common stock, as reported on the NYSE, the last
reported sale price of a share of Centex common stock, as
reported on the NYSE, and the equivalent value of the merger
consideration per share of Centex common stock, in each case, on
April 7, 2009, the last full trading day prior to the
public announcement of the proposed merger, and on July 17,2009,
17
the last trading day prior to the printing of this joint proxy
statement/prospectus for which it was practicable to include
this information.
Calculated by multiplying the last reported sale price of Pulte
common stock by the 0.975 per share exchange ratio.
The market value of the shares of Pulte common stock to be
issued in exchange for shares of Centex common stock upon the
completion of the merger will not be known at the time Centex
stockholders vote on the proposal to approve the Merger
Agreement or at the time Pulte shareholders vote on the proposal
to approve the issuance of shares in the merger and the proposal
to approve the charter amendment to increase the number of
authorized shares of common stock. The exchange ratio is fixed
and will not be adjusted for changes in the stock prices of
either company before the merger is completed.
The above tables show historical stock price comparisons and the
equivalent value of the merger consideration per share of Centex
common stock. Because the market prices of Pulte common stock
and Centex common stock will likely fluctuate prior to the
merger, these comparisons may not provide meaningful information
to Pulte shareholders in determining whether to approve the
proposal to approve the issuance of shares in the merger or the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock, or to Centex stockholders
in determining whether to approve the proposal to approve the
Merger Agreement. Pulte shareholders and Centex stockholders are
encouraged to obtain current market quotations for Pulte and
Centex common stock and to review carefully the other
information contained in this joint proxy statement/prospectus
or incorporated by reference into this joint proxy
statement/prospectus in considering whether to approve the
proposals before them. See “Additional
Information — Where You Can Find More
Information” beginning on page 134.
The merger involves risks for Pulte shareholders and Centex
stockholders. Centex stockholders will be choosing to invest in
Pulte common stock by voting in favor of the proposal to approve
the Merger Agreement. Pulte shareholders will be choosing to
permit significant dilution of their percentage ownership in
Pulte by voting in favor of the proposal to approve the issuance
of shares in the merger and to authorize potential further
dilution of their percentage ownership in Pulte by voting in
favor of the proposal to approve the charter amendment to
increase the number of authorized shares of common stock. In
addition to the other information included in this joint proxy
statement/prospectus, including the matters addressed in
“Cautionary Statement Concerning Forward-Looking
Statements” beginning on page 26, you should carefully
consider the following risks before deciding whether to vote for
approval of the proposal to approve the Merger Agreement, in the
case of Centex stockholders, or for approval of the proposal to
approve the issuance of shares in the merger and the proposal to
approve the charter amendment to increase the number of
authorized shares of common stock, in the case of Pulte
shareholders. You should also read and consider the risks
associated with each of the businesses of Pulte and Centex that
are incorporated by reference into this joint proxy
statement/prospectus because these risks may also affect the
combined company. These risks can be found in the Pulte Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2008 and the Centex
Annual Report on
Form 10-K
for the fiscal year ended March 31, 2009, which are filed
with the SEC and incorporated by reference into this joint proxy
statement/prospectus. You should also read and consider the
other information in this joint proxy statement/prospectus and
the other documents incorporated by reference into this joint
proxy statement/prospectus. See “Additional
Information — Where You Can Find More
Information” beginning on page 134.
The
combined company will have more indebtedness after the merger,
which could adversely affect its cash flows and
business.
As of March 31, 2009, the principal amount of Pulte’s
outstanding long-term debt was approximately $3.2 billion
and its debt service obligations, comprised of scheduled
maturities of principal and interest, during the next twelve
months was approximately $234 million. Assuming the merger
had been completed on March 31, 2009, the principal amount
of the combined company’s outstanding debt as of
March 31, 2009 would have been approximately
$6.3 billion and, based on assumed interest rates, leverage
ratios and credit ratings, the combined company’s debt
service obligations, comprised of scheduled maturities of
principal and interest, during the next twelve months, in the
absence of any other transactions, would have been approximately
$627 million. As a result of this increase in debt, demands
on the combined company’s cash resources will increase
after the completion of the merger. As of March 31, 2009,
Pulte and Centex had combined cash on hand of approximately
$3.5 billion. The increased levels of debt could, among
other things:
•
require the combined company to dedicate a substantial portion
of its cash on hand and cash flow from operations to the
servicing and repayment of its debt, thereby reducing funds
available for working capital, capital expenditures, dividends,
acquisitions and other purposes;
•
make it more difficult for the combined company to maintain
compliance with certain financial covenants in its credit
facilities;
•
increase the combined company’s vulnerability to, and limit
flexibility in planning for, adverse economic and industry
conditions;
•
adversely affect the combined company’s credit rating, with
the result that the combined company may have an increased cost
of borrowing and its ability to obtain surety bonds could be
impaired;
•
limit the combined company’s ability to obtain additional
financing to fund future working capital, capital expenditures,
additional acquisitions and other general corporate requirements;
•
create competitive disadvantages compared to other companies
with less debt; and
•
adversely affect the combined company’s stock price.
19
Pulte
may not realize all of the anticipated benefits of the
transaction.
The combined company’s ability to realize the anticipated
benefits of the merger will depend, to a large extent, on the
ability of Pulte to integrate the businesses of Centex with
Pulte. The combination of two independent companies is a
complex, costly and time-consuming process. As a result, the
combined company will be required to devote significant
management attention and resources to integrating the business
practices and operations of Pulte and Centex. The integration
process may disrupt the business of either or both of the
companies and, if implemented ineffectively, would preclude
realization of the full benefits expected by Pulte and Centex.
The failure of the combined company to meet the challenges
involved in integrating successfully the operations of Pulte and
Centex or otherwise to realize the anticipated benefits of the
transaction could cause an interruption of, or a loss of
momentum in, the activities of the combined company and could
seriously harm its results of operations. In addition, the
overall integration of the two companies may result in
unanticipated problems, expenses, liabilities, competitive
responses, loss of customer and supplier relationships, and
diversion of management’s attention, and may cause the
combined company’s stock price to decline. The difficulties
of combining the operations of the companies include, among
others:
•
consolidating corporate and administrative infrastructures and
eliminating duplicative operations;
•
maintaining employee morale and retaining key employees;
•
the diversion of management’s attention from ongoing
business concerns;
•
coordinating geographically separate organizations;
•
unanticipated issues in integrating information technology,
communications and other systems;
•
managing tax costs or inefficiencies associated with integrating
the operations of the combined company; and
•
making any necessary modifications to operating control
standards to comply with the Sarbanes-Oxley Act of 2002 and the
rules and regulations promulgated thereunder.
In addition, even if the operations of Pulte and Centex are
integrated successfully, the combined company may not realize
the full benefits of the transaction, including the synergies,
cost savings or sales or growth opportunities that we expect.
These benefits may not be achieved within the anticipated time
frame, or at all. As a result, Pulte and Centex cannot assure
you that the combination of Centex with Pulte will result in the
realization of the full benefits anticipated from the
transaction.
The
price of Pulte common stock might decline prior to the
completion of the merger, which would decrease the value of the
merger consideration to be received by Centex stockholders in
the merger. Further, at the Centex special meeting, Centex
stockholders will not know the exact value of Pulte common stock
that will be issued in the merger.
The market price of Pulte common stock at the time the merger is
completed may vary significantly from the price on the date of
the Merger Agreement or from the price on the date of the Pulte
special meeting and Centex special meeting. Pulte common stock
has historically experienced volatility. On April 7, 2009,
the last full trading day prior to the public announcement of
the proposed merger, Pulte common stock closed at $10.77 per
share as reported on the NYSE. From April 8, 2009, through
July 17, 2009, the trading price of Pulte common stock
ranged from a closing high of $12.30 per share to a closing low
of $7.92 per share.
Under the Merger Agreement, each outstanding share of Centex
common stock (other than those shares held by Pulte or its
merger subsidiary Pi Nevada Building Company, and other than
treasury shares) will be converted into the right to receive,
upon completion of the merger, the merger consideration. The
exchange ratio is fixed and will not be adjusted for changes in
the stock prices of either company before the merger is
completed. As a result, any changes in the market price of Pulte
common stock will have a corresponding effect on the market
value of the merger consideration. Neither party, however, has a
right to terminate the Merger Agreement based upon changes in
the market price of Pulte or Centex common stock.
20
Pulte and Centex are working to complete the transaction as
quickly as possible. We currently expect that the merger will be
completed during the third quarter of 2009. Because the date
when the transaction is completed may be later than the date of
the special meetings, Pulte shareholders and Centex stockholders
may not know the exact value of the Pulte common stock that will
be issued in the merger at the time they vote on the proposal to
approve the Merger Agreement. As a result, if the market price
of Pulte common stock upon the completion of the merger is lower
than the market price on the date of the Centex special meeting,
the market value of the merger consideration received by Centex
stockholders in the merger will be lower than the market value
of the merger consideration at the time of vote by the Centex
stockholders. Moreover, during this interim period, events,
conditions or circumstances could arise that could have a
material impact or effect on Pulte, Centex or the industries in
which they operate.
To be
successful, the combined company must retain and motivate key
employees, and failure to do so could seriously harm the
combined company.
To be successful, the combined company must retain and motivate
executives and other key employees. Employees of Pulte and
Centex may experience uncertainty about their future roles with
the combined company until or after strategies for the combined
company are announced or executed. These circumstances may
adversely affect the combined company’s ability to retain
key personnel. The combined company also must continue to
motivate employees and keep them focused on the strategies and
goals of the combined company, which effort may be adversely
affected as a result of the uncertainty and difficulties with
integrating Pulte and Centex. If the combined company is unable
to retain executives and other key employees, the roles and
responsibilities of such executive officers and employees will
need to be filled either by existing or new officers and
employees, which may require the combined company to devote time
and resources to identifying, hiring and integrating
replacements for the departed executives that could otherwise be
used to integrate the businesses of Pulte and Centex or
otherwise pursue business opportunities.
If the
combined company is unable to manage its growth, its business
and financial results could suffer.
The combined company’s future financial results will depend
in part on its ability to profitably manage its core businesses,
including any growth that the combined company may be able to
achieve. Over the past several years, each of Pulte and Centex
has engaged in the identification of, and competition for,
growth and expansion opportunities. In order to achieve those
initiatives, the combined company will need to, among other
things, recruit, train, retain and effectively manage employees
and expand its operations and financial control systems. If the
combined company is unable to manage its businesses effectively
and profitably, its business and financial results could suffer.
The
issuance of shares of Pulte common stock to Centex stockholders
in the merger will substantially reduce the percentage ownership
interests of Pulte shareholders.
If the transaction is completed, Pulte and Centex expect that,
based on Centex’s shares of common stock and equity awards
outstanding as of the Pulte record date, Pulte will issue
approximately 128.1 million shares of Pulte common stock in
the merger. Current Centex stockholders are expected to own
approximately 32.1%, and current Pulte shareholders are expected
to own approximately 67.9%, of the shares of Pulte common stock
outstanding after the merger. The merger will have no effect on
the number of shares of Pulte common stock owned by existing
Pulte shareholders. The issuance of approximately
128.1 million shares of Pulte common stock to Centex
stockholders and holders of equity-based incentive awards will
cause a significant reduction in the relative percentage
interests of current Pulte shareholders in earnings, voting,
liquidation value and book and market value. See
“Summary — Ownership of Pulte After the
Merger” beginning on page 4.
The
pro forma financial statements are presented for illustrative
purposes only and may not be an indication of the combined
company’s financial condition or results of operations
following the transaction.
The pro forma financial statements contained in this joint proxy
statement/prospectus are presented for illustrative purposes
only and may not be an indication of the combined company’s
financial condition or results of operations following the
merger for several reasons. The pro forma financial statements
have been
21
derived from the historical financial statements of Pulte and
Centex and adjustments and assumptions have been made regarding
the combined company after giving effect to the transaction. The
information upon which these adjustments and assumptions have
been made is preliminary, and these kinds of adjustments and
assumptions are difficult to make with accuracy. Moreover, the
pro forma financial statements do not reflect all costs that are
expected to be incurred by the combined company in connection
with the transaction. For example, the impact of any incremental
costs incurred in integrating the two companies is not reflected
in the pro forma financial statements. As a result, the actual
financial condition and results of operations of the combined
company following the merger may not be consistent with, or
evident from, these pro forma financial statements.
The assumptions used in preparing the pro forma financial
information may not prove to be accurate, and other factors may
affect the combined company’s financial condition or
results of operations following the transaction. Any decline or
potential decline in the combined company’s financial
condition or results of operations may cause significant
variations in the stock price of the combined company. See
“Unaudited Pro Forma Condensed Combined Financial
Statements” beginning on page 95.
The
financial forecasts involve risks, uncertainties and
assumptions, many of which are beyond the control of Pulte and
Centex. As a result, they may not prove to be accurate and are
not necessarily indicative of current values or future
performance.
The financial forecasts of Pulte and Centex contained in this
joint proxy statement/prospectus involve risks, uncertainties
and assumptions and are not a guarantee of future performance.
The future financial results of Pulte, Centex and, if the merger
is completed, the combined company, may materially differ from
those expressed in the financial forecasts due to factors that
are beyond Pulte’s and Centex’s ability to control or
predict. Neither Pulte nor Centex can provide any assurance that
their respective financial forecasts will be realized or that
their respective future financial results will not materially
vary from the financial forecasts. The financial forecasts cover
multiple years, and the information by its nature becomes
subject to greater uncertainty with each successive year. The
financial forecasts do not take into account any circumstances
or events occurring after the date they were prepared.
More specifically, the financial forecasts:
•
necessarily make numerous assumptions, many of which are beyond
the control of Pulte and Centex and may not prove to be accurate;
•
do not necessarily reflect revised prospects for Pulte’s
and Centex’s businesses, changes in general business or
economic conditions, or any other transaction or event that has
occurred or that may occur and that was not anticipated at the
time the forecasts were prepared;
•
are not necessarily indicative of current values or future
performance, which may be significantly more favorable or less
favorable than is reflected in the forecasts; and
•
should not be regarded as a representation that the financial
forecasts will be achieved.
The financial forecasts were not prepared with a view toward
public disclosure or compliance with published guidelines of the
SEC or the American Institute of Certified Public Accountants
for preparation and presentation of prospective financial
information or GAAP and do not reflect the effect of any
proposed or other changes in GAAP that may be made in the
future. See “Financial Forecasts” beginning on
page 115.
Some
of the conditions to the merger may be waived by Pulte or Centex
without resoliciting shareholder or stockholder approval of the
proposals approved by them.
Some of the conditions set forth in the Merger Agreement may be
waived by Pulte or Centex, subject to the agreement of the other
party in specific cases. See “The Merger
Agreement — Conditions to Completion of the
Merger” beginning on page 78. If any conditions are
waived, Pulte and Centex will evaluate whether amendment of this
joint proxy statement/prospectus and resolicitation of proxies
are warranted. If the board of directors of Pulte or Centex
determines that resolicitation of their respective shareholders
or stockholders is
22
not warranted, the applicable company will have the discretion
to complete the merger without seeking further shareholder or
stockholder approval.
Provisions
of the Merger Agreement may deter alternative business
combinations and could negatively impact the stock prices of
Pulte and Centex if the Merger Agreement is terminated in
certain circumstances.
Restrictions in the Merger Agreement prohibit Centex from
soliciting any acquisition proposal or offer for a merger or
business combination with any other party, including a proposal
that might be advantageous to the stockholders of Centex when
compared to the terms and conditions of the merger with Pulte.
In addition, if the Merger Agreement is terminated, Centex may
be required in specified circumstances to pay a termination fee
of $24 million or $48 million to Pulte, and Pulte may
be required in specified circumstances to pay a termination fee
of $51 million or $102 million to Centex. In the event
the merger is terminated by Pulte or Centex in circumstances
that obligate either party to pay the termination fee to the
other party, the trading price of Pulte’s
and/or
Centex’s stock may decline.
These provisions may deter third parties from proposing or
pursuing alternative business combinations that might result in
greater value to Centex stockholders than the merger with Pulte.
Directors
and executive officers of Centex have interests in the
transaction that are different from, or in addition to, the
interests of Centex stockholders.
Centex’s executive officers and directors have financial
interests in the merger that are different from, or in addition
to, their interests as Centex stockholders. Stock-based awards
held by Centex’s executive officers and directors will vest
in connection with the merger. In addition, each of
Centex’s executive officers participates in the Centex
Corporation Plan Regarding Severance After a Change in Control,
which would provide severance and other benefits in the case of
qualifying terminations of employment following a change in
control, including the merger. Timothy R. Eller, chairman and
chief executive officer of Centex, has entered into a consulting
agreement with Pulte providing for certain payments and benefits
to him upon the completion of the merger, and for Mr. Eller
to serve as vice chairman of the Pulte board of directors and
serve as a consultant to Pulte, in each case, for a period of
two years following the completion of the merger. Pursuant to
the terms of Centex’s nonqualified deferred compensation
arrangements, certain benefits payable to executive officers
will vest upon completion of the merger.
The
merger may result in substantial goodwill for the combined
company. If the combined company’s goodwill becomes
impaired, then the profits of the combined company may be
significantly reduced or eliminated and shareholders’
equity may be reduced.
The unaudited pro forma financial statements reflect preliminary
estimates of goodwill of approximately $241.6 million as a
result of the merger. This approximate amount of goodwill
assumes that the Pulte common stock received by the Centex
stockholders in the merger has a market value of $8.96 per
share (the closing price of Pulte common stock on the NYSE on
June 25, 2009). The actual amount of goodwill recorded may
be materially different and will depend in part on the market
value of Pulte common stock as of the date on which the merger
is completed and the appropriate allocation of purchase price,
which may be impacted by a number of factors, including changes
in the net assets acquired and changes in the fair values of the
net assets acquired. On at least an annual basis, Pulte assesses
whether there has been an impairment in the value of goodwill.
If the carrying value of goodwill exceeds its estimated fair
value, impairment is deemed to have occurred and the carrying
value of goodwill is written down to fair value. Under GAAP,
this would result in a charge to the combined company’s
operating earnings. Accordingly, any determination requiring the
write-off of a significant portion of goodwill recorded in
connection with the merger would negatively affect the combined
company’s results of operations.
23
The
combined company may be subject to additional asset impairments
in the future.
Both Pulte and Centex have incurred in recent periods
substantial impairments of their land and certain other assets.
The market value of land, building lots and housing inventories
can fluctuate significantly as a result of changing market
conditions and the measures that the combined company will
employ to manage inventory risk may not be adequate to insulate
its operations from a severe drop in inventory values. If
housing demand continues to decrease below what the combined
company anticipates, the combined company may not be able to
generate profits similar to what Pulte and Centex have made in
the past, may experience less than anticipated profits,
and/or may
not be able to recover its costs when it sells and builds homes.
When market conditions are such that land values are not
appreciating, option arrangements previously entered into may
become less desirable, at which time the combined company may
elect to forego deposits and pre-acquisition costs and terminate
the agreement. In the face of adverse market conditions, the
combined company may have substantial inventory carrying costs,
may have to write down its inventory to its fair value,
and/or may
have to sell land or homes at a loss.
As a result of the changing market conditions in the
homebuilding industry that have occurred since early 2006, both
Pulte and Centex have incurred significant land-related charges
resulting from the write-off of deposits and pre-acquisition
costs related to land transactions that they each no longer plan
to pursue, net realizable valuation adjustments related to land
positions sold or held for sale, impairments on land assets
related to communities under development or to be developed in
the future, and impairments of their respective investments in
unconsolidated joint ventures. It is possible that the estimated
cash flows from these projects may change and could result in a
future need of the combined company to record additional
valuation adjustments.
If conditions in the homebuilding industry worsen in the future
or if the combined company’s strategy related to certain
communities changes, the combined company may be required to
evaluate its assets, including additional projects, for
additional impairments or write-downs, which could result in
additional charges that might be significant. Pulte and Centex
cannot predict the duration of the downturn in the homebuilding
industry, nor provide any assurances that the adjustments that
the combined company intends to make in its operating strategy
to address the conditions will be successful.
We also currently expect that the combined company will have
over $200 million of intangible assets relating to
tradenames, of which approximately $110 million will have
resulted from the merger. The combined company will periodically
assess whether there has been an impairment in the value of
these intangible assets. If an impairment is deemed to have
occurred, then the carrying value of the tradenames will be
written down to fair value. Under GAAP, this would result in a
charge to the combined company’s operating earnings.
Accordingly, any determination requiring the write-off of a
significant portion of the value of the tradenames recorded in
connection with the merger would negatively affect the combined
company’s results of operations.
Pulte
and Centex will incur significant transaction and merger-related
integration costs in connection with the merger.
Pulte and Centex expect to incur costs associated with
completing the merger and integrating the operations of the two
companies. Pulte and Centex estimate that their transaction
costs for the merger will be approximately $20.0 million
and $30.0 million, respectively, which include fees for
investment banking, legal, accounting, due diligence, tax,
valuation, printing and other various services in connection
with the transaction. The substantial majority of additional
non-recurring expenses resulting from the merger will be
comprised of facilities and systems consolidation costs and
employment-related costs. Pulte currently estimates severance
costs for cash payments to certain senior executive positions at
Centex in connection with termination of employment to be
approximately $9.6 million. Pulte is continuing to assess
the magnitude of the facilities and systems consolidation costs
and other non-recurring employment-related costs that will be
required in connection with the merger and, therefore, is unable
to provide an estimate of these costs at this time. Additional
unanticipated costs may be incurred in the integration of the
businesses of Pulte and Centex. Although Pulte and Centex expect
that the elimination of duplicative costs, as well as the
realization of other
24
efficiencies related to the integration of the businesses, may
offset incremental transaction and merger-related costs over
time, we cannot give any assurance that this net benefit will be
achieved in the near term, or at all.
The
combined company may not be able to realize Pulte’s and
Centex’s deferred income tax assets.
As of March 31, 2009, Pulte had net deferred tax assets of
$1.27 billion for which a $1.27 billion valuation
allowance was recorded, while Centex had net deferred tax assets
of $1.29 billion for which a $1.29 billion valuation
allowance was recorded. The ultimate realization of the deferred
tax assets is dependent upon a variety of factors, including
taxable income in prior carryback years, future taxable income,
tax planning strategies, potential legislative changes and
reversals of existing taxable temporary differences.
Furthermore, Pulte’s and Centex’s ability to utilize
net operating losses, which we refer to as NOLs, built-in
losses, which we refer to as BILs, and tax credit carryforwards
to offset its future taxable income would be limited if Pulte or
Centex were to undergo an “ownership change” within
the meaning of Section 382 of the Internal Revenue Code. In
general, an “ownership change” occurs whenever the
percentage of the stock of a corporation owned by
“5-percent shareholders” (within the meaning of
Section 382 of the Internal Revenue Code) increases by more
than 50 percentage points over the lowest percentage of the
stock of such corporation owned by such “5-percent
shareholders” at any time over a three-year testing period.
If a corporation undergoes an ownership change within the
meaning of Section 382 of the Internal Revenue Code, its
ability to utilize NOLs, BILs and other tax benefits is subject
to an annual limitation.
As a result of the merger, Centex will experience an ownership
change and, while it is not currently expected, Pulte may also
experience an ownership change. To preserve Pulte’s ability
to utilize NOLs, BILs and other tax benefits in the future
without a Section 382 limitation, Pulte has adopted a
shareholder rights plan, which is triggered upon certain
transfers of its securities, and has amended its by-laws to
prohibit certain transfers of its securities. Notwithstanding
the foregoing measures, there can be no assurance that Pulte
will not undergo an ownership change within the meaning of
Section 382. See “Description of Pulte Capital
Stock — Transfer Restrictions” beginning on
page 122.
Pulte and Centex are, and will continue to be, subject to the
risks described in (1) Part I, Item 1A in
Pulte’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 and
(2) Part I, Item 1A in Centex’s Annual
Report on
Form 10-K
for the fiscal year ended March 31, 2009, in each case as
filed with the SEC and incorporated by reference into this joint
proxy statement/prospectus. See “Additional
Information — Where You Can Find More
Information” beginning on page 134.
This joint proxy statement/prospectus includes
“forward-looking statements” within the meaning of
Section 27A of the Securities Act, and Section 21E of
the Exchange Act. Such statements may include, but are not
limited to, statements about the benefits of the proposed
transaction, including future financial and operating results,
and the combined company’s plans, objectives, expectations
and intentions. These statements are subject to a number of
risks, uncertainties and other factors that could cause our
actual results, performance, prospects or opportunities, as well
as those of the markets we serve or intend to serve, to differ
materially from those expressed in, or implied by, these
statements. You can identify these statements by the fact that
they do not relate to matters of a strictly factual or
historical nature and generally discuss or relate to forecasts,
estimates or other expectations regarding future events.
Generally, the words “believe,”“expect,”“intend,”“estimate,”“anticipate,”“project,”“may,”“can,”“could,”“might,”“will” and similar expressions identify
forward-looking statements, including statements related to
expected operating and performing results, planned transactions,
planned objectives of management, future developments or
conditions in the industries in which we participate and other
trends, developments and uncertainties that may affect our
business in the future.
Such risks, uncertainties and other factors include, among other
things:
•
the failure of Centex’s stockholders to approve the
proposal to approve the Merger Agreement;
•
the failure of Pulte’s shareholders to approve either the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock or the proposal to approve
the issuance of shares in the merger;
•
the possibility that the proposed transaction does not close,
including due to the failure to satisfy the closing conditions;
•
the possibility that the expected efficiencies and cost savings
of the proposed transaction will not be realized, or will not be
realized within the expected time period;
•
the risk that the Pulte and Centex businesses will not be
integrated successfully;
•
disruption from the proposed transaction making it more
difficult to maintain business and operational relationships;
•
interest rate changes and the availability of mortgage financing;
•
continued volatility in, and potential further deterioration of,
the debt and equity markets;
•
competition within the industries in which Pulte and Centex
operate;
•
the availability and cost of land and raw materials used by
Pulte and Centex in their homebuilding operations;
•
the availability and cost of insurance covering risks associated
with Pulte’s and Centex’s businesses;
•
shortages and the cost of labor;
•
adverse weather conditions, which may slow down construction of,
or damage, new homes built by Pulte or Centex;
•
slow growth initiatives
and/or local
building moratoria;
•
the ability to utilize NOLs, BILs and other tax credit
carryforwards;
26
•
governmental regulation, including the effects from the
Emergency Economic Stabilization Act, the American Recovery and
Reinvestment Act, and the interpretation of tax, labor and
environmental laws;
•
changes in consumer confidence and preferences;
•
terrorist acts and other acts of war; and
•
other factors of national, regional and global scale, including
those of a political, economic, business and competitive nature.
Additional risks, uncertainties and other factors include those
discussed under the heading “Risk Factors” and in
documents incorporated by reference into this joint proxy
statement/prospectus. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only
as of the date of this joint proxy statement/prospectus or, in
the case of documents incorporated by reference, as of the date
of those documents. Pulte and Centex disclaim any intent or
obligation to update any forward-looking statements contained
herein.
This joint proxy statement/prospectus is being provided to Pulte
shareholders as part of a solicitation of proxies by the Pulte
board of directors for use at the Pulte special meeting. This
joint proxy statement/prospectus provides Pulte shareholders
with important information they need to know to be able to vote,
or instruct their brokers or other nominees to vote, at the
Pulte special meeting.
The Pulte special meeting will be held at the Auburn Hills
Marriott Pontiac at Centerpoint, located at 3600 Centerpoint
Parkway, Pontiac, Michigan, on August 18, 2009, at
10:00 a.m., local time.
The Pulte special meeting is being held for the following
purposes:
•
to consider and vote upon the proposal to approve the issuance
of shares in the merger;
•
to consider and vote upon the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock;
•
to consider and vote upon the proposal to approve the charter
amendment to change Pulte’s corporate name; and
•
to transact any other business as may properly come before the
special meeting.
The Pulte board of directors has unanimously determined that the
proposed merger is advisable and in the best interests of Pulte
and its shareholders and unanimously recommends that Pulte
shareholders vote “FOR”the proposal to approve
the issuance of shares in the merger, “FOR”the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock, “FOR”the
proposal to approve the charter amendment to change Pulte’s
corporate name and “FOR”the Pulte meeting
adjournment proposal. See “The Merger —
Recommendation of the Pulte Board of Directors and Its Reasons
for the Merger” beginning on page 45.
Only holders of record of Pulte common stock at the close of
business on the Pulte record date, July 10, 2009, are
entitled to notice of and to vote at the Pulte special meeting.
As of the Pulte record date, there were 258,603,672 shares
of Pulte common stock outstanding and entitled to vote at the
special meeting, held by 1,760 holders of record. Each
holder of Pulte common stock is entitled to one vote for each
share of Pulte common stock owned as of the Pulte record date.
A complete list of Pulte shareholders will be available for
review at the special meeting.
A majority of the shares of Pulte common stock issued and
outstanding and entitled to vote as of the Pulte record date
must be present in person or represented by proxy at the Pulte
special meeting to constitute a quorum. A quorum must be present
before a vote can be taken on the proposal to approve the
issuance of shares in the merger, the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock, the proposal to approve the charter amendment to
change Pulte’s corporate name or any other matter except
adjournment or postponement of the meeting due to the absence of
a quorum. Abstentions and broker non-votes, if any, which are
described below, will be counted as present for purposes of
determining the presence of a quorum at the Pulte special
meeting. If a quorum is not present with respect to the proposal
to approve the issuance of shares in the merger or the proposal
to approve the charter amendment to increase the number of
authorized shares of common stock or if there are not sufficient
votes in
28
favor of either proposal, Pulte expects that the Pulte special
meeting will be adjourned to solicit additional proxies, subject
to approval of the Pulte meeting adjournment proposal by the
affirmative vote of the holders of a majority of the shares of
Pulte common stock present in person or by proxy at the Pulte
special meeting and entitled to vote thereon. At any subsequent
reconvening of the special meeting, all proxies will be voted in
the same manner as the proxies would have been voted at the
original convening of the special meeting, except for any
proxies that have been effectively revoked or withdrawn prior to
the subsequent meeting.
In accordance with NYSE listing requirements, the approval by
Pulte shareholders of the proposal to approve the issuance of
shares in the merger requires the approval of a majority of the
votes cast on the proposal, provided that the total votes cast
on this proposal represent over 50% of the outstanding shares of
Pulte common stock entitled to vote on this proposal. Votes
“for,” votes “against” and abstentions count
as votes cast, while broker non-votes do not count as votes cast
for this purpose. All outstanding shares of Pulte common stock,
including broker non-votes, count as shares entitled to vote.
Thus, the total sum of votes “for,” plus votes
“against,” plus abstentions, which we refer to as the
NYSE Votes Cast, must be greater than 50% of the total
outstanding shares of Pulte common stock. The number of votes
“for” the proposal must be greater than 50% of the
NYSE Votes Cast.
In accordance with the MBCA, approval of the proposal to approve
the charter amendment to increase the number of authorized
shares of common stock and the proposal to approve the charter
amendment to change Pulte’s corporate name each requires
the affirmative vote of a majority of the outstanding shares
entitled to vote on the amendment.
In accordance with the MBCA and Pulte’s by-laws, approval
of the Pulte meeting adjournment proposal requires the
affirmative vote of the holders of a majority of the shares of
Pulte common stock present in person or represented by proxy at
the Pulte special meeting and entitled to vote thereon.
As of the Pulte record date for the special meeting, the
directors and executive officers of Pulte as a group owned and
were entitled to vote 44,652,780 shares of Pulte common
stock, or approximately 17.27% of the outstanding shares of
Pulte on that date.
In connection with the Merger Agreement, the following directors
and officers of Pulte entered into voting agreements with
Centex, pursuant to which they have agreed to vote their shares
of Pulte in support of the transaction: William J. Pulte,
Pulte’s founder and current chairman and a director,
Mr. Dugas, Roger A. Cregg, executive vice president and
chief financial officer of Pulte, Steven C. Petruska, executive
vice president and chief operating officer of Pulte, and Brian
P. Anderson, Debra J. Kelly-Ennis, David N. McCammon, Bernard W.
Reznicek and William B. Smith, each a director of Pulte. Alan E.
Schwartz, a director of Pulte until his retirement as a director
of Pulte upon the expiration of his term at the 2009 annual
meeting of shareholders, has also entered into such a voting
agreement with Centex. As of the Pulte record date, these
directors (including Mr. Schwartz) and officers
collectively owned and were entitled to vote
44,207,846 shares of Pulte common stock, or approximately
17.09% of the outstanding shares of Pulte. All of Pulte’s
directors and executive officers entitled to vote at the Pulte
special meeting, including those that have not entered into
voting agreements with Centex, have evidenced their intent to
vote for the proposal to approve the issuance of shares in the
merger, the proposal to approve the charter amendment to
increase the number of authorized shares of common stock, the
proposal to approve the charter amendment to change Pulte’s
corporate name and the Pulte meeting adjournment proposal.
Holders of Pulte common stock as of the Pulte record date may
vote by proxy or in person at the Pulte special meeting. Votes
cast by proxy or in person at the Pulte special meeting will be
tabulated and certified by Pulte’s transfer agent.
29
Voting
in Person
Pulte shareholders who plan to attend the Pulte special meeting
and wish to vote in person will be given a ballot at the special
meeting. Please note, however, that Pulte shareholders who hold
their shares in “street name,” which means such shares
are held of record by a broker, bank or other nominee, and who
wish to vote in person at the Pulte special meeting, must bring
to the special meeting a proxy from the record holder of the
shares authorizing such Pulte shareholder to vote at the Pulte
special meeting.
Voting
by Proxy
The vote of each Pulte shareholder is very important.
Accordingly, Pulte shareholders who hold their shares as a
record holder should complete, sign and return the enclosed
proxy card whether or not they plan to attend the Pulte special
meeting in person. Pulte shareholders should vote their proxy
even if they plan to attend the Pulte special meeting. Pulte
shareholders can always change their vote at the special
meeting. Voting instructions are included on the enclosed proxy
card. If a Pulte shareholder properly gives his or her proxy and
submits it to Pulte in time to vote, one of the individuals
named as such Pulte shareholder’s proxy will vote the
shares as such Pulte shareholder has directed. A proxy card is
enclosed for use by Pulte shareholders.
The method of voting by proxy differs for shares held as a
record holder and shares held in “street name.” If a
Pulte shareholder holds shares of Pulte common stock as a record
holder, he or she may vote by completing, dating and signing the
enclosed proxy card and promptly returning it in the enclosed,
pre-addressed, postage-paid envelope or otherwise mailing it to
Pulte, or by submitting a proxy over the Internet or by
telephone by following the instructions on the enclosed proxy
card. If a Pulte shareholder holds shares of Pulte common stock
in street name, which means such shares are held of record by a
broker, bank or nominee, the Pulte shareholder will receive
instructions from his or her broker, bank or other nominee that
the Pulte shareholder must follow in order to vote his or her
shares. A Pulte shareholder’s broker, bank or nominee may
allow such Pulte shareholder to deliver voting instructions over
the Internet or by telephone. Pulte shareholders who hold their
shares in street name should refer to the voting instructions
from their broker, bank or nominee that accompany this joint
proxy statement/prospectus.
All properly signed proxies that are received prior to the Pulte
special meeting and that are not revoked will be voted at the
special meeting according to the instructions indicated on the
proxies or, if no direction is indicated, they will be voted
“FOR”the proposal to approve the issuance of
shares in the merger, “FOR”the proposal to
approve the charter amendment to increase the number of
authorized shares of common stock, “FOR”the
proposal to approve the charter amendment to change Pulte’s
corporate name and “FOR”the Pulte meeting
adjournment proposal.
Revocation
of Proxy
A Pulte shareholder may revoke his or her proxy at any time
before it is voted at the Pulte special meeting by taking any of
the following actions:
•
delivering to the corporate secretary of Pulte a signed written
notice of revocation, bearing a date later than the date of the
proxy, stating that the proxy is revoked;
•
signing and delivering a new proxy, relating to the same shares
and bearing a later date;
•
submitting another proxy by telephone or on the Internet (the
latest telephone or Internet voting instructions are
followed); or
•
attending the Pulte special meeting and voting in person,
although attendance at the special meeting will not, by itself,
revoke a proxy.
If a Pulte shareholder’s shares are held in “street
name,” he or she may change his or her vote by submitting
new voting instructions to his or her broker, bank or other
nominee. Pulte shareholders must contact their broker, bank or
other nominee to find out how to do so.
30
Written notices of revocation and other communications with
respect to the revocation of Pulte proxies should be addressed
to:
Pulte Homes, Inc.
100 Bloomfield Hills Parkway, Suite 300 Bloomfield Hills, Michigan48304
Attn.: Corporate Secretary
For purposes of the Pulte shareholder vote, an abstention, which
occurs when a shareholder attends a meeting, either in person or
by proxy, but abstains from voting, will have the same effect as
voting against the proposal to approve the issuance of shares in
the merger, the proposal to approve the charter amendment to
increase the number of authorized shares of common stock and the
proposal to approve the charter amendment to change Pulte’s
corporate name, but will not affect the Pulte meeting
adjournment proposal.
Under the listing requirements of the NYSE, brokers who hold
shares of Pulte common stock in “street name” for a
beneficial owner of those shares typically have the authority to
vote in their discretion on “routine” proposals when
they have not received instructions from beneficial owners.
However, brokers are not allowed to exercise their voting
discretion with respect to the approval of matters that the NYSE
determines to be “non-routine,” such as approval of
the issuance of shares of Pulte common stock pursuant to the
Merger Agreement, the proposal to approve the charter amendment
to increase the number of authorized shares of common stock or
the proposal to approve the charter amendment to change
Pulte’s corporate name, without specific instructions from
the beneficial owner. Broker non-votes are shares held by a
broker or other nominee that are represented at the meeting, but
with respect to which the broker or nominee is not instructed by
the beneficial owner of such shares to vote on the particular
proposal and the broker does not have discretionary voting power
on this proposal. If a Pulte shareholder’s broker holds
such shareholder’s Pulte common stock in “street
name,” the broker will vote such shareholder’s shares
only if the shareholder provides instructions on how to vote by
filling out the voter instruction form sent to the shareholder
by his or her broker with this joint proxy statement/prospectus.
It is expected that brokers and other nominees will not have
discretionary authority to vote on the proposal to approve the
issuance of shares in the merger, the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock, the proposal to approve the charter amendment to
change Pulte’s corporate name or the Pulte meeting
adjournment proposal.
Pulte is soliciting proxies for the Pulte special meeting from
Pulte shareholders. Pulte will bear the entire cost of
soliciting proxies from Pulte shareholders, except that Pulte
and Centex have each agreed to share equally all expenses
incurred in connection with the printing of this joint proxy
statement/prospectus and related proxy materials. In addition to
the solicitation of proxies by mail, Pulte will request that
brokers, banks and other nominees send proxies and proxy
materials to the beneficial owners of Pulte common stock held by
them and secure their voting instructions, if necessary. Pulte
will reimburse those record holders for their reasonable
expenses. Pulte has also made arrangements with D.F.
King & Co., Inc. to assist it in soliciting proxies,
and has agreed to pay D.F. King’s reasonable and customary
charges for such services, currently estimated not to exceed
$12,500, plus expenses. Pulte also may use several of its
regular employees, who will not be specially compensated, to
solicit proxies from Pulte shareholders, either personally or by
telephone or electronic mail.
Pulte does not expect that any matter other than the proposals
presented in this joint proxy statement/prospectus will be
brought before the Pulte special meeting. However, if other
matters incident to the conduct
31
of the special meeting are properly presented at the special
meeting, the persons named as proxies will vote in accordance
with their best judgment with respect to those matters.
An adjournment may be made from time to time by approval of the
holders of shares representing a majority of the votes present
in person or by proxy at the special meeting, whether or not a
quorum exists, without further notice other than by an
announcement made at the special meeting.
If a Pulte shareholder needs assistance in completing his or her
proxy card or has questions regarding the Pulte special meeting,
he or she should contact D.F. King & Co., Inc., which
is assisting Pulte with the solicitation of proxies, at
(800) 714-3313
(toll-free) or
(212) 269-5550
(collect) or via
e-mail to
pulteproxy@dfking.com. Alternatively, Pulte shareholders may
contact Pulte Investor Relations at
(248) 647-2750
or via
e-mail to
calvin.boyd@pulte.com or by writing to Pulte Homes, Inc., 100
Bloomfield Hills Parkway, Suite 300, Bloomfield Hills,
Michigan48304, Attn.: Investor Relations.
This joint proxy statement/prospectus is being provided to
Centex stockholders as part of a solicitation of proxies by the
Centex board of directors for use at the Centex special meeting.
This joint proxy statement/prospectus provides Centex
stockholders with important information they need to know to be
able to vote, or instruct their brokers or other nominees to
vote, at the Centex special meeting.
The special meeting of Centex stockholders will be held on the
10th floor of our headquarters building, located at
2728 N. Harwood Street, Dallas, Texas, on
August 18, 2009, at 11:00 a.m., local time.
The Centex special meeting is being held for the following
purposes:
•
to consider and vote upon the proposal to approve the Merger
Agreement;
•
to consider and vote upon the Centex meeting adjournment
proposal; and
•
to transact any other business as may properly come before the
special meeting.
The Centex board of directors has unanimously determined that
the proposed merger is advisable and in the best interests of
Centex and its stockholders and unanimously recommends that
Centex stockholders vote “FOR”the proposal to
approve the Merger Agreement and “FOR”the
Centex meeting adjournment proposal. See “TheMerger — Recommendation of the Centex Board of
Directors and Its Reasons for the Merger” beginning on
page 49.
Only holders of record of Centex common stock at the close of
business on the Centex record date, July 10, 2009, are
entitled to notice of and to vote at the Centex special meeting.
As of the Centex record date, there were 125,319,612 shares
of Centex common stock outstanding and entitled to vote at the
special meeting, held by 2,893 holders of record. Each
holder of Centex common stock is entitled to one vote for each
share of Centex common stock owned as of the Centex record date.
A complete list of Centex stockholders will be available for
review at the special meeting and at the executive offices of
Centex during regular business hours for a period of ten days
before the special meeting.
A majority of the shares of Centex common stock entitled to vote
as of the Centex record date must be present in person or
represented by proxy at the Centex special meeting to constitute
a quorum. A quorum must be present before a vote can be taken on
the proposal to approve the Merger Agreement or any other matter
except adjournment or postponement of the meeting due to the
absence of a quorum. Abstentions and broker non-votes, if any,
which are described below, will be counted as present for
purposes of determining the presence of a quorum at the Centex
special meeting. If a quorum is not present or if there are not
sufficient votes in favor of the proposal to approve the Merger
Agreement, Centex expects that the special meeting will be
adjourned to solicit additional proxies, subject to approval of
the Centex meeting adjournment proposal by the affirmative vote
of the holders of a majority of the shares of Centex common
stock present in person or represented by proxy at the Centex
special meeting and entitled to vote thereon. At any subsequent
reconvening of the special meeting, all proxies will be voted in
the same manner as the proxies would have been voted at the
original convening of the special meeting, except for any
proxies that have been effectively revoked or withdrawn prior to
the subsequent meeting.
33
In accordance with the Nevada Revised Statutes, which we refer
to as the NRS, approval of the proposal to approve the Merger
Agreement requires the affirmative vote of the holders of a
majority of the outstanding shares of Centex common stock
entitled to vote on this proposal at the Centex special meeting.
In accordance with the NRS and Centex’s by-laws, approval
of the Centex meeting adjournment proposal requires the
affirmative vote of the holders of a majority of the shares of
Centex common stock present in person or represented by proxy at
the special meeting and entitled to vote thereon.
As of the Centex record date for the special meeting, the
directors and executive officers of Centex as a group owned and
were entitled to vote 2,199,199 shares of Centex common
stock, or approximately 1.75% of the outstanding shares of
Centex on that date.
In connection with the Merger Agreement, the following directors
and officers of Centex entered into voting agreements with
Pulte, pursuant to which they have agreed to vote their shares
of Centex in support of the transaction: Timothy R. Eller,
chairman and chief executive officer of Centex and a director,
Catherine R. Smith, executive vice president and chief financial
officer of Centex, and Barbara T. Alexander, Thomas J. Falk,
Clint W. Murchison, III, Frederic M. Poses, James J. Postl,
David W. Quinn, Matthew K. Rose and Thomas M. Schoewe, each a
director of Centex. As of the Centex record date, these
directors and officers collectively owned and were entitled to
vote 1,694,109 shares of Centex common stock, or
approximately 1.35% of the outstanding shares of Centex common
stock. All of Centex’s directors and executive officers
entitled to vote at the Centex special meeting, including those
that have not entered into voting agreements with Pulte, have
evidenced their intent to vote for the proposal to approve the
Merger Agreement and the Centex meeting adjournment proposal.
Holders of Centex common stock as of the Centex record date may
vote by proxy or in person at the Centex special meeting. Votes
cast by proxy or in person at the Centex special meeting will be
tabulated and certified by Centex’s transfer agent.
Voting
in Person
Centex stockholders who plan to attend the Centex special
meeting and wish to vote in person will be given a ballot at the
special meeting. Please note, however, that Centex stockholders
who hold their shares in “street name,” which means
such shares are held of record by a broker, bank or other
nominee, and who wish to vote in person at the Centex special
meeting, must bring to the special meeting a proxy from the
record holder of the shares authorizing such Centex stockholder
to vote at the Centex special meeting.
Voting
by Proxy
The vote of each Centex stockholder is very important.
Accordingly, Centex stockholders who hold their shares as a
record holder should complete, sign and return the enclosed
proxy card whether or not they plan to attend the Centex special
meeting in person. Centex stockholders should vote their proxy
even if they plan to attend the Centex special meeting. Centex
stockholders can always change their vote at the special
meeting. Voting instructions are included on the enclosed proxy
card. If a Centex stockholder properly gives his or her proxy
and submits it to Centex in time to vote, one of the individuals
named as such Centex stockholder’s proxy will vote the
shares as such Centex stockholder has directed. A proxy card is
enclosed for use by Centex stockholders.
The method of voting by proxy differs for shares held as a
record holder and shares held in “street name.” If a
Centex stockholder holds shares of Centex common stock as a
record holder, he or she may vote by completing, dating and
signing the enclosed proxy card and promptly returning it in the
enclosed, pre-addressed, postage-paid envelope or otherwise
mailing it to Centex, or by submitting a proxy over the Internet
or by telephone by following the instructions on the enclosed
proxy card. If a Centex stockholder holds shares
34
of Centex common stock in street name, which means such shares
are held of record by a broker, bank or other nominee, the
Centex stockholder will receive instructions from his or her
broker, bank or other nominee that the Centex stockholder must
follow in order to vote his or her shares. Centex stockholders
who hold their shares in street name should refer to the voting
instructions from their broker, bank or nominee that accompany
this joint proxy statement/prospectus.
All properly signed proxies that are received prior to the
special meeting and that are not revoked will be voted at the
special meeting according to the instructions indicated on the
proxies or, if no direction is indicated, they will be voted
“FOR”the proposal to approve the Merger
Agreement and “FOR”the Centex meeting
adjournment proposal.
Revocation
of Proxy
A Centex stockholder may revoke his or her proxy at any time
before it is voted at the Centex special meeting by taking any
of the following actions:
•
delivering to the corporate secretary of Centex a signed written
notice of revocation, bearing a date later than the date of the
proxy, stating that the proxy is revoked;
•
signing and delivering a new proxy, relating to the same shares
and bearing a later date;
•
submitting another proxy by telephone or on the Internet (the
latest telephone or Internet voting instructions are
followed); or
•
attending the Centex special meeting and voting in person,
although attendance at the special meeting will not, by itself,
revoke a proxy.
If a Centex stockholder’s shares are held in “street
name,” he or she may change his or her vote by submitting
new voting instructions to his or her broker, bank or other
nominee. Centex stockholders must contact their broker, bank or
other nominee to find out how to do so.
Written notices of revocation and other communications with
respect to the revocation of Centex proxies should be addressed
to:
Centex Corporation
2728 N. Harwood Street Dallas, Texas75201
Attn.: Corporate Secretary
For purposes of the proposal to approve the Merger Agreement,
abstentions will have the same effect as voting against the
proposals.
Under the listing requirements of the NYSE, brokers who hold
shares of Centex common stock in “street name” for a
beneficial owner of those shares typically have the authority to
vote in their discretion on “routine” proposals when
they have not received instructions from beneficial owners.
However, brokers are not allowed to exercise their voting
discretion with respect to the approval of matters that the NYSE
determines to be “non-routine,” such as approval of
the proposal to approve the Merger Agreement, without specific
instructions from the beneficial owner. Broker non-votes are
shares held by a broker or other nominee that are represented at
the meeting, but with respect to which the broker or nominee is
not instructed by the beneficial owner of such shares to vote on
the particular proposal and the broker does not have
discretionary voting power on the proposal. If a Centex
stockholder’s broker holds such stockholder’s Centex
common stock in “street name,” the broker will vote
such stockholder’s shares only if the stockholder provides
instructions on how to vote by filling out the voter instruction
form sent to the stockholder by his or her broker with this
joint proxy statement/prospectus. It is expected that brokers
and other nominees will not have discretionary authority to vote
on the proposal to approve the Merger Agreement.
35
For purposes of the Centex meeting adjournment proposal,
abstentions will have the same effect as voting against the
proposal. It is expected that brokers and other nominees will
not have discretionary voting authority on this proposal.
Centex is soliciting proxies for the Centex special meeting from
Centex stockholders. Centex will bear the entire cost of
soliciting proxies from Centex stockholders, except that Pulte
and Centex have each agreed to share equally all expenses
incurred in connection with the printing of this joint proxy
statement/prospectus and related proxy materials. In addition to
the solicitation of proxies by mail, Centex will request that
brokers, banks and other nominees send proxies and proxy
materials to the beneficial owners of Centex common stock held
by them and secure their voting instructions, if necessary.
Centex will reimburse those record holders for their reasonable
expenses. Centex has also made arrangements with Innisfree
M&A Incorporated to assist it in soliciting proxies, and
has agreed to pay a fee not to exceed $35,000 plus expenses for
those services. Centex also may use several of its regular
employees, who will not be specially compensated, to solicit
proxies from Centex stockholders, either personally or by
telephone or electronic mail.
Centex does not expect that any matter other than the proposals
presented in this joint proxy statement/prospectus will be
brought before the Centex special meeting. However, if other
matters incident to the conduct of the special meeting are
properly presented at the special meeting, the persons named as
proxies will vote in accordance with their best judgment with
respect to those matters. An adjournment may be made from time
to time by approval of the holders of shares representing a
majority of the votes present in person or by proxy at the
special meeting, whether or not a quorum exists, without further
notice other than by an announcement made at the special meeting.
If a Centex stockholder needs assistance in completing his or
her proxy card or has questions regarding the Centex special
meeting, he or she should contact Innisfree M&A
Incorporated, which is assisting Centex with the solicitation of
proxies, at
(877) 717-3930
(toll-free). Banks and brokers may call collect at
(212) 750-5833.
Centex stockholders with requests for materials only may contact
Innisfree via
e-mail at
info@innisfreema.com. Alternatively, Centex stockholders may
contact Centex Investor Relations at
(214) 981-5000
or via
e-mail to
ir@centex.com or write to Centex Corporation,
P.O. Box 199000, Dallas, Texas
75219-9000,
Attn.: Investor Relations.
The following is a description of the material aspects of the
merger. While we believe that the following description covers
the material terms of the merger, the description may not
contain all of the information that is important to you. We
encourage you to read carefully this entire joint proxy
statement/prospectus, including the Merger Agreement attached to
this joint proxy statement/prospectus as Annex A, for a
more complete understanding of the merger.
Each of the Pulte and Centex board of directors has unanimously
approved the Merger Agreement and the transactions contemplated
by the Merger Agreement, including the merger. Upon completion
of the merger, Pi Nevada Building Company, a wholly owned
subsidiary of Pulte, will merge with and into Centex, with
Centex continuing as the surviving corporation and a wholly
owned subsidiary of Pulte. Each share of Centex common stock,
other than those shares held by Pulte or Pi Nevada Building
Company and other than treasury shares, will be converted into
the right to receive the merger consideration, upon the terms
provided in the Merger Agreement and as described below under
“The Merger Agreement — Merger
Consideration” beginning on page 75.
2008 was an extraordinarily difficult year in the home
building industry. According to the U.S. Census Bureau,
only 485,000 new homes were sold in 2008, a 37.5% decline from
2007 and a 62.2% decline from the five-year high of 1,283,000
homes set in 2005; and median new home prices fell from $248,000
to $232,000, reflecting the largest single year-to-year decline
since 1970. In addition, as of December 31, 2008, the
U.S. Census Bureau estimated an 8.8 month supply of
unsold new homes, approximately double the median level since
2000. The outlook for the industry was severely affected by the
crises in the credit markets, which restricted the availability
of financing for home purchases, and the deteriorating
conditions in the economy.
In response, in the fall of 2008, Centex accelerated the actions
that it had begun in 2006 to improve its cost structure through
implementing operational improvements in construction,
purchasing, sales and marketing, minimizing cash expenditures at
all levels, implementing overhead and personnel reductions and
reducing land-related spending. In addition, in the fall of
2008, Centex began a comprehensive analysis of its capital
structure, including with respect to the near-term maturities of
certain of its outstanding indebtedness. During this period, the
board of directors of Centex, which we refer to as the Centex
Board, and Centex’s senior management discussed
Centex’s strategic alternatives in light of worsening
industry and economic conditions and how to best position Centex
to take advantage of any recovery. In addition, Goldman,
Sachs & Co., which we refer to as Goldman Sachs, and
which had served as a strategic financial advisor to Centex
since 2005, was engaged to assist Centex’s consideration of
strategic alternatives, and Wachtell, Lipton, Rosen &
Katz, which we refer to as Wachtell Lipton, was hired as a legal
advisor.
On December 13, 2008, the Centex Board met with
Centex’s senior management and its financial advisors to
further discuss Centex’s strategic alternatives. At the
meeting, representatives of Goldman Sachs presented a
preliminary analysis of potential strategic alternatives,
including engaging in a business combination transaction or a
recapitalization to strengthen Centex’s financial condition
through the private or public sale of equity, repurchase of
debt, a debt-for-debt or debt-for-equity exchange offer or a
combination of the foregoing. The Centex Board directed
Centex’s senior management to develop with Goldman Sachs an
analysis of potential merger candidates as well as a
recapitalization plan, and to consider the optimal sequencing of
each alternative. The Centex Board also formed a special
initiatives committee, which we refer to as the Centex Special
Initiatives Committee, comprised of four independent directors,
one of whom served as chair, and Timothy R. Eller, Centex’s
chairman and chief executive officer. The mandate of the Special
Initiatives Committee was to assist the Centex Board’s
analysis, negotiation and implementation of strategic
alternatives including a business combination or a
recapitalization.
37
On several occasions during December and January, the Centex
Special Initiatives Committee met with Centex’s senior
management to discuss Centex’s business in light of general
industry and economic conditions as well as Centex’s
capital structure, including the maturities of Centex’s
outstanding indebtedness and the potential desirability of, and
methods for, repurchasing certain tranches of indebtedness,
including with the proceeds of a private or public sale of
equity. The Centex Special Initiatives Committee also discussed
with Centex’s senior management more than 10 potential
candidates for a business combination, including the attributes
of the combined companies that would result from such
transactions, if effected.
At a meeting on January 10, 2009, the Centex Board
discussed with Centex’s senior management and its legal and
financial advisors Centex’s potential strategic
alternatives, including engaging in a potential business
combination transaction or a recapitalization and considered
potential candidates for a business combination. At the meeting,
representatives of Goldman Sachs presented a preliminary
analysis of potential candidates selected by Goldman Sachs and
Centex’s senior management on the basis of, among other
factors, the candidates’ capacity to effect a transaction
that would provide attractive value to Centex’s
stockholders, their ability to achieve synergies in a
transaction with Centex, the strength of the balance sheet of
the combined company that would result from such a transaction
and their likely interest in engaging in such a transaction. The
presentation included a preliminary analysis of the balance
sheet and geographic profile of the combined company and
potential synergies identified by Centex’s senior
management that might be achieved in a transaction with each of
the potential candidates. After discussion, the Centex Board
identified three homebuilding industry participants as the
preferred business combination partners: Pulte, Company A and
Company B. These companies were selected and certain other
candidates were excluded based on, among other factors, the
Centex Board’s assessment of their capacity to effect a
transaction that would provide attractive value to Centex’s
stockholders, their ability to achieve synergies in a
transaction with Centex, the strength of the balance sheet of
the combined company that would result from such a transaction
and their likely interest in engaging in such a transaction.
Goldman Sachs did not independently contact prospective
combination partners.
In selecting Pulte as a potential candidate, the Centex Board
considered that Mr. Eller and Pulte’s then chief
executive officer held preliminary discussions, initiated by
Pulte’s chief executive officer, regarding a potential
negotiated transaction in 2000 and 2004, which discussions did
not result in either party making an acquisition proposal, and
that, in August 2005, Pulte had made an unsolicited confidential
acquisition proposal to acquire Centex in a stock-for-stock
merger with an exchange ratio of 1.8 shares of Pulte common
stock for each Centex share, which was later increased to 1.85
Pulte shares, and which the Centex Board determined not to
pursue. The Centex Board considered the companies’
respective equity values, industry conditions and Centex’s
position in the homebuilding industry at the time the proposals
were made, and concluded that Centex’s strategic
initiatives had the potential to deliver greater value to
Centex’s stockholders than the proposed business
combination with Pulte.
Following further meetings of the Centex Special Initiatives
Committee and the Centex Board and in accordance with the Centex
Board’s direction, Mr. Eller initiated contact and
held discussions with the chief executive officers of Pulte,
Company A and Company B during the first week of February 2009.
The Centex Board determined to pursue a potential business
combination transaction with Pulte, Company A and Company B
rather than a potential recapitalization based on the Centex
Board’s belief that a business combination transaction with
such parties had the potential to offer Centex stockholders
greater value than a recapitalization. In addition, the Centex
Board believed that the volatility of the debt and equity
securities markets created uncertainty regarding the ability of
Centex to successfully and timely complete a recapitalization
plan, including, for example, to purchase its outstanding debt
securities on favorable terms and to issue new debt
and/or
equity securities. During an initial conversation on
February 4, 2009, with Richard J. Dugas, Jr.,
Pulte’s president and chief executive officer and a member
of the Pulte board of directors, which we refer to as the Pulte
Board, Mr. Dugas indicated to Mr. Eller that he
believed a combination between the two companies had strategic
merit, and that the two companies should further consider
engaging in a potential transaction. The chief executive officer
of Company A also indicated to Mr. Eller during a
conversation on February 4, 2009, that he would be
interested in discussing a potential transaction, and, at
Mr. Eller’s request, the two met in person on
February 13, 2009 together with David W. Quinn, a Centex
director, and a director from Company A. Mr. Eller and
Company A’s chief executive officer held an
38
additional discussion by telephone on February 17, 2009.
Ultimately, Company A determined not to proceed with a further
exploration of a merger with Centex. During an initial
conversation on February 6, 2009, the chief executive
officer of Company B expressed interest in a potential
transaction, and Mr. Eller discussed a potential
transaction with Company B’s chief executive officer again
on February 13, 2009.
The Pulte Board, together with Pulte management, has in the
ordinary course regularly evaluated business development
strategies and reviewed Pulte’s strategic alternatives,
including from time to time potential business combinations and
other strategic alliances, in pursuing its objective of
enhancing shareholder value. Following the initial discussion
between Mr. Dugas and Mr. Eller, Pulte retained
Citigroup Global Markets Inc., which we refer to as Citi, as
Pulte’s financial advisor and Sidley Austin LLP, which we
refer to as Sidley Austin, to serve as special counsel to Pulte
and the Pulte Board in connection with the Pulte Board’s
consideration of a possible business combination with Centex.
On February 9, 2009, at a regularly scheduled meeting of
the Pulte Board, Mr. Dugas reported on his discussions with
Mr. Eller with respect to a possible business combination
with Centex. Mr. Dugas and Roger A. Cregg, Pulte’s
executive vice president and chief financial officer, discussed
the strategic rationale for a potential combination with Centex
and the financial profile of the combined company, including the
combined cash balance of the two companies and the pro forma
debt maturity schedule, the potential significant cost synergies
that could result from a business combination with Centex and
the possible risks associated with such a transaction.
Mr. Dugas also informed the Pulte Board that he believed
that Pulte and Centex shared similar philosophies with respect
to business culture, including a commitment to maintain a high
level of customer and employee satisfaction, and a conservative
approach to financial accounting matters. Following the
presentation by Mr. Dugas and Mr. Cregg regarding a
possible business combination with Centex, the Pulte Board
discussed a number of items, including the significant combined
cash balance of the two companies, which the Pulte Board
believed would better position the combined company to navigate
the downturn in the housing industry, the potential significant
cost synergies due to reduced overhead and interest expense
savings that could be achieved in such a transaction, the
complementary nature of the Pulte and Centex businesses given
Pulte’s strength in the
move-up and
active adult segments of the homebuilding industry and
Centex’s strength in the entry-level and
move-up
segments of the homebuilding industry and the potential for
shareholders of both companies to participate in the potential
benefits to be realized from a business combination transaction.
The Pulte Board also discussed the favorable timing for a
potential business combination transaction with Centex given the
recent comparative share price performance between the companies
relative to the companies’ historical trading prices.
During its discussion, the Pulte Board noted some of the
potential risks associated with a possible business combination
with Centex, with particular focus on the pro forma debt
maturity schedule for the combined company, possible future
goodwill and other asset impairments for the combined company
and the ability to achieve the identified cost synergies. See
“— Recommendation of the Pulte Board of Directors
and Its Reasons for the Merger” beginning on page 45
for additional discussion of the Pulte Board’s reasons for
pursuing a business combination with Centex.
The Pulte Board did not consider pursuing potential strategic
alternatives with other companies in the homebuilding industry
and instead primarily focused on whether it was in the best
interests of Pulte and its shareholders to continue to operate
its business as currently conducted or to pursue a potential
business combination with Centex. The Pulte Board decided to
pursue a potential business combination with Centex because it
had viewed a combination with Centex favorably when it last
considered such a transaction in 2005, the information made
available to it, including the Pulte management team’s
views of the current status of the homebuilding industry and
Centex’s competitive and financial position, suggested that
a combination with Centex at this time would be favorable to
Pulte and its shareholders and completion of a business
combination with Centex would not preclude Pulte from pursuing
other alternatives in the future. In addition, given changes
since 2005 in the companies’ respective equity values,
industry conditions and the companies’ respective positions
in the homebuilding industry, the Pulte Board viewed the ability
to pursue a combination with Centex using an exchange ratio that
it expected to be able to negotiate as an attractive opportunity
for Pulte and its shareholders. Based primarily upon the
information presented and the views expressed by Mr. Dugas
and Mr. Cregg at the meeting, the Pulte Board determined
that the potential benefits of a business combination with
Centex outweighed the potential risks identified at the meeting
and authorized Pulte management to pursue discussion of a
possible business combination with Centex.
39
On February 11, 2009, Mr. Dugas contacted
Mr. Eller and reported that the Pulte Board was supportive
of proceeding with discussions concerning a possible business
combination with Centex. Mr. Dugas identified Pulte’s
concern with Centex’s near-term debt maturities and sought
additional information concerning Centex’s projected cash
flows during the 2009 calendar year. Mr. Dugas proposed an
in-person meeting between members of Pulte and Centex
managements to conduct due diligence and further discuss
potential cost synergies and how the companies might operate
together.
On February 17, 2009, Centex and Pulte entered into a
confidentiality and standstill agreement to facilitate their
exchange of confidential information and further consideration
of a transaction.
On February 18, 2009, Mr. Dugas and Mr. Eller,
together with Mr. Quinn and other members of Pulte and
Centex senior management, including Mr. Cregg and
Ms. Smith, met to further discuss the combination of Pulte
and Centex. At the meeting, Mr. Dugas presented
Mr. Eller with a term sheet outlining a business
combination, structured as a stock-for-stock merger, in which
Centex’s stockholders would receive a premium of 8-10%
based on a fixed exchange ratio, and thereby own approximately
one-third of the combined company. The Pulte Board favored a
proposal featuring a stock-for-stock merger with a fixed
exchange ratio because this transaction structure provided
certainty as to the number of shares of Pulte common stock to be
delivered to Centex stockholders and the percentage of the total
shares of Pulte common stock that current Centex stockholders
would own after the merger. In addition, this transaction
structure would not require Pulte to incur any new debt in order
to effect the business combination. Based on the closing prices
on the NYSE of Centex common stock and Pulte common stock on the
day the term sheet was provided, a premium of 8-10% would have
implied an exchange ratio of approximately 0.876 to 0.892 of a
share of Pulte common stock for each Centex share. As proposed,
the board of directors of the combined company would be
comprised of eleven to thirteen directors, with nine or ten
designated by Pulte and two or three designated by Centex. The
term sheet also contemplated that Pulte’s and Centex’s
directors and officers would enter into customary voting
agreements in support of the transaction. In addition, the
headquarters of the combined company would be based in Detroit,
and the combined company would have a regional headquarters/home
office extension in Dallas.
On February 20, 2009 at a meeting of the Centex Special
Initiatives Committee, Mr. Eller updated committee members
on his discussions with Mr. Dugas and with the chief
executive officers of Company A and Company B. The Centex
Special Initiatives Committee directed Mr. Eller to seek to
improve the exchange ratio and other transaction terms proposed
by Pulte and to continue discussions with Company A and Company
B.
On March 5, 2009, Mr. Dugas and Mr. Eller,
together with Mr. Quinn and other members of Pulte and
Centex senior management, including Mr. Cregg and
Ms. Smith, met to further discuss the combination of Pulte
and Centex. Mr. Eller expressed the Centex Board’s
willingness to consider the combination, but only if the
exchange ratio and other terms proposed by Pulte were improved.
During this meeting, the attendees had further discussions
concerning the amount and timing for achievement of the
potential cost synergies, each company’s financial
statements and their respective liquidity positions, integration
plans and brand strategy. Mr. Dugas also inquired as to
Mr. Eller’s desired role in the combined company, and
Mr. Eller indicated that he and the Centex Board believed
that Mr. Eller’s role should not be considered until
agreement had been reached on the principal terms of the
proposed transaction. Acting in accordance with the direction of
the Centex Special Initiatives Committee, Mr. Eller
proposed that Centex’s stockholders receive
1.04 shares of Pulte common stock for each share of Centex
common stock and that the board of directors of the combined
company be comprised of ten directors, with seven designated by
Pulte and three designated by Centex.
On March 9, 2009, the Pulte Board met, together with
members of Pulte management and Pulte’s financial advisor,
to discuss the proposed business combination transaction between
Pulte and Centex. Mr. Dugas updated the Pulte Board on
Pulte management’s discussions with Centex management.
Pulte’s financial advisor discussed with the Pulte Board
financial matters relating to Centex and the proposed business
combination. Mr. Dugas also reviewed a term sheet for the
proposed transaction with the Pulte Board and discussed the
potential role for Mr. Eller in the combined company,
noting Mr. Eller’s and the Centex Board’s view
that his role should not be considered until agreement had been
reached on the principal terms of the proposed transaction. The
Pulte Board authorized Mr. Dugas to submit the term sheet
to Centex, which included an exchange ratio of 0.90 of a share
of Pulte common stock for each outstanding share of Centex
40
common stock that would be subject to adjustment based on the
relative trading values of Centex common stock and Pulte common
stock at the time of signing a merger agreement.
On March 9, 2009, following the conclusion of the Pulte
Board meeting, Mr. Dugas contacted Mr. Eller and
proposed a business combination in which Centex’s
stockholders would receive 0.90 of a share of Pulte common stock
for each share of Centex common stock, subject to adjustment as
described in the preceding paragraph. Mr. Dugas also
proposed that the board of directors of the combined company be
comprised of eleven to thirteen directors, with eight to ten
designated by Pulte and three designated by Centex.
At a meeting of the Centex Special Initiatives Committee held
later on March 9, 2009, Centex’s senior management
updated committee members on Centex’s business and general
industry and economic conditions, and Mr. Eller reported on
his discussions with Mr. Dugas as well as a discussion with
the chief executive officer of Company A who had informed
Mr. Eller that Company A had decided not to further
consider a transaction with Centex. During this meeting, a
representative of Wachtell Lipton also reviewed with the
directors their fiduciary duties in the context of evaluating
Centex’s strategic alternatives. The Centex Special
Initiatives Committee directed Mr. Eller to seek to improve
the exchange ratio and other transaction terms proposed by Pulte
and to make a business combination proposal to Company B, in
each instance on the terms discussed at the meeting.
On March 11, 2009, Mr. Eller met with the chief
executive officer of Company B to further discuss the possible
combination of Company B and Centex. At the meeting,
Mr. Eller proposed that Centex combine with Company B in a
“merger of equals” in which Centex stockholders would
own approximately 51% of the combined company and Company
B’s stockholders would own approximately 49% of the
combined company. Mr. Eller further proposed that the board
of directors of the combined company would be split equally
between Centex and Company B designees, that Mr. Eller
would be the chief executive officer of the combined company and
that the headquarters of the combined company would be located
in Dallas. Mr. Eller and the chief executive officer of
Company B did not discuss the compensation Mr. Eller would
receive as chief executive officer of the combined company.
On March 13, 2009 at a meeting of the Centex Board attended
by its legal and financial advisors, Centex’s senior
management updated the directors on Centex’s business and
general industry and economic conditions, and Mr. Eller
reported on his discussions with Mr. Dugas and with the
chief executive officers of Company A and Company B. During this
meeting, a representative of Wachtell Lipton also reviewed with
the directors their fiduciary duties in the context of
evaluating Centex’s strategic alternatives, and a
representative of Goldman Sachs discussed with the Centex Board
financial matters relating to a possible business combination
transaction.
On March 15, 2009, Mr. Eller contacted Mr. Dugas
to respond to Pulte’s March 9 proposal. Mr. Eller
proposed that the exchange ratio be increased to 1.00 share
of Pulte common stock for each share of Centex common stock, and
that this exchange ratio would not be subject to adjustment
based on fluctuations in Pulte’s and Centex’s
respective stock prices prior to execution of a merger
agreement. Mr. Eller further proposed that directors
designated by Pulte would constitute two-thirds of the board of
directors of the combined company and the remaining one-third
would consist of directors designated by Centex.
On March 17, 2009, the chief executive officer of Company B
contacted Mr. Eller to discuss Mr. Eller’s March
11 transaction proposal. The chief executive officer of Company
B proposed that, in the “merger of equals” of their
respective companies, Centex’s stockholders and Company
B’s stockholders would each own approximately 50% of the
combined company, neither company’s stockholders would
receive a premium, Mr. Eller would be the chief executive
officer of the combined company for two years following the
combination and the combined company’s headquarters would
be located in the city of Company B’s headquarters.
On March 17, 2009, the Pulte Board met to discuss the
proposed business combination transaction between Pulte and
Centex. Mr. Dugas updated the Pulte Board on recent
discussions that had taken place with Centex management
regarding the proposed business combination, and Mr. Cregg
provided the board with additional analysis conducted by Pulte
management with respect to Centex’s recent financial
results. Mr. Dugas also reviewed a revised term sheet for
the proposed transaction with the Pulte Board, which
contemplated an
41
exchange ratio of 0.95 of a share of Pulte common stock for each
outstanding share of Centex common stock. The Pulte Board
authorized Mr. Dugas to submit the revised term sheet to
Centex.
At a meeting of the Centex Board on March 18, 2009 attended
by its legal and financial advisors, the directors reached a
consensus that a transaction with Pulte had the potential to
offer Centex stockholders greater value than a transaction with
Company B primarily because of the substantial premium to the
trading value of Centex common stock that was expected to be
reflected in any transaction with Pulte. In contrast, any
transaction to be effected with Company B would include little
or no premium based on the equity market capitalization of
Company B and the type of transaction that Centex and Company B
had been discussing. In reaching this consensus, the Centex
Board did not attribute significance to the potential
inconvenience to Centex’s employees that could result from
any relocation of Centex’s operations, including a
relocation of its headquarters. Thus, while not foreclosing a
potential transaction with Company B, the Centex Board directed
Centex’s senior management to focus its efforts primarily
on its negotiations with Pulte and to seek improvement of the
exchange ratio and other transaction terms proposed by Pulte.
On March 18, 2009, Mr. Dugas contacted Mr. Eller,
and in response to Centex’s March 15 proposal, proposed a
business combination in which Centex’s stockholders would
receive 0.95 of a share of Pulte common stock for each share of
Centex common stock, subject to adjustment at the time of
signing a merger agreement only if the stock prices of Centex
and Pulte fluctuated significantly during the time prior to
signing. Mr. Dugas expressed Pulte’s willingness to
proceed on the basis that the board of directors of the combined
company be comprised of twelve directors, with eight designated
by Pulte and four designated by Centex. Mr. Dugas also
proposed that Pulte select all of the senior management of the
combined company.
On March 19, 2009, in response to Pulte’s March 18
proposal and in accordance with the Centex Special Initiatives
Committee’s direction, Mr. Eller contacted
Mr. Dugas and proposed that Centex’s stockholders
receive between 0.95 and 1.00 of a share of Pulte common stock
for each share of Centex common stock, with the exchange ratio
to be determined at the time of signing to result in a 30%
premium to Centex’s common stock price based on the prior
day’s closing. Mr. Eller then expressed Centex’s
willingness to proceed on the basis of Pulte’s proposal
that the combined company be comprised of twelve directors, with
eight designated by Pulte and four designated by Centex, but
proposed that the senior management of the combined company be
determined by a selection committee comprised of two Pulte
representatives and one Centex representative. During a later
call on March 19, Mr. Dugas confirmed Pulte’s
willingness to proceed on the basis that the senior management
of the combined company be determined by a selection committee
comprised of two Pulte representatives and one Centex
representative.
On March 20, 2009, Ms. Smith and Mr. Cregg
discussed the business outlook of both companies. Following
these discussions, they exchanged financial forecasts for their
respective company’s future operating performance. See
“Financial Forecasts” beginning on page 115.
On March 20, 2009, Mr. Dugas delivered a term sheet to
Mr. Eller proposing a business combination in which
Centex’s stockholders would receive between 0.90 and 1.00
of a share of Pulte common stock for each share of Centex common
stock, and that this exchange ratio would be determined at the
time of signing a merger agreement to result in a 25% premium to
Centex’s common stock price based on the average trading
prices of Centex and Pulte’s common stock prior to signing.
Later on March 20, 2009, following a meeting of the Centex
Special Initiatives Committee attended by its legal and
financial advisors, Mr. Eller contacted Mr. Dugas and
proposed two alternative approaches, either of which would be
acceptable to Centex: (1) a 0.975 exchange ratio or
(2) if adjustment of the exchange ratio prior to signing
was critical to the Pulte Board, the adjustment parameters
previously proposed by Centex (i.e., an exchange ratio of
between 0.95 and 1.00 of a share), applied to result in a 30%
premium to Centex stockholders at the time of signing.
Following this call, Mr. Dugas had telephonic discussions
with the other members of the Pulte Board during which he
informed them of the most recent Centex proposal on the exchange
ratio. The Pulte directors authorized Mr. Dugas to proceed
on the basis of a fixed exchange ratio of 0.975 of a share of
Pulte common stock for each outstanding share of Centex common
stock, subject to the completion of confirmatory due
42
diligence investigations of Centex and the negotiation of
definitive documentation to effect the business combination.
Later that evening, Mr. Dugas contacted Mr. Eller to
confirm Pulte’s willingness to seek to negotiate the
definitive terms of a merger agreement on the basis that Centex
stockholders would receive 0.975 of a share of Pulte common
stock for each outstanding share of Centex common stock.
On March 21, 2009, Mr. Eller updated the Centex Board
on his negotiations with Pulte at a meeting attended by the
Centex Board’s legal and financial advisors. The directors
confirmed their support of the principal transaction terms
negotiated by Mr. Eller and directed Mr. Eller and the
other members of Centex’s senior management to negotiate
the definitive terms of a merger agreement in accordance with
such terms.
Commencing on March 22, 2009, when Wachtell Lipton
distributed an initial draft merger agreement to Pulte and
Sidley Austin, representatives of Pulte, Sidley Austin, Centex
and Wachtell Lipton negotiated the terms of the merger agreement
and other documents related to the proposed transaction. The key
transaction terms discussed by Pulte and Centex and their
respective legal advisors included the circumstances under which
termination fees would be payable by either party and the
amounts of such termination fees, under what circumstances the
Pulte Board would have the ability to change its recommendation
for the transaction, whether the transaction would be
conditioned on an amendment to Pulte’s Restated Articles of
Incorporation, the restrictions on Centex’s ability to
enter into discussions regarding an alternative transaction
proposal, the definition of “Material Adverse Effect”
and the interim operating covenants applicable to Centex. During
this period, Pulte and Centex and their respective legal
advisors continued their due diligence investigation of the
other and regularly apprised their respective boards of
directors (and, in the case of Centex, the Centex Special
Initiatives Committee) concerning their diligence findings and
the status of the negotiations of definitive agreements. Also
during this period, Mr. Eller, with the prior approval of
the Centex Special Initiatives Committee, began discussions with
Pulte regarding his role in the combined company and a potential
consulting agreement between Mr. Eller and Pulte to be
effective if a business combination of Centex and Pulte were
consummated. During these discussions, Mr. Eller,
Mr. Dugas and Bernard Reznicek, chairman of the
compensation committee of the Pulte Board, discussed appropriate
terms to ensure that the combined company would continue to have
the benefit of Mr. Eller’s knowledge of Centex and its
business following the completion of a transaction.
Mr. Dugas, Mr. Eller and Mr. Reznicek discussed,
among other terms, whether Mr. Eller would report directly
to Mr. Dugas, the length of Mr. Eller’s
consulting period, and the payments and benefits to which
Mr. Eller would be entitled as a consultant to the combined
company. The terms of Mr. Eller’s consulting
agreement, as executed on April 7, 2009, are described
below under “Interests of Centex’s Directors and
Executive Officers in the Merger — Consulting
Agreement Between Timothy R. Eller and Pulte” beginning on
page 73. In addition, on March 31, 2009, Sidley Austin
distributed an initial draft of the form of voting agreement to
be entered into by certain directors and officers of Centex and
Pulte, including William J. Pulte, Pulte’s founder and
chairman.
On March 26, 2009, the Pulte Board met, together with
members of Pulte management and Pulte’s legal advisors, to
receive an update on the proposed business combination with
Centex since the prior meeting of the Pulte Board.
Representatives of Sidley Austin reviewed with the Pulte Board
the fiduciary duties of the directors in evaluating the proposed
business combination between Pulte and Centex and reviewed the
principal terms of the draft merger agreement submitted to Pulte
by Centex, and Pulte’s proposed response to such terms. The
Pulte Board considered the advisability of pursuing a business
combination with Centex and authorized Pulte management to
continue discussions with Centex on the proposed business
combination, including the terms of the draft merger agreement.
On March 27, 28 and 29, 2009, management teams from Pulte
and Centex and their respective auditors and legal and financial
advisors attended mutual in-person due diligence meetings in
Dallas, Texas. During these meetings, the management teams from
Pulte and Centex made presentations about their respective
businesses, discussed how the companies might operate together,
reviewed documents and responded to questions and additional
information requests.
On March 30, 2009 at a meeting of the Centex Special
Initiatives Committee attended by its legal and financial
advisors, Centex’s senior management updated the committee
members on their due diligence investigation of Pulte, including
the results of the in-person due diligence meetings held in
Dallas. A
43
representative of Wachtell Lipton also discussed the terms of
the draft merger agreement, including termination fees,
regulatory covenants, closing conditions, fiduciary provisions,
employee benefits provisions and other terms and conditions and
the terms of the proposed voting agreement, and addressed
various other issues and related matters. On April 1, 2009,
the Centex Board also received an update from Centex’s
senior management and its legal and financial advisors.
The Pulte Board met on April 3, 2009 and again on
April 6, 2009, together with members of Pulte’s
management and Pulte’s legal and financial advisors, to
further consider the proposed business combination with Centex.
During these meetings, Pulte management discussed with the Pulte
Board the due diligence work conducted in contemplation of the
proposed transaction and possible market reaction to the
transaction. The Pulte Board also discussed certain financial
matters, including an overview of the projected cost synergies
estimated by Pulte management to be achieved in connection with
the proposed transaction, the combined company’s projected
debt, cash and liquidity using the forecasts prepared by Pulte
management and referred to under “Financial Forecasts”
on page 115 and the anticipated reaction of the rating
agencies to the proposed transaction. Representatives of Sidley
Austin also reviewed the principal terms of the draft merger
agreement and voting agreements and provided an update on the
status of negotiations of the merger agreement with Centex. The
Pulte Board also discussed the strategic rationale for the
transaction, financial considerations for the combined company,
including the significant increase in debt of the combined
company, and the integration of the two companies after the
closing of the transaction. At the conclusion of these meetings,
the Pulte Board authorized Pulte’s management to continue
to pursue the proposed transaction. On the evening prior to its
April 3 meeting, the Pulte Board held a dinner which, at the
request of the Pulte Board, was attended by Mr. Eller. At
the dinner, Mr. Eller discussed his views regarding the
strategic rationale for the proposed transaction.
On April 7, 2009, the Pulte Board met, together with
members of Pulte’s management and Pulte’s legal and
financial advisors. Pulte management updated the Pulte Board on
the due diligence investigation conducted by Pulte and the
financial matters that were discussed at the April 3 and
April 6, 2009 Pulte Board meetings. Representatives of
Sidley Austin again reviewed the fiduciary duties of the members
of the Pulte Board with respect to the evaluation of the
proposed transaction and provided a summary of the terms of the
proposed merger agreement. Pulte management discussed with the
Pulte Board the principal terms of the consulting agreement with
Mr. Eller, and representatives of Sidley Austin discussed
with the Pulte Board the principal terms of the voting
agreements between Pulte and certain of the directors and
officers of Centex and the voting agreements between Centex and
certain of the directors and officers of Pulte. Citi reviewed
with the Pulte Board its financial analysis of the 0.975
exchange ratio provided for in the merger agreement and rendered
to the Pulte Board an oral opinion, which was confirmed by
delivery of a written opinion dated April 7, 2009, to the
effect that, as of that date and based on and subject to the
matters described in its opinion, the exchange ratio was fair,
from a financial point of view, to Pulte. Pulte management
recommended that the Pulte Board approve the proposed business
combination with Centex and authorize Pulte’s entry into
the merger agreement. After further consideration and
deliberation, and taking into account the factors described
under “— Recommendation of the Pulte Board of
Directors and Its Reasons for the Merger” beginning on
page 45, the Pulte Board unanimously determined that it was
advisable and in the best interests of Pulte and its
shareholders to enter into a business combination transaction
with Centex and voted for Pulte to enter into the proposed
merger agreement, approved the proposed merger agreement and the
proposed charter amendment to increase the number of authorized
shares of common stock, and determined to recommend to
Pulte’s shareholders that they vote to approve the proposal
to approve the issuance of shares in the merger and the proposal
to approve the charter amendment to increase the number of
authorized shares of common stock. At this meeting, the Pulte
Board also approved and authorized Pulte’s entry into the
consulting agreement with Mr. Eller and Pulte’s entry
into the voting agreements with certain of the directors and
officers of Centex.
On April 7, 2009, the Centex Board held a special meeting,
which was also attended by Centex’s senior management and
representatives of Goldman Sachs and Wachtell Lipton, to further
consider the proposed transaction. At the meeting, a
representative of Wachtell Lipton again reviewed the
directors’ fiduciary duties and described the terms of the
proposed merger agreement, the consulting agreement to be
entered into
44
between Mr. Eller and Pulte and the voting agreements to be
entered into by Pulte and Centex and certain of the other
party’s directors and officers, and the representatives of
Goldman Sachs reviewed financial aspects of the proposed
transaction, which analysis was based in part on the closing
prices of Centex’s and Pulte’s common stock on
April 6, 2009. Goldman Sachs then delivered its oral
opinion, which was subsequently confirmed in writing, to the
effect that, as of April 7, 2009 and based upon and subject
to the assumptions and qualifications set forth in the opinion,
the exchange ratio pursuant to the proposed merger agreement was
fair from a financial point of view to the holders of Centex
common stock. At the request of the Centex Board, Mr. Dugas
attended a portion of the meeting to discuss his views regarding
the strategic rationale for the proposed transaction. After
further consideration and deliberation, and taking into account
the factors described under “— Recommendation of
the Centex Board of Directors and Its Reasons for the
Merger” beginning on page 49, the Centex Board
unanimously determined that it was in the best interests of
Centex and its stockholders, and declared it advisable, to enter
into the merger agreement, adopted the merger agreement and
approved the consummation of the transactions contemplated by
the merger agreement, including the merger, and determined to
recommend to Centex’s stockholders that they vote to
approve the merger agreement. At this meeting, the Centex Board
also approved Centex’s entry into the voting agreements
with certain of the directors and officers of Pulte.
On the evening of April 7, 2009, Pulte, Centex and Pi
Nevada Building Company executed the definitive merger agreement
and certain directors and officers of Centex and Pulte entered
into the voting agreements. In addition, Pulte and
Mr. Eller entered into Mr. Eller’s consulting
agreement. On April 8, 2009, before the opening of trading
on the NYSE, Pulte and Centex issued a joint press release
announcing the execution of the Merger Agreement. The terms of
the Merger Agreement are described below under “The Merger
Agreement” beginning on page 75.
The Pulte Board has unanimously approved the Merger Agreement
and unanimously recommends that Pulte shareholders vote
“FOR” the proposal to approve the charter amendment to
increase the number of authorized shares of common stock,
“FOR” the proposal to approve the issuance of shares
in the merger, “FOR” the proposal to approve the
charter amendment to change Pulte’s corporate name and
“FOR” the Pulte meeting adjournment proposal.
In evaluating the merger and Merger Agreement, the Pulte Board
consulted with Pulte’s management and legal and financial
advisors and, in reaching its decision to approve the Merger
Agreement and to recommend that Pulte shareholders vote
“FOR” the proposal to approve the charter amendment to
increase the number of authorized shares of common stock and
“FOR” the proposal to approve the issuance of shares
in the merger, the Pulte Board evaluated the results of
management’s due diligence investigation of Centex’s
businesses and operations, reviewed publicly available
information regarding Centex’s businesses and operations
and considered various factors, including the factors described
below. The following discussion of the information and factors
considered by the Pulte Board is not exhaustive, but includes
the material factors considered by the Pulte Board. In view of
the wide variety of factors considered by the Pulte Board in
connection with its evaluation of the merger, the Pulte Board
did not consider it practical to, nor did it attempt to,
quantify, rank or otherwise assign relative weights to the
specific factors that it considered in reaching its decision. In
considering the factors described below, individual members of
the Pulte Board may have given different weight to different
factors. The Pulte Board considered this information as a whole,
and overall considered the information and factors to be
favorable to, and in support of, its determinations and
recommendations. Among the material information and factors
considered by the Pulte Board were the following:
•
Strategic Rationale.
•
The Pulte Board reviewed Pulte’s position in the
homebuilding industry and believes that a combination with
Centex would create the nation’s preeminent homebuilder,
including a number one ranking in terms of revenues and number
of home closings. The Pulte Board discussed that a business
combination with Centex would create a combined company with a
top three position in 25 of the top 50 new homebuilder
geographic markets across the United States and have the ability
to
45
increase market share in a number of additional geographic
markets where both companies currently operated. The Pulte Board
further considered the recent and continuing challenges faced by
the homebuilding industry, including lack of consumer
confidence, decreased housing affordability, rising
unemployment, a significant increase in the number of foreclosed
homes, and large supplies of resale and new home inventories and
the uncertain prospects and timing for a recovery.
Notwithstanding the fact that the proposed business combination
with Centex would increase Pulte’s exposure to the
homebuilding industry and result in possible additional
impairments to the combined company’s assets, the Pulte
Board determined that Pulte would have an opportunity to be
well-positioned after a combination to take advantage of the
market for new homes when the homebuilding industry eventually
recovers, particularly in light of the potential synergies
resulting from the combination, the complementary market
segments and geographies in which the additional land inventory
being acquired would be located, the fact that a significant
portion of the inventory reflected developed lots that would not
require substantial additional infrastructure investment to
drive revenue and the fact that the accounting treatment of
recording that inventory at fair value in connection with the
combination would reduce the potential for additional
impairments with respect to the inventory acquired as part of
the combination.
•
The Pulte Board considered the similar management styles and
comparable corporate cultures of the two companies and believed
that such similarities would allow the companies to more easily
and quickly integrate their operations. The Pulte Board
acknowledged that there are challenges inherent in the
combination of two business enterprises of the size and scope of
Pulte and Centex, including the possible resulting diversion of
management attention for an extended period and the possibility
of not achieving cost synergies following the merger, including
the ability to successfully repurchase the outstanding debt of
the combined company, in the amounts or at the time anticipated,
and evaluated these risks in light of Pulte’s history and
experience in integrating businesses in prior significant
transactions, including the acquisition of Del Webb in 2001.
•
The Pulte Board considered that, although no assurances could be
given that any particular level of cost synergies would be
achieved following the merger, management of Pulte had
quantified significant potential cost synergies in the principal
areas of corporate overhead, field and divisional overhead,
financial services and cash interest savings, estimated to be
approximately $350 million on an annual basis, and
identified additional potential cost synergies that could not
readily be quantified. The Pulte Board believed that the
likelihood of achieving the estimated cost synergies was high
and did not believe that it would be possible for Pulte to
achieve cost savings in an amount approaching these estimated
synergies if Pulte continued to operate as a standalone company.
•
The Pulte Board considered the trends and competitive
developments in the homebuilding industry and the range of
strategic alternatives available to Pulte, including continuing
to operate its business as currently conducted, and
management’s recommendation in favor of the merger and its
perspective that Centex was the best merger partner for Pulte in
the homebuilding industry. The Pulte Board determined that the
combined company would have more substantial financial and
management resources to address the challenges facing the
homebuilding industry and the larger combined capitalization
would provide shareholders of the combined company with greater
liquidity for their shares.
•
Opportunity for Growth Through Expanded Geographic and Brand
and Customer Segment Diversity. The Pulte Board considered
the complementary nature of the Pulte and Centex businesses,
with a particular emphasis on the opportunity to diversify
Pulte’s geographic and brand and customer segment presence
by combining the two companies. The Pulte Board believed that
the geographic strength of Centex in Texas and the Coastal
Carolinas would complement the geographic strength of Pulte in
the Florida and Southwest markets. The Pulte Board also noted
the significant brand and customer presence of both Pulte and
Centex in the
move-up
segment of the homebuilding industry, Pulte’s strength in
the active adult segment of the homebuilding industry through
its Del Webb brand and the opportunity to expand Pulte’s
presence in the entry level segment of the homebuilding industry
based on Centex’s relative strength in that customer
segment.
46
•
Financial Considerations for Combined
Company. The Pulte Board considered the projected
financial position, cost structure and capitalization structure
of the combined company and the anticipated financial benefits
that are expected to result from the merger, including the
potential for an accelerated path to profitability based
primarily upon the opportunity of the combined company to
achieve annual cost synergies of approximately $350 million
and a stronger liquidity position relative to other participants
in the homebuilding industry based primarily upon the
significant amount of cash that would be held by the combined
company (approximately $3.5 billion as of March 31,2009) which should allow the combined company to retire a
significant amount of debt and allow the combined company to
better mitigate uncertainty regarding the future prospects of
the homebuilding industry.
The Pulte Board examined various debt repayment scenarios for
the combined company. During the course of this review, the
Pulte Board reviewed and discussed a number of items, including
the following:
•
Pulte’s long-term debt outstanding as of December 31,2008 was approximately $3.2 billion, but immediately after
the merger, the principal outstanding of the combined
company’s debt was anticipated to be approximately
$6.2 billion;
•
As of December 31, 2008, Pulte’s debt service
obligations, comprised of scheduled maturities of principal and
interest, during the next twelve months were anticipated to be,
in the absence of the merger, approximately $234 million,
and on a pro forma basis and based on assumed interest rates,
leverage ratios and credit ratings, and assuming the merger was
completed on July 1, 2009, the combined company’s debt
service obligations, comprised of scheduled maturities of
principal and interest, during the twelve months following the
merger were anticipated to be approximately $627 million;
•
The anticipated use of the combined company’s cash to
retire in excess of $1 billion of debt prior to the end of
2009, which the Pulte Board expected would be disproportionately
weighted toward the retirement of debt with near-term maturities;
The difficulty that Centex would potentially have with
refinancing all or a portion of its maturing debt in the near
term;
•
The fact that a significant portion of the Centex debt had been
investment grade debt at the time of issuance with relatively
low interest rates and flexible covenants;
•
A report from Pulte management based on preliminary discussions
with the rating agencies and the implications of potential
rating agency actions for the combined company;
•
The amendments to Pulte’s unsecured revolving credit
facility in 2007 and 2008 which, among other things, decreased
the borrowing capacity from $2.01 billion to
$1.2 billion, extended the maturity date from October 2010
to June 2012, adjusted the required tangible net worth minimum,
increased the maximum allowed
debt-to-total
capitalization ratio and increased the costs of borrowing or
issuing letters of credit, and required Pulte to maintain
certain liquidity reserve accounts in the event Pulte fails to
satisfy an interest coverage test. While the Pulte Board
believed that the anticipated retirement of in excess of
$1 billion of debt would significantly reduce the risk of
debt covenant non-compliance by the combined company in the near
term, the Pulte Board also discussed the ability to have
discussions with Pulte’s lenders and obtain additional
amendments to Pulte’s unsecured revolving credit facility
if necessary following the completion of the merger to ensure
compliance with applicable financial covenants; and
•
The Pulte liquidity-case forecasts and the Centex liquidity-case
forecasts which were prepared by Pulte management to assist the
Pulte Board in its evaluation of the combined company’s
ability to service its debt obligations in the event of a more
sustained downturn in the homebuilding industry. See
“Financial Forecasts” beginning on page 115.
47
In addition to the items described above, the Pulte Board
evaluated the historical financial condition, operating results
and businesses of Pulte and Centex, including information with
respect to the respective earnings history and performance of
the companies over the past several years. The Pulte Board also
took into account the detailed financial, pro forma and other
information with respect to the merger presented by Pulte’s
management. Notwithstanding the increased amount of debt that
the combined company would have and the other potential risks
and considerations noted above, the Pulte Board believed that
the combined company would be able to service its maturing debt
obligations and comply with the financial covenants applicable
to such debt.
•
Financial Terms of Transaction. The Pulte
Board reviewed the use of Pulte common stock as the
consideration to be paid to Centex stockholders in the merger
and noted that this transaction structure would not require
Pulte to incur any new debt to consummate the merger. The Pulte
Board considered the fact that the fixed exchange ratio provides
certainty as to the number of shares of Pulte common stock to be
delivered to Centex stockholders and the percentage of the total
shares of Pulte common stock that current Centex stockholders
will own after the merger. The Pulte Board took note of the
historical and current market prices of Pulte common stock and
Centex common stock and the course of negotiations in
determining the exchange ratio.
•
Opinion of Pulte’s Financial Advisor. The
Pulte Board considered Citi’s financial presentation and
its opinion, dated April 7, 2009, to the Pulte Board as to
the fairness, from a financial point of view and as of the date
of the opinion, to Pulte of the 0.975 exchange ratio provided
for in the Merger Agreement, as more fully described below. See
“— Opinion of Pulte’s Financial
Advisor” beginning on page 51.
•
Terms of the Merger Agreement. The Pulte
Board, with the assistance of its legal advisors, also
considered the non-financial terms and conditions of the Merger
Agreement, including the amounts of the termination fees payable
by Centex and Pulte and the circumstances under which those fees
would be payable, the circumstances under which the Centex Board
could change its recommendation to the Centex stockholders, the
provisions regarding the selection of the board members and
senior management of the combined company and the provisions
relating to employee compensation and benefits.
•
Likelihood of Completion of the Merger. The
Pulte Board considered the likelihood that the merger would be
completed and determined that it was relatively high given the
limited regulatory approvals that needed to be obtained in
connection with the proposed transaction and the Pulte
Board’s belief that the transaction would be viewed
favorably by both Pulte shareholders and Centex stockholders
because they would each participate in the potential value
creation of the combined company and have greater liquidity for
their shares.
In addition to the risks noted above, the Pulte Board also
identified and considered other potential risks of the merger,
including the following:
•
the reaction of Centex employees to the merger and the risk
that, despite the efforts of the combined company, key personnel
might not remain employed by Pulte;
•
the possibility that the merger might not be completed due to
difficulties in obtaining the requisite Centex stockholder
approval of the merger or the requisite Pulte shareholder
approval of the proposal to approve the charter amendment to
increase the number of authorized shares of common stock and the
proposal to approve the issuance of shares in the merger;
•
the effect of the public announcement of the Merger Agreement on
Pulte’s stock price if Pulte shareholders perceived that
Pulte was paying too high a price for Centex or if shareholders
were concerned about the amount of debt of the combined company
or other concerns; and
•
other risks associated with Centex’s business generally
that were raised during due diligence presentations made by
Pulte management to the Pulte Board.
The Pulte Board concluded that these risks could be managed or
mitigated by Pulte or were unlikely to have a material impact on
the merger or Pulte, and that, overall, the potentially negative
factors or risks
48
associated with the merger were outweighed by the potential
benefits of the merger to Pulte and its shareholders.
Additional factors considered by the Pulte Board included:
•
the fact that Pulte shareholders will have an opportunity to
vote on the proposal to approve the charter amendment to
increase the number of authorized shares of common stock and the
proposal to approve the issuance of shares in the merger;
•
the fact the Pulte Board has the right under the Merger
Agreement to withdraw its recommendation to Pulte shareholders
that they approve the proposal to approve the charter amendment
to increase the number of authorized shares of common stock and
the proposal to approve the issuance of shares in the merger if
they are required to do so by applicable law; and
•
the terms and conditions of the consulting agreement between
Pulte and Timothy R. Eller, Centex’s chairman and chief
executive officer, that will become effective upon completion of
the merger.
The Pulte Board realized that there can be no assurance about
future results, including results considered or expected as
described in the factors listed above, such as assumptions
regarding potential cost synergies. The explanation of the Pulte
Board’s reasoning and all other information presented in
this section are forward-looking in nature and, therefore,
should be read in light of the factors discussed under the
heading “Cautionary Statement Concerning Forward-Looking
Statements.”
The Centex Board has unanimously adopted the Merger Agreement
and approved the consummation of the transactions contemplated
by the Merger Agreement, including the merger, upon the terms
and subject to the conditions set forth in the Merger Agreement
and unanimously recommends that Centex’s stockholders vote
“FOR” the proposal to approve the Merger Agreement at
the Centex special meeting.
In reaching this decision, the Centex Board consulted with
Centex’s management and its legal and financial advisors
and considered a variety of factors, including the following
material factors, among others:
•
the financial terms of the merger achieved through extensive,
arm’s-length negotiations with Pulte, including the right
of Centex stockholders to receive, for each share of Centex
common stock held by them, 0.975 of a share of Pulte common
stock, which represented an implied market value of
$10.50 per share of Centex common stock and a premium of
approximately 36%, in each case based on the closing prices on
the NYSE of Centex and Pulte common stock on April 7, 2009
(the last trading day prior to the execution and announcement of
the Merger Agreement);
•
the financial analyses presented by Goldman Sachs to the Centex
Board, and the opinion of Goldman Sachs dated as of
April 7, 2009 to the effect that, as of that date, and
subject to and based upon the factors and assumptions set forth
in such opinion, the exchange ratio pursuant to the Merger
Agreement was fair from a financial point of view to the holders
of Centex common stock;
•
the expectation that Centex stockholders will have the
opportunity to share in the future growth and expected synergies
of the combined company through the continued ownership of
shares of Pulte common stock, while retaining the flexibility of
selling all or a portion of those shares for cash at any time.
The synergies considered by the Centex Board included cost
savings achieved by reductions in public company related
expenses, financial services operations, corporate overhead and
advertising and marketing as well as personnel reduction;
•
the strength of the balance sheet of the combined company, the
belief that a combination with Pulte would better enable Centex
to weather the current economic downturn and position the Centex
business (as part of the combined company) to take advantage of
any recovery, and the potential strategic and operational
benefits of the merger identified by Centex’s management
and Pulte’s management, including the complementary nature
of the businesses of Centex and Pulte, and the opportunity for
cost
49
savings as a combined company; in view of these considerations,
the Centex Board believed that the merger would further enhance
the leading role of the Centex business in the homebuilding
industry, due to the benefits of the increased scale, diversity
and resources of the combined company;
•
its assessment of the likelihood that the merger would be
completed in a timely manner, including its view of the
likelihood the regulatory approvals required in connection with
the merger would be received in a timely manner and without
unacceptable conditions, and that the management team of the
combined company would be able to successfully integrate and
operate the businesses of the combined company after the merger;
•
the fact that Centex had conducted discussions with Company A
and Company B, which the Centex Board considered to be the
companies other than Pulte most likely to offer a transaction
that would provide attractive value to Centex’s
stockholders (based on, among other factors, the Centex
Board’s assessment of their capacity to effect a
transaction, their ability to achieve synergies in a transaction
with Centex, the strength of the balance sheet of the combined
company that would result from such a transaction and their
likely interest in engaging in such a transaction), and that the
Merger Agreement enables the Centex Board, in accordance with
the applicable provisions, to consider unsolicited proposals and
to terminate the Merger Agreement and accept a superior proposal
prior to Centex stockholder approval of the Merger Agreement,
subject to payment of a termination fee;
•
the fact that the transaction will be subject to the approval of
Centex’s stockholders; and
•
presentations by Centex’s management concerning the
operations, financial condition and prospects of Centex and its
review of other potential strategic transactions, including its
discussions with Company A and Company B, and its consideration
of a recapitalization and its belief as a result of such review
that the merger with Pulte represents the most attractive
direction for Centex’s business, such merger being expected
to enhance and expand Centex’s present business and future
growth.
The Centex Board was also aware of and considered the following
adverse factors associated with the proposed merger, among
others:
•
the risk that the expected synergies and other benefits of the
merger might not be fully achieved or may not be achieved within
the time frames expected;
•
the risks of the type and nature described under “Risk
Factors” beginning on page 19;
•
the possibility that regulatory or governmental authorities
might seek to impose conditions on or otherwise prevent or delay
the merger (and that the merger may not be completed as a result
of conditions imposed by regulatory authorities or otherwise)
balanced by the fact that Pulte had agreed to assume certain
regulatory approval risks for the proposed transaction;
•
the requirement that Centex pay a termination fee equal to
(1) $24 million if Pulte or Centex were to terminate
the Merger Agreement due to the failure to obtain approval of
Centex’s stockholders following a favorable recommendation
by the Centex Board and (2) $48 million under certain
circumstances, including if Pulte were to terminate the Merger
Agreement following a change of recommendation by the Centex
Board or if Centex were to terminate the Merger Agreement in
light of a superior proposal (see “The Merger
Agreement — Termination of the Merger
Agreement — Termination Fees” beginning on
page 89);
•
the fact that some of Centex’s directors and executive
officers may have interests in the merger and arrangements that
are different from, or in addition to, those of Centex
stockholders generally, including as a result of compensation
arrangements with Centex and the manner in which they would be
affected by the merger (see “— Interests of
Centex’s Directors and Executive Officers in the
Merger” beginning on page 70);
•
the possibility that the merger might not be completed if
Centex’s stockholders fail to approve the proposal to
approve the Merger Agreement or if the Pulte shareholders fail
to approve the proposal to approve the charter amendment to
increase the number of authorized shares of common stock or the
50
proposal to approve the issuance of shares in the merger or if
the parties otherwise fail to satisfy the conditions to
completion of the merger;
•
that Centex’s customers, suppliers or distributors may seek
to modify or terminate existing agreements or arrangements, or
that they or land sellers would be hesitant to enter into new
agreements or arrangements, as a result of the announcement of
the merger; and
•
the potential impact of the restrictions under the Merger
Agreement on Centex’s ability to take certain actions
during the period prior to the completion of the merger (which
may delay or prevent Centex from undertaking business
opportunities that may arise pending completion of the merger),
the potential for diversion of management and employee attention
and for increased employee attrition, or difficulty in
attracting new employees, during that period and the potential
effect of these on Centex’s business and relations with
customers and service providers.
The foregoing discussion of the factors considered by the Centex
Board is not intended to be exhaustive, but rather includes
material factors considered by the Centex Board. In reaching its
decision to approve the Merger Agreement, the merger and the
other transactions contemplated by the Merger Agreement, the
Centex Board did not quantify or assign any relative weights to
the factors considered, and individual directors may have given
different weights to different factors. The Centex Board
considered all these factors as a whole, including discussions
with, and questioning of, Centex management and Centex’s
financial and legal advisors, and overall considered the factors
to be favorable to, and to support, its determination.
Pulte has retained Citi as its financial advisor in connection
with the merger. In connection with this engagement, Pulte
requested that Citi evaluate the fairness, from a financial
point of view, to Pulte of the 0.975 exchange ratio provided for
in the Merger Agreement. On April 7, 2009, at a meeting of
Pulte’s board of directors held to evaluate the merger,
Citi rendered to Pulte’s board of directors an oral
opinion, which was confirmed by delivery of a written opinion
dated April 7, 2009, to the effect that, as of that date
and based on and subject to the matters described in its
opinion, the exchange ratio was fair, from a financial point of
view, to Pulte.
The full text of Citi’s written opinion, dated
April 7, 2009, which describes the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken, is attached to this joint proxy
statement/prospectus as Annex B and is incorporated into
this joint proxy statement/prospectus by reference.
Citi’s opinion was provided to Pulte’s board of
directors in connection with its evaluation of the exchange
ratio from a financial point of view to Pulte and does not
address any other aspects or implications of the merger or the
underlying business decision of Pulte to effect the merger, the
relative merits of the merger as compared to any alternative
business strategies that might exist for Pulte or the effect of
any other transaction in which Pulte might engage. Citi’s
opinion is not intended to be and does not constitute a
recommendation to any securityholder as to how such
securityholder should vote or act on any matters relating to the
proposed merger.
In arriving at its opinion, Citi:
•
reviewed the Merger Agreement;
•
held discussions with certain senior officers, directors and
other representatives and advisors of Pulte and certain senior
officers and other representatives and advisors of Centex
concerning the businesses, operations and prospects of Pulte and
Centex;
•
reviewed certain publicly available business and financial
information relating to Pulte and Centex;
•
reviewed certain financial forecasts, referred to in this joint
proxy statement/prospectus as the Centex strategic-case
forecasts and the Pulte strategic-case forecast, and other
information and data relating to Pulte and Centex which were
provided to or discussed with Citi by Pulte’s management,
including information relating to potential strategic
implications and operational benefits (including the amount,
timing and achievability thereof) anticipated by Pulte’s
management to result from the merger;
51
•
reviewed the financial terms of the merger as set forth in the
Merger Agreement in relation to, among other things, current and
historical market prices and trading volumes of Pulte common
stock and Centex common stock, Pulte’s and Centex’s
historical and projected earnings and other operating data and
Pulte’s and Centex’s capitalization and financial
condition;
•
analyzed certain financial, stock market and other publicly
available information relating to the businesses of other
companies whose operations Citi considered relevant in
evaluating those of Pulte and Centex;
•
considered, to the extent publicly available, the financial
terms of certain other transactions which Citi considered
relevant in evaluating the merger;
•
evaluated certain potential pro forma financial effects of the
merger on Pulte utilizing, among other things, the financial
forecasts and estimates relating to Pulte and Centex referred to
above after giving effect to the potential strategic
implications and operational benefits anticipated by
Pulte’s management to result from the merger; and
•
conducted such other analyses and examinations and considered
such other information and financial, economic and market
criteria as Citi deemed appropriate in arriving at its opinion.
In rendering its opinion, Citi 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 reviewed by or discussed with Citi
and upon the assurances of the managements of Pulte and Centex
that they were not aware of any relevant information that was
omitted or remained undisclosed to Citi. With respect to
financial forecasts and other information and data provided to
or otherwise reviewed by or discussed with Citi relating to
Pulte and Centex and potential pro forma financial effects of,
and strategic implications and operational benefits resulting
from, the merger, Citi was advised by Pulte’s management,
and Citi assumed, with Pulte’s consent, that the forecasts
and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments
of Pulte’s management as to the future financial
performance of Pulte and Centex, such strategic implications and
operational benefits and the other matters covered thereby. Citi
also assumed, with Pulte’s consent, that the financial
results (including the potential strategic implications and
operational benefits anticipated to result from the merger)
reflected in such financial forecasts and other information and
data will be realized in the amounts and at the times projected.
Citi assumed, with Pulte’s consent, that the merger would
be consummated in accordance with its terms without waiver,
modification or amendment of any material term, condition or
agreement, and that, in the course of obtaining the necessary
regulatory or third party approvals, consents, releases and
waivers for the merger, no delay, limitation, restriction or
condition would be imposed that would have an adverse effect on
Pulte, Centex or the contemplated benefits of the merger. Citi
also assumed, with Pulte’s consent, that the merger would
qualify for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code. Citi’s opinion relates to the relative values
of Pulte and Centex. Citi did not express any opinion as to what
the value of Pulte common stock actually would be when issued
pursuant to the merger or the prices at which Pulte common stock
or Centex common stock would trade at any time. Citi did not
make, and it was not provided with, an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise,
of Pulte or Centex, and Citi did not make any physical
inspection of the properties or assets of Pulte or Centex. Citi
expressed no view as to, and its opinion did not address, the
underlying business decision of Pulte to effect the merger, the
relative merits of the merger as compared to any alternative
business strategies that might exist for Pulte or the effect of
any other transaction in which Pulte might engage. Citi’s
opinion did not address any terms (other than the exchange ratio
to the extent expressly specified in the opinion) or other
aspects or implications of the merger, including, without
limitation, the form or structure of the merger or any other
agreement, arrangement or understanding to be entered into in
connection with or contemplated by the merger or otherwise. Citi
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 to any officers, directors or
employees of any parties to the merger, or any class of such
persons, relative to the exchange ratio. Citi’s opinion was
necessarily based on information available to Citi, and
financial, stock market and other conditions and circumstances
existing and disclosed to Citi, as of the date of its opinion.
The
52
credit, financial and stock markets are experiencing unusual
volatility, and Citi expressed no opinion or view as to any
potential effects of such volatility on Pulte, Centex or the
contemplated benefits of the merger. Although subsequent
developments may affect its opinion, Citi does not have any
obligation to update, revise or reaffirm its opinion. Except as
described above, Pulte imposed no other instructions or
limitations on Citi with respect to the investigations made or
procedures followed by Citi in rendering its opinion.
In preparing its opinion, Citi performed a variety of financial
and comparative analyses, including those described below. The
summary of these analyses is not a complete description of the
analyses underlying 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 assessed as a
whole, and did not draw, in isolation, conclusions from or with
regard to any one factor or method of analysis for purposes of
its opinion. Accordingly, Citi believes that its analyses 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 its
analyses and 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 Pulte and Centex. No company, business
or transaction used in those analyses as a comparison is
identical to Pulte, Centex or the merger, and an evaluation of
those 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 acquisition, public trading or other values of
the companies, business segments or transactions analyzed.
Accordingly, such analyses may not necessarily utilize all
companies or transactions that could be deemed comparable to
Pulte, Centex or the merger.
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 its analyses. In addition,
analyses relating to the value of businesses or securities do
not necessarily purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold.
Accordingly, the estimates used in, and the results derived
from, Citi’s analyses are inherently subject to substantial
uncertainty.
The type and amount of consideration payable in the merger was
determined through negotiations between Pulte and Centex and the
decision to enter into the Merger Agreement was solely that of
Pulte’s board of directors. Citi’s opinion was only
one of many factors considered by Pulte’s board of
directors in its evaluation of the merger and should not be
viewed as determinative of the views of Pulte’s board of
directors or management with respect to the merger or the
exchange ratio.
The following is a summary of the material financial analyses
presented to Pulte’s board of directors in connection with
Citi’s opinion. The financial analyses summarized below
include information presented in tabular format. In order to
fully understand Citi’s financial analyses, the tables must
be read together with the text of each summary. The tables alone
do not constitute a complete description of the financial
analyses. Considering the data below without considering the
full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Citi’s financial
analyses.
Selected
Public Companies Analysis
Citi performed separate selected publicly traded companies
analyses of Pulte and Centex in which Citi reviewed publicly
available financial and stock market information for Pulte,
Centex and the following nine selected publicly traded
companies. These companies were selected generally because they
are publicly-traded
53
companies in the U.S. homebuilding industry (which is the
industry in which Pulte and Centex operate) and were not viewed
as distressed companies:
•
D.R. Horton, Inc.
•
KB Home
•
Lennar Corporation
•
M.D.C. Holdings, Inc.
•
Meritage Homes Corporation
•
NVR, Inc.
•
Orleans Homebuilders, Inc.
•
The Ryland Group, Inc.
•
Toll Brothers, Inc.
Citi reviewed, among other things, the equity values of the
selected companies, Pulte and Centex, based on closing stock
prices on April 3, 2009, as a multiple of book value as of
the selected companies’ latest public filings. Financial
data of Pulte, Centex and the selected public companies were
based on public filings and other publicly available
information. Citi then applied a range of selected book value
multiples derived from the selected companies and Centex to
Pulte’s book value of equity as of December 31, 2008
and a range of selected book value multiples derived from the
selected companies and Pulte to Centex’s book value of
equity as of December 31, 2008. This indicated an implied
per share equity reference range for Pulte of approximately
$10.50 to $12.50 per share and for Centex of approximately $8.50
to $10.50 per share (the closing price of Pulte common stock on
April 3, 2009 was $11.54 per share and the implied merger
consideration based on the exchange ratio provided for in the
Merger Agreement and the closing price of Pulte common stock on
April 3, 2009 was approximately $11.25 per share). Based on
the implied per share equity reference ranges derived for Pulte
and Centex, this analysis indicated the following implied
exchange ratio reference range, as compared to the exchange
ratio provided for in the Merger Agreement:
Implied Exchange Ratio Reference Range
Exchange Ratio
0.67 - 1.02
0.975
Selected
Precedent Transactions Analysis
Citi performed a selected precedent transactions analysis of
Centex in which Citi reviewed, to the extent publicly available,
financial information relating to the following 13 selected
transactions. These transactions
54
were selected generally because they involve companies in the
U.S. homebuilding industry (which is the industry in which
Centex operates):
Announcement Date
Acquiror
Target
• 6/6/05
• Technical Olympic USA, Inc.
• Transeastern Properties, Inc. (homebuilding
operations and assets)
• 4/9/02
• Newmark Homes Corporation
• Engle Holdings Corporation
• 1/30/02
• Beazer Homes USA, Inc.
• Crossmann Communities, Inc.
• 12/19/01
• Hovnanian Enterprises, Inc.
• The Forecast Group, L.P. (California homebuilding
operations)
• 10/23/01
• D.R. Horton, Inc.
• Schuler Homes, Inc.
• 5/1/01
• Pulte
• Del Webb Corporation
• 10/12/00
• Technical Olympic S.A.
• Engle Homes, Inc.
• 9/12/00
• Schuler Homes, Inc.
• Western Pacific Housing
• 2/17/00
• Lennar Corporation
• U.S. Home Corporation
• 10/4/99
• Technical Olympic S.A.
• Newmark Homes Corporation
• 10/20/98
• Kaufman and Broad Home Corporation
• Lewis Homes
• 12/19/97
• D.R. Horton, Inc.
• Continental Homes Holding Corp.
• 6/11/97
• Lennar Corporation
• Pacific Greystone Corporation
Citi reviewed, among other things, transaction values,
calculated as the equity value implied for the target company
based on the consideration payable in the selected transaction,
as a multiple of the target company’s book value of equity
as of the most recent accounting period prior to public
announcement of the relevant transaction. Financial data of
Pulte, Centex and the selected transactions were based on public
filings and other publicly available information. Citi then
applied a range of selected book value multiples derived from
the selected transactions to Centex’s book value of equity
as of December 31, 2008. This indicated an implied per
share equity reference range for Centex of approximately $13.25
to $18.50 per share (the implied merger consideration based on
the exchange ratio provided for in the Merger Agreement and the
closing price of Pulte common stock on April 3, 2009 was
approximately $11.25 per share). Based on the implied per share
equity reference range derived for Centex and Pulte’s
closing share price as of April 3, 2009, this analysis
indicated the following implied exchange ratio reference range,
as compared to the exchange ratio provided for in the Merger
Agreement:
Implied Exchange Ratio Reference Range
Exchange Ratio
1.15 - 1.60
0.975
Discounted
Cash Flow Analysis
Citi performed separate discounted cash flow analyses of Pulte
and Centex to calculate the estimated present value of the
standalone unlevered, after-tax free cash flows that each of
Pulte and Centex was forecasted to generate during fiscal years
2009 through 2017. Based on internal estimates of Pulte’s
management for Pulte and Centex, including the Pulte
strategic-case forecasts and Centex strategic-case forecasts,
and historical financial results for Pulte and Centex,
unlevered, after-tax free cash flows were calculated as
estimated adjusted earnings before interest and taxes, referred
to as adjusted EBIT, plus depreciation and amortization, less
capital expenditures and adjustments for changes in working
capital. In the case of Centex, Citi performed this analysis
both with and without taking into account potential strategic
implications and operational benefits anticipated by
Pulte’s management to result from the merger, referred to
as potential synergies. Estimated terminal values for Pulte and
Centex were calculated by applying to each of Pulte’s and
Centex’s fiscal year 2017 estimated earnings before
interest, taxes, depreciation and amortization, referred to as
EBITDA, terminal value EBITDA multiples of 6.0x to 7.0x, which
range was derived taking into consideration, among other things,
historical EBITDA trading multiples for Pulte, Centex and the
selected companies described above under “Selected Public
Companies Analysis.” The cash flows and terminal values
were then discounted to present value as of March 31, 2009
using discount rates ranging from 10.6% to
55
12.2%, which range was derived taking into account, among other
things, a weighted average cost of capital calculation based on
factors commonly considered for purposes of calculating an
estimated weighted average cost of capital, including the
trading volatility of the common stock of Pulte, Centex and the
selected companies described above under “Selected Public
Companies Analysis” relative to the overall market. This
indicated an implied per share equity reference range for Pulte
of approximately $19.50 to $24.25 per share and for Centex of
approximately $21.25 to $27.00 per share (without taking into
account potential synergies) and approximately $36.00 to $43.75
per share (after taking into account potential synergies). Based
on the implied per share equity reference ranges derived for
Pulte and Centex, this analysis indicated the following implied
exchange ratio reference ranges, as compared to the exchange
ratio provided for in the Merger Agreement:
Implied Exchange Ratio Reference Ranges
Without Potential Synergies
With Potential Synergies
Exchange Ratio
0.88 - 1.39
1.48 - 2.25
0.975
Contribution
Analysis
Citi reviewed the relative financial contributions of Pulte and
Centex to the future financial performance of the combined
company on a pro forma basis based on historical financial
results and internal estimates of Pulte’s management for
Pulte and Centex, without giving effect to potential synergies
anticipated by Pulte’s management to result from the
merger. For purposes of this analysis, Citi reviewed
Pulte’s and Centex’s:
•
calendar year 2008 revenue, free cash flow, book value, and
deferred tax asset value adjusted book value;
•
calendar year 2009 estimated revenue, free cash flow and book
value;
•
calendar year 2010 estimated revenue, EBITDA, adjusted EBIT, and
book value; and
•
calendar years 2011 and 2012 estimated EBITDA and adjusted EBIT.
Citi then derived from the relative contributions implied by
these metrics a selected contribution percentage range for Pulte
of approximately 44.4% to 68.3% and for Centex of approximately
31.7% to 55.6%. Based on these ranges for Pulte and Centex, this
analysis indicated the following exchange ratio reference range,
as compared to the exchange ratio provided for in the Merger
Agreement:
Selected Exchange Ratio Reference Range
Exchange Ratio
0.68 - 2.61
0.975
56
Pro
Forma Financial Analysis
Citi reviewed the potential pro forma financial effects of the
merger on, among other things, the combined company’s full
calendar years 2009, 2010 and 2011 estimated earnings per share,
referred to as EPS, book value per share and tangible book value
per share (calculated as book value less goodwill) based on
internal estimates of Pulte’s management, including the
Pulte strategic-case forecasts and the Centex strategic-case
forecasts, after taking into account potential synergies
anticipated by Pulte’s management to result from the
merger. Based on the exchange ratio provided for in the Merger
Agreement, this analysis indicated that the merger could be
accretive to Pulte’s calendar years 2009, 2010 and 2011
estimated EPS and book value per share and calendar years 2010
and 2011 estimated tangible book value per share and dilutive to
Pulte’s calendar year 2009 estimated tangible book value
per share as follows (percentages that could not be calculated
due to values of less than zero are designated as not
meaningful):
Percentage
Accretion/(Dilution)
EPS:
Calendar Year 2009
Not Meaningful
Calendar Year 2010
Not Meaningful
Calendar Year 2011
169.6%
Book Value Per Share:
Calendar Year 2009
8.5%
Calendar Year 2010
17.0%
Calendar Year 2011
24.8%
Tangible Book Value Per Share:
Calendar Year 2009
(1.4)%
Calendar Year 2010
6.5%
Calendar Year 2011
14.9%
The actual results achieved by the combined company may vary
from forecasted results and the variations may be material.
Miscellaneous
Under the terms of Citi’s engagement, Pulte has agreed to
pay Citi for its financial advisory services in connection with
the merger an aggregate fee of $12.5 million,
$2.5 million of which was payable upon delivery of
Citi’s opinion and $10.0 million of which is
contingent upon completion of the merger. Pulte also has agreed
to reimburse Citi for reasonable expenses incurred by Citi in
performing its services, including reasonable fees and expenses
of its legal counsel, and to indemnify Citi and related persons
against liabilities, including liabilities under the federal
securities laws, arising out of its engagement.
Citi and its affiliates in the past have provided, currently are
providing and in the future may provide services to Pulte and
Centex unrelated to the proposed merger, for which services Citi
and its affiliates have received and expect to receive
compensation, including, without limitation, (1) acting as
joint arranger
and/or agent
for, and as a lender under, revolving credit facilities of Pulte
with initial principal amounts of $1.6 billion and
$1.86 billion, respectively, and (2) acting as agent
for, and as a lender under, a revolving credit facility of
Centex with an initial principal amount of $2.085 billion.
Excluding the compensation paid and payable to Citi as described
above in connection with the merger, during the past two years,
Citi and its affiliates have received in the aggregate
approximately $1.0 million from Pulte and its affiliates as
compensation for investment banking and other financial
services. In the ordinary course of business, Citi and its
affiliates may actively trade or hold the securities of Pulte
and Centex for its own account or for the account of its
customers and, accordingly, may at any time hold a long or short
position in those securities. In addition, Citi and its
affiliates, including Citigroup Inc. and its affiliates, may
maintain relationships with Pulte, Centex and their respective
affiliates.
Pulte selected Citi as its financial advisor in connection with
the merger based on Citi’s reputation, experience and
familiarity with Pulte’s business. Citi is an
internationally recognized investment banking firm
57
which 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. The issuance of Citi’s opinion was authorized by
Citi’s fairness opinion committee.
Goldman Sachs rendered its opinion to Centex’s board of
directors that, as of April 7, 2009 and based upon and
subject to the factors and assumptions set forth therein, the
exchange ratio of 0.975 shares of Pulte common stock to be
paid for each share of Centex common stock was fair from a
financial point of view to the holders of the outstanding shares
of Centex common stock.
The full text of the written opinion of Goldman Sachs, dated
April 7, 2009, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached to
this joint proxy statement/prospectus as Annex C. Goldman
Sachs provided its opinion for the information and assistance of
Centex’s board of directors in connection with its
consideration of the transaction. The Goldman Sachs opinion is
not a recommendation as to how any holder of Centex common stock
should vote with respect to the transaction, or any other
matter.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
•
the Merger Agreement;
•
annual reports to stockholders and Annual Reports on
Form 10-K
of Centex and Pulte for the five fiscal years ended
March 31, 2008 and December 31, 2008, respectively;
•
certain interim reports to stockholders and Quarterly Reports on
Form 10-Q
of Centex and Pulte;
•
certain other communications from Centex and Pulte to their
respective stockholders;
•
certain publicly available research analyst reports for Centex
and Pulte;
•
certain internal financial analyses and forecasts for Centex
prepared by its management and certain internal financial
analyses and forecasts for Pulte prepared by its management, as
adjusted by the management of Centex, in each case, as approved
for Goldman Sachs’s use by Centex, which we refer to as the
forecasts;
•
certain cost savings and operating synergies projected by the
management of Pulte to result from the transaction; and
•
certain cost savings and operating synergies projected by the
management of Centex to result from the transaction, as approved
for Goldman Sachs’s use by Centex, which we refer to as the
synergies.
Goldman Sachs also held discussions with members of the senior
management of Pulte regarding their assessment of the strategic
rationale for, and the potential benefits of, the transaction
and the past and current business operations, financial
condition, and future prospects of Pulte, and with members of
the senior management of Centex regarding their assessment of
the strategic rationale for, and the potential benefits of, the
transaction and the past and current business operations,
financial condition, and future prospects of Centex and Pulte.
In addition, Goldman Sachs reviewed the reported price and
trading activity for shares of Centex common stock and Pulte
common stock, compared certain financial and stock market
information for Centex and Pulte with similar information for
certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business
combinations in the home building industry specifically and in
other industries generally and performed such other studies and
analyses, and considered such other factors, as it considered
appropriate.
For purposes of rendering the opinion described above, Goldman
Sachs relied upon and assumed, without assuming any
responsibility for independent verification, the accuracy and
completeness of all of the financial,
58
legal, accounting, tax and other information provided to,
discussed with or reviewed by it. In that regard, Goldman Sachs
has assumed that the forecasts and the synergies have been
reasonably prepared on a basis reflecting the best then
available estimates and judgments of the management of Centex
and that the synergies will be realized in all respects
meaningful to Goldman Sachs’s analysis. In addition,
Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities (including any
contingent, derivative or off-balance-sheet assets and
liabilities) of Centex or Pulte or any of their respective
subsidiaries and it has not been furnished with any such
evaluation or appraisal. Goldman Sachs also has assumed that all
governmental, regulatory or other consents and approvals
necessary for the consummation of the transaction will be
obtained without any adverse effect on Centex or Pulte or on the
expected benefits of the transaction in any way meaningful to
its analysis.
Goldman Sachs’s opinion addresses only the fairness from a
financial point of view, as of the date of the opinion, of the
exchange ratio pursuant to the Merger Agreement, and Goldman
Sachs’s opinion to the Centex board of directors does not
otherwise address any legal, regulatory, tax or accounting
matters nor does it address the underlying business decision of
Centex to engage in the transaction or the relative merits of
the transaction as compared to any strategic alternatives that
may have been available to Centex. Goldman Sachs does not
express any view on, and Goldman Sachs’s opinion does not
address, any other term or aspect of the Merger Agreement or the
transaction other than the fairness from a financial point of
view, as of the date of the opinion, of the exchange ratio
pursuant to the Merger Agreement, including, without limitation,
the fairness of the transaction to, or any other consideration
received in connection therewith by, the holders of any other
class of securities, creditors or other constituencies of Centex
or Pulte; the fairness of the amount or nature of any
compensation to be paid or payable to any of the officers,
directors or employees of Centex or Pulte, or class of such
persons in connection with the transaction, whether derived from
the exchange ratio pursuant to the Merger Agreement or
otherwise. Goldman Sachs did not express any opinion as to the
prices at which shares of Pulte common stock will trade at any
time. Goldman Sachs’s opinion was necessarily based on
economic, monetary, market and other conditions as in effect on,
and the information made available to it as of, the date of the
opinion and Goldman Sachs assumed no responsibility for
updating, revising or reaffirming its opinion based on
circumstances, developments or events occurring after the date
of its opinion. Goldman Sachs’s opinion was approved by a
fairness committee of Goldman Sachs.
The following is a summary of the material financial analyses
delivered by Goldman Sachs to Centex’s board of directors
in connection with rendering the opinion described above. The
following summary, however, does not purport to be a complete
description of the financial analyses performed by Goldman
Sachs, nor does the order of analyses described represent
relative importance or weight given to those analyses by Goldman
Sachs. Some of the summaries of the financial analyses include
information presented in tabular format. The tables must be read
together with the full text of each summary and are alone not a
complete description of Goldman Sachs’s financial analyses.
Except as otherwise noted, the following quantitative
information, to the extent that it is based on market data, is
based on market data as it existed before April 7, 2009 and
is not necessarily indicative of current market conditions.
Historical Stock Trading Analysis. Goldman
Sachs reviewed the historical trading prices for Centex common
stock as of February 27, 2009, the date on which Centex and
Pulte commenced serious discussions and April 6, 2009, the
last trading day prior to the delivery of Goldman Sachs’s
opinion. In addition, Goldman Sachs analyzed the consideration
to be received by holders of Centex common stock pursuant to the
Merger Agreement in relation to the market prices of Centex
common stock as of February 27, 2009 and April 6,2009. This analysis was undertaken to assist the Centex board of
directors in understanding how the Pulte proposal compared to
recent historical market prices of Centex common stock. To
undertake this analysis, the Pulte proposal needed to be
converted into an implied price per share, and the market price
of $8.29 per share of Centex common stock on April 6, 2009
was used for this purpose.
This analysis indicated that the implied value per share to be
paid to Centex stockholders pursuant to the Merger Agreement
represented:
•
a premium of 81.7% based on the February 27, 2009 market
price of $6.21 per share of Centex common stock; and
59
•
a premium of 36.1% based on the April 6, 2009 market price
of $8.29 per share of Centex common stock.
Selected Companies Analysis. Goldman Sachs
reviewed and compared certain financial information and public
market multiples for Centex and Pulte to corresponding financial
information and public market multiples for the following
publicly traded corporations in the homebuilding industry:
•
D.R. Horton, Inc.
•
KB Home
•
Lennar Corporation
•
M.D.C. Holdings, Inc.
•
NVR, Inc.
•
The Ryland Group, Inc.
•
Toll Brothers, Inc.
Orleans Homebuilders and Meritage were excluded from Goldman
Sachs’s analysis based on the size of their market
capitalization relative to the other comparable companies. As of
April 6, 2009, the market capitalization of Orleans
Homebuilders was $44 million and the market capitalization
of Meritage was $403 million.
Although none of the selected companies is directly comparable
to Centex or Pulte, the companies included were chosen because
they are publicly traded companies in the homebuilding industry,
the industry in which Centex operates. The analysis was
undertaken to assist the Centex board of directors in
understanding how the common stock of Centex, Pulte and their
peers were trading relative to their 52-week market highs, as
compared to public estimates of such companies’ annual
growth rates and historical and estimated future book values, a
commonly used financial metric for the homebuilding industry,
and whether Centex’s and Pulte’s common stock was
trading in line with other companies in the homebuilding
industry. The analysis was also undertaken in order to assist
Goldman Sachs in understanding how the various companies within
the homebuilding industry were then currently trading with
respect to certain commonly used financial metrics and in
understanding if the shares of Centex or Pulte were trading at a
relative premium or discount to one another. The analysis was
provided to the Centex board of directors to help the directors
to understand the existing market dynamics with respect to the
selected companies, including Pulte and Centex.
Goldman Sachs calculated and compared the selected
companies’ last twelve months, 2009 and 2010 price-book
value ratio and estimated five-year earnings per share
compounded annual growth rate, or CAGR, for calendar years ended
December 31, 2009 to 2014, to the corresponding data for
Centex and Pulte based on certain publicly available financial
information and the Institutional Brokers’ Estimate System,
or IBES. The 2009 price/book value ratio for each the selected
companies is as follows: D.R. Horton, Inc., 1.28x; KB Home,
0.96x; Lennar Corporation, 0.53x; M.D.C. Holdings, Inc., 1.63x;
NVR, Inc., not applicable; The Ryland Group, 1.16x; and Toll
Brothers, Inc., 1.00x. The ratios of 2009 and 2010 estimated
price to book value of shareholders’ equity per share were
calculated using Centex’s closing share price on
April 6, 2009 and IBES median estimates for book value of
shareholders’ equity per share as of April 6, 2009.
The results of these analyses are summarized as follows:
Selected Companies
Range
Median
Centex
Pulte
LTM Price/Book Value
2.02x-0.46x
1.05
x
0.78x
1.05
x
2009 Price/Book Value
1.63x-0.53
x
1.14
x
1.34
x
1.12
x
2010 Price/Book Value
1.72x-0.53
x
1.05
x
0.72
x
1.12
x
Five-year EPS CAGR (CY2009E-2014E)
15%-5%
10
%
8
%
15
%
60
Goldman Sachs also analyzed certain publicly available
information relating to selected transactions involving
companies in the homebuilding industry. The following precedent
transactions were considered in Goldman Sachs’ analysis
(target / acquiror): William Lyon
Homes / General William Lyon; Crossman
Comm. / Beazer Homes; Forecast / Hovnanian;
Schuler Homes / DR Horton; Del Webb / Pulte
Homes; Engle Homes / Technical Olympic; US
Home / Lennar; Lewis Homes / KB Home;
Continental / DR Horton.
Analysis at Various Prices. Goldman Sachs
performed certain analyses, based on publicly available
historical information and projections provided by Centex
management. Assuming an exchange ratio of 0.975 shares of
Pulte common stock for each share of Centex common stock,
Goldman Sachs calculated for Centex the implied Centex share
price per share as of April 6, 2009, the implied total
equity consideration (on a diluted basis), implied enterprise
value, the implied book value per share multiple and the implied
earnings per share multiple. The analysis was undertaken to
assist the Centex board of directors’ understanding as to
how Pulte’s proposal, converted into an implied per share
cash value based on the market price of Pulte’s common
stock, compared to recent market prices of Centex common stock
and how such price could be compared as a multiple of
Centex’s historical and estimated future book value. The
following table presents the results of Goldman Sachs’s
analysis (dollar amounts in millions, except for implied value
per share):
Implied price per Centex Common Stock (as of April 6, 2009)
Illustrative Discounted Cash Flow
Analysis. Goldman Sachs performed illustrative
discounted cash flow analyses on Centex using
(1) illustrative multiples of book value, which is referred
to as the book value methodology, (2) illustrative
perpetuity growth rates of free cash flow, which is referred to
as the perpetuity growth methodology, and (3) illustrative
multiples of net income, which is referred to as the P/E
multiple methodology, in each case using Centex
management’s projections and Pulte projections provided by
Pulte management as adjusted by Centex management. This analysis
was undertaken to assist the Centex board of directors in
understanding how Pulte’s proposal, converted into an
implied per share cash value might compare to Centex’s
projections of its stand-alone future cash flows. Goldman Sachs
calculated indications of net present value of cash flows for
Centex for the fiscal years ended March 31, 2010 through
2014 using discount rates ranging from 13.5% to 14.5%. Goldman
Sachs calculated implied values per share of Centex common stock
using illustrative terminal values in the year 2014 based on
(1) book value multiples ranging from 1.0x to 1.5x,
(2) perpetuity growth rate of free cash flow from 0% to 2%,
and (3) net income multiples ranging from 6.0x to 8.0x.
Terminal multiples were estimated based upon the average trading
multiples of Centex and Pulte over time as well as the multiples
of their peers. These illustrative terminal or end values were
then discounted to calculate implied indications of present
values using discount rates ranging from 13.5% to 14.5%. For the
purposes of calculating an illustrative terminal value for both
perpetuity growth and P/E multiple methodologies, Goldman Sachs
assumed a 35% marginal tax rate per Centex management’s
guidance. The estimated tax expense in each year was provided by
Centex management and based upon company projections. The 35%
tax rate was only used in conjunction with the calculation of
the terminal value in the discounted cash flow analysis. The
ranges of implied values in this analysis were calculated based
on ranges of multiples, including a range of price to earnings
multiples
(P/E
multiples), derived by Goldman Sachs utilizing its experience
and professional judgment, taking into account current and
historical trading data and the current P/E multiples for
selected homebuilding companies. The ranges of discount rates
used by Goldman Sachs in this analysis were derived by Goldman
Sachs utilizing a weighted average cost of capital analysis,
based on the capital asset pricing model, which takes into
account certain financial metrics, including betas, for Centex
and selected homebuilding companies, the risk free rate, by
reference to the U.S. government bond,
61
and an equity risk premium, which represents the excess return
demanded by investors over a risk-free rate. The following table
presents the results of this analysis:
Illustrative Per Share Value Indications
Book Value Methodology
$
8.83 - $14.85
Perpetuity Growth Methodology
$
9.28 - $13.47
P/E Multiple Methodology
$
11.21 - $16.29
In addition, Goldman Sachs performed an illustrative pro forma
discounted cash flow analysis of the combined company following
consummation of the transaction using Centex management’s
projections and Pulte management’s projections as adjusted
by Centex management, assuming levels of synergies achieved as
provided by both Centex and Pulte management. Goldman
Sachs’s analysis assumed a perpetuity growth methodology
for terminal or end value calculation based on a range of free
cash flow growth rates from 0% to 2%. The illustrative terminal
or end values were then discounted to calculate implied
indications of net present values using discount rates ranging
from 13.5% to 14.5% for Centex stand-alone and from 11.5% to
12.5% for the combined company per Pulte’s cost of capital.
For the purposes of calculating an illustrative terminal or end
value, Goldman Sachs assumed a 35% marginal tax rate per Centex
management’s guidance. The ranges of implied values in this
analysis were calculated based on ranges of multiples, including
a range of price to earnings multiples (P/E multiples), derived
by Goldman Sachs utilizing its experience and professional
judgment, taking into account current and historical trading
data and the current P/E multiples for selected homebuilding
companies. The ranges of discount rates used by Goldman Sachs in
this analysis were derived by Goldman Sachs utilizing a weighted
average cost of capital analysis, based on the capital asset
pricing model, which takes into account certain financial
metrics, including betas, for Centex and selected homebuilding
companies, the risk free rate, by reference to the
U.S. government bond, and an equity risk premium, which
represents the excess return demanded by investors over a
risk-free rate. The following table presents the results of this
analysis:
Illustrative Per Share Value Indications
Centex Stand-alone Value
$
9.28 - $13.47
Combined Company Value
$
13.19 - $17.57
Pro Forma Value to Centex Stockholders Assuming Pulte Management
Synergies
$
20.08 - $27.17
Pro Forma Value to Centex Stockholders Assuming Centex
Management Synergies
$
21.85 - $29.26
Contribution Analysis. Goldman Sachs reviewed
specific historical and estimated future operating and financial
information including, among other things, book value of
stockholders’ equity, market capitalization, implied fair
market value of stockholders’ equity based on publicly
available research of a leading homebuilder research firm and
relative discounted cash flows for Centex and Pulte. The
analysis was undertaken to assist the Centex board of directors
in understanding how the Pulte proposal, expressed as a
percentage of the combined company’s total common equity,
compared to the percentage of the combined company’s book
value and projected cash flows, among other measures,
contributed to the combined company by Centex or Pulte, as the
case may be. The analysis indicated that Centex’s
stockholders would receive 31.9% of the outstanding common
equity of the combined company following completion of the
transaction. Goldman Sachs analyzed the relative potential cash
flow contribution of Centex and Pulte to the combined company
following completion of the transaction pursuant to the
perpetuity growth methodology and assumed a 14% discount rate
for Centex and a 12% discount rate for Pulte, and a 1.0%
perpetuity growth rate of free cash flow. Centex has a different
weighted average cost of capital than Pulte, which accounts for
the difference in discount rates.
Present Value of Future Share Price
Analysis. Goldman Sachs performed an illustrative
analysis of the implied present value of the future price per
share of Centex common stock, which is designed to provide an
indication of the present value of a theoretical future value of
a company’s equity as a function of such company’s
estimated future earnings and its assumed price to future book
value of stockholders’ equity per share multiple. For this
analysis, Goldman Sachs used Centex management projections for
fiscal years ended March 31, 2010 to 2014 and Pulte
projections provided by Pulte management as adjusted by Centex
management.
Goldman Sachs first calculated, based on an assumed book value
of stockholders’ equity multiple of 1.0x, the projected
future value per share of Centex common stock, and then
discounted the projected future value per share back, using a
discount rate of 16.0%, to derive the present value of the
projected future value of Centex common stock. Goldman Sachs
also performed the same calculation based on an assumed book
value multiple of 1.5x. The discount rate used in this analysis
reflects the cost of equity which is calculated by taking into
account certain financial metrics, including betas, for Centex,
the risk free rate, by reference to the
10-year
U.S. Government Treasury bond, and an equity risk premium,
which represents the excess return demanded by investors over a
risk-free rate. The following table presents the results of this
analysis:
Present Value of Centex’s Stand-Alone Future Stock
Price
FY2010E
FY2011E
FY2012E
FY2013E
FY2014E
1.5x Book
$
11.15
$
8.24
$
8.51
$
11.69
$
14.67
1.0x Book
$
7.43
$
5.49
$
5.67
$
7.79
$
9.78
In addition, Goldman Sachs also performed an illustrative
analysis of implied pro forma present value per share of common
stock of the combined company based on Centex management
projections and Pulte management projections as adjusted by
Centex management. Goldman Sachs first calculated, based on an
assumed book value multiple of 1.0x, the projected future value
per Centex share of common stock of the combined company for
each of the fiscal years ended March 31, 2009 to
March 31, 2013, and then discounted the projected future
value per share back, using a discount rate of 14.0%, to
calculate the present value of the projected future value of
common stock of the combined company. Goldman Sachs also
performed the same calculation based on an assumed book value
multiple of 1.5x. The following table presents the results of
this analysis:
Present Value of Pro Forma Future Stock Price
FY2009E
FY2010E
FY2011E
FY2012E
FY2013E
1.5x Book
$
13.48
$
12.84
$
13.64
$
16.80
$
20.13
1.0x Book
$
8.99
$
8.56
$
9.10
$
11.20
$
13.42
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Goldman Sachs’s opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of
all of its analyses and did not attribute any particular weight
to any factor or analysis considered by it. Rather, Goldman
Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the
results of all of its analyses. No company or transaction used
in the above analyses as a comparison is directly comparable to
Centex or Pulte, respectively, or the contemplated transaction.
63
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs’s providing its opinion to Centex’s board of
directors as to the fairness from a financial point of view of
the exchange ratio pursuant to the Merger Agreement. These
analyses do not purport to be appraisals nor do they necessarily
reflect the prices at which businesses or securities actually
may be sold. Analyses based upon forecasts of future results are
not necessarily indicative of actual future results, which may
be significantly more or less favorable than suggested by these
analyses. Because these analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond
the control of the parties or their respective advisors, none of
Centex, Goldman Sachs or any other person assumes responsibility
if future results are materially different from those forecast.
The exchange ratio was determined through arm’s-length
negotiations between Centex and Pulte and was approved by
Centex’s board of directors. Goldman Sachs provided advice
to Centex during these negotiations. Goldman Sachs did not,
however, recommend any specific exchange ratio to Centex or the
Centex board of directors or that any specific exchange ratio
constituted the only appropriate exchange ratio for the
transaction.
As described above, Goldman Sachs’s opinion to
Centex’s board of directors was one of many factors taken
into consideration by Centex’s board of directors in making
its determination to approve the Merger Agreement. The foregoing
summary does not purport to be a complete description of the
analyses performed by Goldman Sachs in connection with the
fairness opinion and is qualified in its entirety by reference
to the written opinion of Goldman Sachs attached to this joint
proxy statement/prospectus as Annex C.
Goldman, Sachs & Co. and its affiliates are engaged in
investment banking and financial advisory services, securities
trading, investment management, principal investment, financial
planning, benefits counseling, risk management, hedging,
financing, brokerage activities and other financial and
non-financial activities and services for various persons and
entities. In the ordinary course of these activities and
services, Goldman, Sachs & Co. and its affiliates may
at any time make or hold long or short positions and
investments, as well as actively trade or effect transactions,
in the equity, debt and other securities (or related derivative
securities) and financial instruments (including bank loans and
other obligations) of Centex, Pulte and any of their respective
affiliates or any currency or commodity that may be involved in
the transaction for their own account and for the accounts of
their customers. Goldman Sachs acted as financial advisor to
Centex in connection with, and participated in certain of the
negotiations leading to, the transaction. In addition, Goldman
Sachs has provided certain investment banking and other
financial services to Centex and its affiliates from time to
time, including having acted as financial advisor to Centex in
connection with the sale of certain of its land assets in March
2008. During the two-year period prior to April 7, 2009,
the date on which Goldman Sachs rendered its fairness opinion,
Goldman Sachs has received aggregate fees from Centex for
investment banking and other financial services unrelated to the
transaction of approximately $5,000,000. Goldman Sachs also has
provided certain investment banking and other financial services
to Pulte and its affiliates from time to time. Goldman Sachs
also may provide investment banking and other financial services
to Centex, Pulte and their respective affiliates in the future.
In connection with the above-described services Goldman Sachs
has received, and may receive in the future, compensation.
The Centex board of directors selected Goldman Sachs as its
financial advisor because it is an internationally recognized
investment banking firm that has substantial experience in
transactions similar to the transaction. During the two-year
period prior to April 7, 2009, the date on which Goldman
Sachs rendered its fairness opinion, Goldman Sachs received
aggregate fees from Centex for investment banking and other
financial services unrelated to the transaction of approximately
$5,000,000 and has not been engaged by Pulte to provide
investment banking or other financial services. Pursuant to a
letter agreement dated March 10, 2009, Centex engaged
Goldman Sachs to act as its financial advisor in connection with
the contemplated transaction. Pursuant to the terms of this
engagement letter, Centex has agreed to pay Goldman Sachs a
transaction fee of approximately $18 million,
$5 million of which was payable upon execution of the
Merger Agreement and approximately $13 million of which is
contingent upon consummation of the transaction. In addition,
Centex has agreed to reimburse Goldman Sachs for its expenses,
including attorneys’ fees and disbursements, and to
indemnify Goldman Sachs and related persons against various
liabilities, including certain liabilities under the federal
securities laws.
The merger was subject to review by the DOJ and the FTC under
the HSR Act. Under the HSR Act, Pulte and Centex were required
to make pre-merger notification filings and to await the
expiration or early termination of the statutory waiting period
prior to completing the merger. The notifications required under
the HSR Act to the FTC and the DOJ were filed on April 21,2009 by Centex and on April 22, 2009 by Pulte. The
statutory waiting period under the HSR Act expired on
May 22, 2009 at 11:59 p.m., eastern time. No further
regulatory approvals are a condition to the completion of the
merger.
At any time before or after completion of the merger, either the
DOJ, the FTC or any state attorneys general could challenge or
seek to block the merger under the antitrust laws, as it deems
necessary or desirable in the public interest. In addition, in
some jurisdictions, a private party could initiate legal action
under the antitrust laws challenging or seeking to enjoin the
merger, before or after it is completed. Pulte and Centex cannot
be sure that a challenge to the merger will not be made or that,
if a challenge is made, Pulte and Centex will prevail.
Following the announcement of the Merger Agreement on
April 8, 2009, the following actions were filed purporting
to challenge the merger:
The first case, styled Roseman, et al. v. Alexander, et al.
(Case
No. 09-04396),
was filed in the District Court of Dallas County, Texas on
April 15, 2009. This case asserts claims on behalf of a
purported class of Centex stockholders against Centex and each
of its directors, related to an alleged breach of fiduciary duty
in connection with the merger. The complaint alleges, among
other things, that the Centex directors, aided and abetted by
Centex, breached their fiduciary duties by failing to maximize
stockholder value. Among other things, the complaint seeks to
enjoin Centex and its directors from completing the merger. The
complaint also seeks damages.
The second case, styled Hanson v. Eller, et al. (Case
No. 09-04425),
was filed in the District Court of Dallas County, Texas on
April 16, 2009. This case asserts claims on behalf of a
purported class of Centex stockholders against Centex, Pulte and
each of Centex’s directors, related to an alleged breach of
fiduciary duty in connection with the merger. The complaint
alleges, among other things, that the Centex directors, aided
and abetted by Centex and Pulte, breached their fiduciary duties
by taking steps to avoid competitive bidding, by failing
properly to value Centex, and by not protecting against supposed
conflicts of interest. Among other things, the complaint seeks
to enjoin the defendants from completing the merger. The
complaint also seeks a constructive trust into which the court
should direct any benefits improperly received by the defendants
as a result of their alleged wrongful conduct.
The third case, styled Praytor v. Alexander, et al. (Case
No. 09-04518),
was filed in the District Court of Dallas County, Texas on
April 17, 2009. This case asserts claims on behalf of a
purported class of Centex stockholders against each of
Centex’s directors. The complaint alleges, among other
things, that the Centex directors breached their fiduciary
duties by taking steps to avoid competitive bidding, by failing
properly to value Centex, and by not protecting against supposed
conflicts of interest. Among other things, the complaint seeks
to enjoin Centex’s directors from completing the merger.
On April 21, 2009, plaintiffs in the Roseman and
Hanson actions moved to consolidate those cases with the
Praytor action, and for appointment of interim class
counsel and liaison counsel. On April 23, 2009, plaintiff
in the Praytor action filed a motion to consolidate that
action with the Roseman and Hanson actions, and
requested a briefing schedule on the issue of lead and liaison
counsel.
The fourth case, styled Witmer v. Eller, et al. (Case
No. 09-04751),
was filed in the District Court of Dallas County, Texas on
April 22, 2009. This case asserts claims on behalf of a
purported class of Centex stockholders against Centex, Pulte and
each of Centex’s directors, related to an alleged breach of
fiduciary duty and an alleged abuse of control. The complaint
alleges, among other things, that the Centex directors, aided
and abetted by Centex and Pulte, breached their fiduciary duties
by failing to obtain an adequate price for Centex, by acting to
deter competing bids, by engaging in self-dealing, and by
soliciting shareholder votes
65
based upon inadequate disclosures. The complaint also alleges
that the Centex directors abused their ability to control and
influence Centex. Among other things, the complaint seeks to
enjoin the defendants from completing the merger. The complaint
also seeks a constructive trust into which the court should
direct any benefits improperly received by the defendants as a
result of their alleged wrongful conduct.
The fifth case, styled Gottlieb v. Centex Corp., et al.
(Case
No. 09-05010),
was filed in the District Court of Dallas County, Texas on
April 23, 2009. This case asserts claims on behalf of a
purported class of Centex stockholders against Centex, Pulte,
each of Centex’s directors and Pi Nevada Building Company,
related to an alleged breach of fiduciary duty in connection
with the merger. The complaint alleges, among other things, that
the Centex directors, aided and abetted by Centex, Pulte and Pi
Nevada Building Company, breached their fiduciary duties by
failing to obtain an adequate price for Centex, by acting to
deter competing bids, by engaging in self-dealing, and by
soliciting stockholder votes based upon inadequate disclosures.
Among other things, the complaint seeks to enjoin the defendants
from completing the merger. The complaint also seeks damages.
On June 1, 2009, the five cases pending in the District
Court of Dallas County, Texas were consolidated under the case
number
09-4396 for
all purposes, including pretrial proceedings and trial. The
consolidated case is styled In re Centex Corporation
Shareholder Class Action Litigation and will proceed in
the 160th Judicial District of the District Court of Dallas
County, Texas.
On June 22, 2009, the plaintiffs in In re Centex
Corporation Shareholder Class Action Litigation filed a
consolidated amended class action complaint. This consolidated
complaint asserts claims on behalf of a purported class of
Centex stockholders against Centex, Pulte and each of
Centex’s directors, related to an alleged breach of
fiduciary duty in connection with the merger. The consolidated
complaint alleges, among other things, that the Centex
directors, aided and abetted by Centex and Pulte, breached their
fiduciary duties by failing to obtain an adequate price for
Centex shares, by conducting a flawed process culminating in the
sale of Centex, by engaging in self-dealing, and by soliciting
stockholder votes based upon inadequate disclosures. Among other
things, the consolidated complaint seeks to enjoin the
defendants from completing the merger. The consolidated
complaint also seeks a constructive trust into which the court
should direct any benefits improperly received by the defendants
as a result of their alleged wrongful conduct. No due date has
been set for an answer or responsive pleading.
On July 10, 2009, the plaintiffs in In re Centex
Corporation Shareholder Class Action Litigation filed a
motion to compel and expedite discovery. The plaintiffs allege
that they require expedited discovery in order to prepare for a
temporary injunction hearing. The plaintiffs’ motion to
compel and expedite discovery further states that the plaintiffs
expect to file a motion to temporarily enjoin the merger once
Centex mails the final joint proxy statement/prospectus to
Centex’s stockholders. The court set a hearing on
July 24, 2009 to hear the plaintiffs’ motion to compel
and expedite discovery.
On July 17, 2009, the plaintiffs in In re Centex
Corporation Shareholder Class Action Litigation and the
defendants entered into a memorandum of understanding reflecting
a preliminary settlement of the case. The memorandum of
understanding sets forth the general terms of a settlement to be
embodied in a stipulation of settlement to be submitted to the
court. The settlement is subject to, among other things,
approval by the court and additional confirmatory discovery by
the plaintiffs. Pursuant to the memorandum of understanding, the
defendants agreed to provide certain additional disclosure that
is included in this joint proxy statement/prospectus.
The sixth case, styled Anbar Holdings Ltd. v. Eller, et al.
(Case
No. 09-588699),
was filed in the District Court of Clark County, Nevada on
April 24, 2009. This case asserts claims on behalf of a
purported class of Centex stockholders against Centex, Pulte and
each of Centex’s directors, related to an alleged breach of
fiduciary duty in connection with the merger. The complaint
alleges, among other things, that the Centex directors, aided
and abetted by Centex and Pulte, breached their fiduciary duties
by failing to obtain an adequate price for Centex and by acting
to deter competing bids. Among other things, the complaint seeks
to enjoin the defendants from completing the merger. The
complaint also seeks damages. On June 4, 2009, Centex and
the Centex directors responded to the complaint. Both Centex and
its directors moved to stay the Nevada case pending the
resolution of the earlier-filed consolidated action in Dallas
County, Texas. In a
66
separate filing, Centex’s directors moved to dismiss the
claims against them for lack of personal jurisdiction. Finally,
Centex moved to dismiss, for failure to state a claim upon which
relief can be granted, the allegations against Centex for aiding
and abetting the Centex directors’ alleged breach of
fiduciary duty. On June 23, 2009, Pulte filed a motion
joining in the motion to stay, and also filed a separate motion
to dismiss the complaint. The plaintiffs filed an amended class
action complaint on June 22, 2009, which largely restates
the allegations from the complaint filed on April 24, 2009,
and adds new allegations asserting, among other things, that the
Centex directors, aided and abetted by Centex and Pulte,
breached their fiduciary duties by not protecting against
alleged conflicts of interest and soliciting stockholder votes
based upon inadequate disclosures. No due date has been set for
an answer or responsive pleading to the amended complaint.
Based on the facts known to date, the defendants believe that
the claims asserted against them in these cases are without
merit, and the defendants intend to defend themselves vigorously
against the claims.
The following discussion is a summary of the material
U.S. federal income tax consequences of the merger to
U.S. Holders (as defined below) of Centex common stock.
This discussion is based on the Internal Revenue Code,
applicable U.S. Treasury regulations promulgated
thereunder, administrative rulings and judicial authorities,
each as in effect as of the date of this document and all of
which are subject to change at any time, possibly with
retroactive effect. In addition, this discussion does not
address any state, local or foreign tax consequences of the
merger.
This discussion addresses only Centex stockholders who are
U.S. Holders and hold Centex common stock as a capital
asset within the meaning of Section 1221 of the Internal
Revenue Code (generally, property held for investment). It does
not address all aspects of U.S. federal income taxation
that may be relevant to a particular Centex stockholder in light
of that stockholder’s individual circumstances or to a
Centex stockholder who is subject to special treatment under
U.S. federal income tax law, including, without limitation:
•
a bank, insurance company or other financial institution;
•
a tax-exempt organization;
•
a mutual fund;
•
a
non-U.S. Holder
(as defined below);
•
a U.S. expatriate;
•
an entity or arrangement treated as a partnership for
U.S. federal income tax purposes or an investor in such
partnership;
•
a dealer in securities;
•
a holder who has a functional currency other than the United
States dollar;
•
a holder liable for the alternative minimum tax;
•
a trader in securities who elects to apply a mark-to-market
method of accounting;
•
a holder who holds Centex common stock as part of a hedge,
straddle, constructive sale or conversion transaction; and
•
a holder who acquired Centex common stock pursuant to the
exercise of employee stock options or otherwise as compensation.
For purposes of this discussion, “U.S. Holder”
refers to a beneficial owner of Centex common stock that is, for
U.S. federal income tax purposes, (1) an individual
citizen or resident of the United States, (2) a
corporation, or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized in
or under the laws of the United States, any state thereof or the
District of Columbia, (3) an estate the income of which is
subject to U.S. federal income taxation regardless of its
source or (4) a trust if it (A) is subject to the
primary supervision of a court within the United States and one
or more U.S. persons have the
67
authority to control all substantial decisions of the trust or
(B) has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a
U.S. person. The term
“non-U.S. Holder”
means a beneficial owner of Centex common stock that is neither
a U.S. Holder nor an entity or arrangement treated as a
partnership for U.S. federal income tax purposes.
If an entity or arrangement treated as a partnership for
U.S. federal income tax purposes holds Centex common stock,
the tax treatment of a partner in such entity will generally
depend upon the status of the partner and the activities of that
partnership. A partner in a partnership holding Centex common
stock should consult its tax advisor regarding the tax
consequences of the merger.
Centex stockholders should consult their tax advisors as to
the specific tax consequences to them of the merger in light of
their particular circumstances, including the applicability and
effect of U.S. federal, state, local and foreign income and
other tax laws.
The merger has been structured to qualify as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code. It is a condition to the completion of the merger
that Pulte receive a written opinion from its counsel, Honigman
Miller Schwartz and Cohn LLP or Sidley Austin LLP, and that
Centex receive a written opinion from its counsel, Wachtell,
Lipton, Rosen & Katz, in each case dated as of the
date of completion of the merger, to the effect that the merger
will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. These opinions
will be based on representations provided by Pulte and Centex to
be delivered at the time of closing and on customary
assumptions. If any such representation or assumption is
inaccurate, the tax consequences of the merger to holders of
Centex common stock could differ materially from those described
below.
No ruling has been or will be sought from the IRS as to the
U.S. federal income tax consequences of the merger and an
opinion of counsel is not binding on the IRS or any court.
Accordingly, there can be no assurances that the IRS will not
disagree with or challenge any of the conclusions described
herein.
In addition, in connection with the filing of the registration
statement of which this joint proxy statement/prospectus is a
part, each of Pulte and Centex has received a legal opinion from
Honigman Miller Schwartz and Cohn LLP and Wachtell, Lipton,
Rosen & Katz, respectively, to the same effect as the
opinions described above. Neither Pulte nor Centex intends to
waive the receipt of an opinion of counsel, dated as of the date
of completion of the merger, as a condition to its obligation to
complete the merger, and neither Pulte nor Centex will waive the
receipt of this opinion as a condition to its obligation to
complete the merger without the approval of Centex stockholders.
Accordingly, the material U.S. federal income tax
consequences of the merger to U.S. Holders of Centex common
stock are as follows:
•
a holder of Centex common stock will not recognize gain or loss
upon receipt of Pulte common stock solely in exchange for Centex
common stock, except with respect to cash received in lieu of
fractional shares of Pulte common stock (as discussed below);
•
the aggregate tax basis in the shares of Pulte common stock
received in the merger (including any fractional shares deemed
received and exchanged for cash) will be equal to the aggregate
tax basis of the Centex common stock surrendered; and
•
the holding period of the shares of Pulte common stock received
in the merger will include the holding period of the shares of
Centex common stock surrendered in exchange therefor.
If a holder acquired different blocks of Centex common stock at
different times or different prices, such holder’s tax
basis and holding periods in its Pulte common stock may be
determined with reference to each block of Centex common stock.
Cash in Lieu of Fractional Shares. A
holder of Centex common stock who receives cash in lieu of a
fractional share of Pulte common stock generally will be treated
as having received such fractional share in the merger and then
as having received cash in exchange for such fractional share.
Gain or loss generally will be recognized based on the
difference between the amount of cash received in lieu of the
fractional share and
68
the tax basis allocated to such fractional share of Pulte common
stock. Such gain or loss generally will be long-term capital
gain or loss if, as of the effective date of the merger, the
holding period in the Centex common stock exchanged is greater
than one year.
Information Reporting and Backup
Withholding. A Centex stockholder may be
subject to information reporting and backup withholding on any
cash payment received in lieu of a fractional share of Pulte
common stock, unless such stockholder properly establishes an
exemption or provides a correct taxpayer identification number,
and otherwise complies with backup withholding rules. Any
amounts withheld under the backup withholding rules are not an
additional tax and may be allowed as a refund or credit against
such holder’s United States federal income tax liability,
provided the required information is timely furnished to the IRS.
Statement of Financial Accounting Standards No. 141(R),
Business Combinations, which we refer to as
SFAS 141(R), requires the use of the acquisition method of
accounting for business combinations. In applying the
acquisition method, it is necessary to identify the acquirer and
the acquiree for accounting purposes. In a business combination
effected through an exchange of equity interests, the entity
that issues the equity interests is generally considered the
acquirer, but there are other factors in SFAS 141(R) that
must also be considered. Pulte management considered these other
factors and determined that Pulte will be considered the
acquirer of Centex for accounting purposes. The total purchase
price will be allocated to the identifiable assets acquired and
liabilities assumed from Centex based on their fair values as of
the date of the completion of the transaction, with any excess
allocated to goodwill. Reports of financial condition and
results of operations of Pulte issued after completion of the
merger will reflect Centex’s balances and results after
completion of the merger, but will not be restated retroactively
to reflect the historical financial position or results of
operations of Centex. Following the completion of the merger,
the earnings of the combined company will reflect acquisition
accounting adjustments; for example, additional depreciation of
property, plant and equipment, amortization of identified
intangible assets or other impacts from the purchase price
allocation.
In accordance with the Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets,
goodwill resulting from the purchase business combination
will not be amortized but instead will be tested for impairment
at least annually (more frequently if certain indicators are
present). If Pulte management determines that the value of
goodwill has become impaired, the combined company will incur an
accounting charge for the amount of impairment during the fiscal
quarter in which the determination is made.
It is a condition to the completion of the merger that the
shares of Pulte common stock to be issued in connection with the
merger be approved for listing on the NYSE, subject to official
notice of issuance.
Under Michigan law, holders of Pulte common stock are not
entitled to dissenters’ rights with respect to their Pulte
shares in connection with the proposal to approve the issuance
of shares in the merger, the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock or the proposal to approve the charter amendment to change
Pulte’s corporate name.
Centex
Under Nevada law, holders of Centex common stock are not
entitled to dissenters’ rights in connection with the
merger.
If the merger is completed, Centex common stock will be delisted
from the NYSE and deregistered under the Exchange Act and Centex
will no longer file periodic reports with the SEC.
The shares of Pulte common stock to be issued in connection with
the merger will be registered under the Securities Act and will
be freely transferable, except for certain transfers to persons
who own, or would own as a result of such transfer, 4.9% or more
of Pulte’s outstanding securities, as described under
“Description of Pulte Capital Stock — Transfer
Restrictions” beginning on page 122, and except for
shares issued to any Centex stockholder who may be deemed to be
an “affiliate” of Pulte for purposes of Rule 144
under the Securities Act. Persons who may be deemed to be
affiliates of Pulte include individuals or entities that
control, are controlled by, or are under common control with,
Pulte and may include the executive officers, directors and
significant shareholders of Pulte.
Upon completion of the merger, Mr. Dugas, currently
president and chief executive officer of Pulte, will also assume
the position of chairman of Pulte. The other members of
Pulte’s senior management team following completion of the
merger will include Steven C. Petruska as executive vice
president and chief operating officer, Roger A. Cregg as
executive vice president and chief financial officer, James R.
Ellinghausen as executive vice president, human resources, Debra
W. Still as president and chief executive officer of Pulte
Mortgage LLC and Steven M. Cook as senior vice president,
general counsel and secretary, each of whom currently holds such
position with Pulte. Mr. Eller will join the Pulte board of
directors as vice chairman and will serve as a consultant to the
company for two years following the completion of the merger. In
connection with the completion of the merger, the Pulte board of
directors will be expanded to twelve directors and will include
four members of the current Centex board of directors, namely
Mr. Eller, Clint W. Murchison, III, James J. Postl and
Thomas M. Schoewe, and eight members of the current Pulte board
of directors, namely Pulte’s founder and current chairman
William J. Pulte, Mr. Dugas, Brian P. Anderson, Cheryl W.
Grisé, Debra J. Kelly-Ennis, David N. McCammon,
Patrick J. O’Leary and Bernard W. Reznicek. Pulte has
agreed to appoint each of the Centex designees to serve on the
Pulte board of directors until Pulte’s next annual meeting
of shareholders and to nominate each of the Centex designees at
its next annual meeting of shareholders, such that one will be
nominated to a term expiring at the second annual meeting
following the date of completion of the merger, one will be
nominated to a term expiring at the third annual meeting
following the date of completion of the merger and two will be
nominated to terms expiring at the fourth annual meeting
following the date of completion of the merger. In accordance
with Pulte’s Restated Articles of Incorporation, each of
the Centex designees appointed to serve on the Pulte board of
directors until Pulte’s next annual meeting of shareholders
will serve without classification until such annual meeting of
shareholders takes place. The Pulte board of directors has not
yet determined the class of the Pulte board of directors to
which each of the Centex designees will be nominated at the next
Pulte annual meeting of shareholders.
Pulte believes that none of the executive officers and directors
of Pulte has interests in the merger that differ from, or are in
addition to, the interests of Pulte’s shareholders.
In considering the recommendation of Centex’s board of
directors that Centex stockholders vote for the proposal to
approve the Merger Agreement, Centex stockholders should be
aware that some of Centex’s executive officers and
directors have financial interests in the merger that are
different from, or in addition to, those of Centex’s
stockholders generally. For purposes of all of the Centex
agreements and plans described below, the completion of the
transactions contemplated by the Merger Agreement will
constitute a change in control.
Equity
Compensation Awards
The Centex equity compensation plans generally provide that
outstanding options, restricted shares, restricted stock units
and deferred stock units vest in full upon a change in control
of Centex, such as the
70
merger. However, the Merger Agreement provides that restricted
stock granted as long-term incentive awards under the Centex
equity compensation plans after execution of the Merger
Agreement and before the completion of the merger will not vest
upon completion of the merger. Instead, the Merger Agreement
provides that upon completion of the merger, subject to
continued employment (1) 25% of the number of shares of
restricted stock that were subject to those awards on the date
of grant will be forfeited, (2) 25% will vest on
March 31, 2010, (3) 25% will vest on March 31,2011 and (4) 25% will vest on March 31, 2012. In May
2009, with Pulte’s consent, Centex awarded 278,482
restricted stock units and 835,505 shares of restricted
stock to executive officers and other employees pursuant to
Centex’s annual long-term award practices. Consistent with
the intent of the Merger Agreement, all of the 2009 restricted
stock units (representing 25% of the aggregate 2009 long-term
award to each participant) will be forfeited upon completion of
the merger, and
331/3%
of each participant’s 2009 restricted stock award
(representing 25% of the aggregate 2009 long-term award to each
participant) will vest on each of March 31, 2010, 2011 and
2012. If, following completion of the merger, the holder of such
a restricted stock award is terminated from employment in a
severance-qualifying termination, the next installment of the
award will immediately vest. Consistent with Centex’s
outside director compensation plan, and with Pulte’s
consent, Centex currently anticipates that it will award to each
of its non-employee directors in July 2009 restricted stock
units having a grant date value of $100,000 that will vest
immediately but not be settled until the third anniversary of
grant, with no provision for accelerated settlement upon the
change in control resulting from the merger.
In addition, the Merger Agreement provides that, with respect to
stock options issued to employees under the Centex equity
compensation plans with an exercise price of less than $40.00
per share, if the employment of the holder of the option is
terminated during the two-year period following the merger under
circumstances that would entitle the holder to severance
benefits under a severance plan or agreement to which the holder
is a party, the stock option will remain exercisable until the
later of (1) the third anniversary of the date of the
termination of employment and (2) the date on which the
option would cease to be exercisable in accordance with its
terms (or, in either case, if earlier, the expiration of the
scheduled term of the option).
Long
Term Performance Units
Each of Centex’s executive officers holds unvested
long-term performance units issued under Centex’s 2003
Equity Incentive Plan. Long-term performance units represent the
right to receive cash amounts based upon the achievement of
certain performance goals and the value of Centex common stock.
The Merger Agreement provides that each unvested unit
outstanding prior to the merger will be converted into the right
to receive an amount of cash equal to the product of
(1) the total number of shares of Centex common stock
subject to the unit, assuming the achievement of all performance
goals applicable to the performance unit at target levels, and
(2) the fair market value (as defined in the 2003 Equity
Incentive Plan) of a share of Centex common stock on the day
immediately prior to the date on which the merger occurs.
Equity
Compensation Vesting Table
The table below sets forth on an individual basis the number of
stock options, deferred stock units, restricted stock units,
restricted stock, and long-term performance units that will vest
upon consummation of the merger for each Centex named executive
officer, as well as for the remaining executive officers and
directors as a group. The table also includes the aggregate
value of all such awards, based on the closing price of Pulte
common stock (or Centex common stock, as applicable) as of
July 13, 2009, and valuing all stock options based on the
excess, if any, of fair market value of the underlying shares
over the exercise price. The table (including the aggregate
value amounts) also includes the following unvested restricted
stock awards held by Centex executive officers that would vest
upon a termination of service without “cause”
immediately after the completion of the merger: Ms. Smith
23,986, Mr. Stewart 13,325, Mr. Woram 14,658, and all
other executive officers as a group 30,648. The table does not
include the portion of the awards granted subsequent to the
execution of the Merger Agreement which would be forfeited upon
a termination of service without “cause” immediately
after completion of the merger. The table is based on Centex
equity compensation awards outstanding as of the Pulte record
date, and assumes that the merger is completed on
August 18, 2009. See
71
“— Equity Compensation Awards” beginning on
page 70 for a description of the terms of awards granted
subsequent to execution of the Merger Agreement.
Value of All
Range of Exercise
Restricted Stock
Long-Term
Accelerated
Stock Options
Prices
Deferred Stock Units
Units
Restricted Shares
Performance Units
Equity Awards
Timothy R. Eller
228,768
$
22.08-$45.53
0
0
341,763
130,163
$
3,730,277
Catherine R. Smith
113,493
$
22.08-$52.48
0
0
135,988
53,055
$
1,494,159
David L. Barclay
0
0
0
0
0
$
0
Robert S. Stewart
31,104
$
22.08-$45.53
0
0
44,326
22,636
$
528,807
Brian J. Woram
40,335
$
22.08-$45.53
0
0
61,160
30,134
$
721,044
All other executive officers and directors as a group
88,468
$
22.08-$50.90
3,478
12,056
216,114
59,985
$
2,307,557
Annual
Incentive Plan
Centex maintains the 2003 Annual Incentive Compensation Plan,
which provides senior executives with the opportunity to earn
incentive-based compensation based on the achievement of certain
performance goals. Certain of Centex’s executive officers
have been selected as participants in the plan for fiscal year
2010.
The plan provides for the payment of the target award to each
participant for the fiscal year in which a change in control,
such as the merger, occurs, upon such change in control.
Assuming that the merger is completed on August 18, 2009,
each of Timothy R. Eller, Catherine R. Smith, Robert S. Stewart
and Brian J. Woram, and all other executive officers entitled to
payments under this plan will receive $2,750,800, $572,000,
$312,000, $450,000 and $328,000, respectively, in respect of the
payment of the target award pursuant to the annual bonus plan in
connection with the merger.
Plan
Regarding Severance After a Change in Control
On April 7, 2009, the Centex board of directors approved
the Centex Corporation Plan Regarding Severance After a Change
in Control, which we refer to as the CIC Severance Plan, which
will supersede the Centex Corporation Executive Severance Policy
upon a change in control of Centex, such as the merger. The
executive severance policy will continue to govern benefits for
participants whose employment is terminated prior to a change in
control or who are not participants in the CIC Severance Plan.
Each of Centex’s executive officers is a participant in the
CIC Severance Plan. Under this plan, in the event that, during
the two year period following a change in control, a
participant’s employment is terminated by Centex without
“cause,” or by the participant for “good
reason” (in each case as defined in the plan), the
participant will generally be entitled to receive a lump sum
cash payment equal to two times (in the case of Mr. Eller)
or 1.5 times (in the case of Ms. Smith and
Messrs. Stewart and Woram) the executive’s base salary
and annual target bonus, as well as customary outplacement
services.
If a participant receives a bonus payment under the change in
control provision of the annual bonus plan described above and
is subsequently terminated during the same fiscal year in which
the change in control occurs, the cash severance payable under
the CIC Severance Plan will be reduced by an amount equal to the
portion of the bonus payment attributable to the portion of the
year with respect to which the participant did not perform
services. In addition, the cash severance payable under the CIC
Severance Plan may not exceed 2.99 times the sum of the
participant’s base salary, annual bonus, and the value of
other incentive compensation granted to the participant in the
CIC Severance Plan during the year immediately prior to the year
in which the change in control occurs. If a participant in the
CIC Severance Plan would be subject to the “golden
parachute” excise tax under Section 4999 of the
Internal Revenue Code, amounts payable to participants under the
plan will be reduced to the maximum amount that the participant
could receive without being subject to the tax if such a
reduction would place the executive in a better after-tax
position than no such reduction. This provision would not apply
to any participant who is party to a change in control
72
agreement. As noted below, each of Centex’s executive
officers (other than Scott J. Richter) is subject to such an
agreement.
Based on compensation and benefit levels in effect on
July 13, 2009 and assuming the merger is completed on
August 18, 2009 and the employment of each executive
officer is terminated by Centex without “cause” or by
the executive for “good reason” immediately
thereafter, each of Timothy R. Eller, Catherine R. Smith, Robert
S. Stewart and Brian J. Woram, and each of the remaining
executive officers as a group, will be entitled to receive
$5,645,901, $1,363,397, $860,671, $1,072,603 and $2,759,166,
respectively, in cash severance payments under the CIC Severance
Plan.
Change
in Control Agreements
Each of Centex’s executive officers (other than
Mr. Richter) is party to an agreement with Centex which
provides that, in the event that the executive would be subject
to the excise tax under Section 4999 of the Internal
Revenue Code, the executive would receive an additional payment
such that the executive would be placed in the same after-tax
position as if no excise tax had been imposed, unless the
underlying payments to which the executive is entitled are less
than 110% of the maximum amount of payments that would not be
subject to the excise tax, in which case the payments will be
reduced to the maximum amount of payments that would not be
subject to the excise tax.
Consulting
Agreement Between Timothy R. Eller and Pulte
On April 7, 2009, Timothy R. Eller, chairman and chief
executive officer of Centex, entered into a consulting agreement
with Pulte, which will become effective upon the completion of
the merger. The consulting agreement provides that, upon the
completion of the merger, Mr. Eller (1) will resign
his positions with Centex and become vice chairman of
Pulte’s board of directors and a consultant to Pulte,
reporting to Pulte’s chief executive officer, with the
consulting period and board service to continue for
24 months following the occurrence of the merger and
(2) will be entitled to all payments and benefits under the
CIC Severance Plan resulting from a termination for “good
reason,” plus an additional payment of $293,000, and all of
his Centex equity awards will vest in full, with his stock
options becoming exercisable for their full term. See “TheMerger — Interests of Centex’s Directors and
Executive Officers in the Merger — Plan regarding
Severance After a Change in Control” beginning on
page 72 for a description of the payments and benefits to
which Mr. Eller will be entitled under the CIC Severance
Plan.
The consulting agreement also provides that Pulte (1) will
pay to Mr. Eller board fees equal to the fees paid to other
non-chairman directors of Pulte, an annual consulting fee of
$750,000 and an annual guaranteed performance bonus of $300,000,
(2) will grant to Mr. Eller on the date on which the
merger occurs options to purchase 650,000 shares of Pulte
common stock having a
10-year term
and an exercise price per share equal to the fair market value
of a share of Pulte common stock on such date and becoming
exercisable in two equal installments on the first and second
anniversaries of such date and (3) will provide
Mr. Eller during the consulting period with an office and
an administrative assistant in Pulte’s Dallas office. Upon
a termination of the consulting period for any reason, except by
Pulte for “cause” or by Mr. Eller without
“good reason” (as defined in the consulting
agreement), Mr. Eller would be entitled to the consulting
fees and guaranteed performance bonuses that would have been
payable over the remainder of the consulting period, and equity
awards in respect of board fees not yet paid. In addition, his
equity awards would vest in full, with his stock options
remaining exercisable for their full term. During the period
that Mr. Eller renders services under the consulting
agreement, Mr. Eller will be subject to a standard
non-competition and non-solicitation covenant provided by senior
executive officers of Pulte.
Nonqualified
Deferred Compensation Plans
Each of Centex’s executive officers participates in the
Centex Corporation Executive Deferred Compensation Plan. In
general, the plan provides that, upon a change in control (such
as the merger), each participant will receive full vesting of
any deferred compensation cash award granted to the participant
under the plan and lump sum cash settlement of the
participant’s account balance under the plan.
73
Based on compensation and benefit levels in effect on
July 13, 2009, and assuming the merger is completed on
August 18, 2009, each of Timothy R. Eller, Catherine R.
Smith, David L. Barclay, Robert S. Stewart and Brian J. Woram,
and each of the remaining executive officers as a group, will
receive $0, $915,200, $0, $0, $720,000 and $297,941,
respectively, in respect of additional vesting of deferred
compensation cash awards.
Indemnification
of Directors and Officers; Directors’ and Officers’
Insurance
The Centex directors and officers are entitled under the Merger
Agreement to continued indemnification and insurance coverage
(see “The Merger Agreement — Other Covenants and
Agreements” beginning on page 87.
The following summary describes the material provisions of
the Merger Agreement. The summary is qualified in its entirety
by reference to the Merger Agreement, a copy of which is
attached as Annex A to this joint proxy
statement/prospectus and is incorporated into this joint proxy
statement/prospectus by reference. You should read the Merger
Agreement carefully in its entirety, as it is the legal document
governing the transaction.
The Merger Agreement and the following summary have been
included to provide you with information regarding the terms of
the Merger Agreement and the transaction described in this joint
proxy
statement/prospectus.
We do not intend for the representations and warranties
contained in the Merger Agreement to be a source of business or
operational information about Pulte or Centex as they are made
as of a specified date, are tools used to allocate risk between
the parties, are subject to contractual standards of knowledge
and materiality and are modified or qualified by information
contained in the parties’ public filings and in the
disclosure schedules exchanged by the parties. Business and
operational information regarding Pulte or Centex can be found
elsewhere in this joint proxy statement/prospectus and in the
other public documents that Pulte and Centex file with the SEC.
See “Additional Information — Where You Can Find
More Information” beginning on page 134.
Pursuant to the Merger Agreement, Pi Nevada Building Company, a
wholly owned subsidiary of Pulte, will merge with and into
Centex, with Centex surviving the merger as a wholly owned
subsidiary of Pulte.
The merger will occur as soon as possible but no later than the
second business day after the date upon which all of the
conditions to completion of the merger contained in the Merger
Agreement (other than those conditions that are waived or by
their nature are to be satisfied at the closing of the merger)
are satisfied or at such other date as Pulte and Centex may
agree (see “— Conditions to Completion of the
Merger” beginning on page 78). The merger will become
effective at the time that Centex and Pi Nevada Building Company
file the articles of merger with the Secretary of State of the
State of Nevada, or at such later time agreed to by the parties
and specified in the articles of merger.
We currently expect that the merger will be completed during the
third quarter of 2009.
Merger
Consideration
Centex
Common Stock
Each share of Centex common stock issued and outstanding
immediately prior to completion of the merger (including the
preferred share purchase rights granted under Centex’s
stockholder rights agreement), other than shares of Centex
common stock held by Pulte, Pi Nevada Building Company or by
Centex in its treasury, will be converted automatically into a
right to receive 0.975 shares of Pulte common stock, which
we refer to as the exchange ratio. The exchange ratio is fixed,
which means that it is not subject to adjustment. We refer to
the consideration to be paid to the Centex stockholders by Pulte
as the merger consideration. Shares of Centex common stock held
by Pulte or Pi Nevada Building Company or held by Centex in its
treasury immediately prior to the completion of the merger will
be cancelled and retired, and will not be converted into the
right to receive the merger consideration.
Stock
Options and Other Equity Awards
The Merger Agreement provides that:
•
upon the completion of the merger, each Centex stock option
granted under a Centex stock plan, whether vested or unvested,
that is outstanding immediately prior to the completion of the
merger will be converted into a vested option to purchase Pulte
common stock on the same terms and conditions as were applicable
to such Centex stock option immediately prior to the completion
of the merger (except for vesting conditions), with adjustments
to the number of shares subject to the stock option and the
75
exercise price per share to reflect the exchange ratio. In
addition, each stock option resulting from the conversion of a
Centex stock option that was granted with an exercise price of
less than $40.00 per share will provide that, if the option
holder experiences a severance-qualifying termination during the
two-year period following the merger, the stock option will
remain exercisable until the later of (1) the third
anniversary of the date of the termination of employment and
(2) the date on which the option would cease to be
exercisable in accordance with its terms (or, in either case, if
earlier, the expiration of the scheduled term of the option);
•
upon the completion of the merger, each award of restricted
shares of, or restricted or deferred stock units with respect
to, Centex common stock granted under a Centex stock plan that
is outstanding immediately prior to the completion of the merger
will vest and be converted into a number of shares of, or units
with respect to, Pulte common stock on the same terms and
conditions (except for vesting conditions) as were applicable to
such award immediately prior to the completion of the merger,
with adjustments to the number of shares of, or units with
respect to, Pulte common stock to reflect the exchange ratio,
except that restricted stock and restricted stock units granted
to executive officers and employees as long-term incentive
awards under the Centex equity compensation plans after
execution of the Merger Agreement and before the completion of
the merger will not vest upon completion of the merger and will
be treated as described in “Interests of Centex’s
Directors and Executive Officers in the Merger —
Equity Compensation Awards” beginning on page 70.
•
immediately prior to the completion of the merger, each award of
performance units granted under a Centex stock plan that is then
outstanding will vest and be converted into the right to receive
an amount in cash equal to the product of (1) the fair
market value of a share of Centex common stock on the day
immediately prior to the completion of the merger and
(2) the number of shares of Centex common stock subject to
such award (assuming the achievement of all applicable
performance goals at target levels).
Pulte will not issue fractional shares in the merger. Instead,
each holder of shares of Centex common stock who would otherwise
be entitled to a fractional share of Pulte common stock will be
entitled to receive a cash payment, without interest, from the
exchange agent in lieu of such fractional shares in an amount
equal to the product of:
•
the fractional share interest to which such holder (after taking
into account all fractional share interests then held by such
holder) would otherwise be entitled, multiplied by,
•
the per share value of one share of Pulte common stock
calculated as the average of the closing sale prices of Pulte
common stock over the five trading days immediately preceding
the date on which the completion of the merger occurs.
The cash payable in lieu of fractional shares is the only merger
consideration payable in cash by Pulte in connection with the
proposed merger.
Pulte has retained Computershare Trust Company, N.A., or
Computershare, as the exchange agent for the merger to handle
the exchange of shares of Centex common stock for the merger
consideration, including the payment of cash for fractional
shares.
Only those holders of Centex common stock who properly surrender
their Centex stock certificates in accordance with the exchange
agent’s instructions will receive:
•
a statement indicating book-entry ownership of Pulte common
stock or, if requested, a certificate representing Pulte common
stock;
•
cash in lieu of any fractional share of Pulte common
stock; and
76
•
dividends or other distributions, if any, on Pulte common stock
to which they are entitled under the terms of the Merger
Agreement.
After the completion of the merger, each certificate
representing shares of Centex common stock that has not been
surrendered will represent only the right to receive upon
surrender of that certificate each of the items listed in the
preceding sentence. Following the completion of the merger,
Centex will not register any transfers of Centex common stock
outstanding on its stock transfer books prior to the merger.
As soon as reasonably practicable after the completion of the
merger, and in any event not later than the third business day
following the completion of the merger, the exchange agent will
mail to each holder of shares of Centex common stock a letter of
transmittal (which will specify that the delivery will be
effected, and risk of loss and title will pass, only upon proper
delivery of such holder’s certificates representing shares
of Centex common stock) and instructions for surrendering the
certificates representing shares of Centex common stock or
book-entry shares in exchange for the merger consideration. Upon
surrender of certificates representing shares of Centex common
stock or book-entry shares, together with an executed letter of
transmittal, to the exchange agent, the holder of those
certificates or book-entry shares will be entitled to receive
the merger consideration. The surrendered certificates
representing Centex common stock and the book-entry shares will
be cancelled. If any Centex stockholder’s certificates have
been lost, stolen or destroyed, Pulte may require the
stockholder to provide a customary affidavit of loss in lieu of
the actual certificates, and to deliver a bond in a reasonable
amount as indemnity against any claim that may be made against
Computershare or Pulte with respect to the certificates.
Holders of Centex common stock are not entitled to receive any
dividends or other distributions on Pulte common stock until the
merger is completed. After the merger is completed, holders of
Centex common stock certificates will be entitled to
(1) all dividends and other distributions payable in
respect of such shares of Pulte common stock with a record date
after the completion of the merger and a payment date on or
prior to the date of such surrender and not previously paid and
(2) at the appropriate payment date, an amount equal to the
dividends or other distributions payable with respect to such
shares of Pulte common stock with a record date after the
completion of the merger but with a payment date subsequent to
such surrender.
Twelve months after the completion of the merger, Pulte may
require the exchange agent to deliver to Pulte all shares of
Pulte common stock and any cash remaining in the exchange fund.
Thereafter, Centex stockholders must look only to Pulte for
payment of the merger consideration on their shares of Centex
common stock, subject to applicable law. Any shares of Pulte
common stock or cash remaining unclaimed by holders of shares of
Centex common stock five years following the completion of the
merger (or immediately prior to such time as such amounts would
otherwise escheat to or become property of any governmental
authority) will, to the extent permitted by applicable law,
become the property of Pulte free and clear of any claims or
interest of any person previously entitled to such shares of
Pulte common stock or cash.
None of Pulte, Centex or Pi Nevada Building Company will be
liable to any holder of a certificate representing shares of
Centex common stock for any merger consideration delivered to a
public official pursuant to any abandoned property laws.
The obligations of Pulte, Pi Nevada Building Company and Centex
to effect the merger are subject to the fulfillment, or waiver
by Pulte, Pi Nevada Building Company and Centex, of the
following conditions at or prior to the completion of the merger:
•
the approval of the Merger Agreement by the holders of a
majority of the outstanding shares of Centex common stock;
•
the approval of (1) the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock by the holders of a majority of the outstanding shares of
Pulte common stock and (2) the proposal to approve the
issuance of shares in the merger by a majority of the votes cast
on the proposal, provided that the total votes cast on this
proposal represent over 50% of the outstanding shares of Pulte
common stock entitled to vote on this proposal;
•
the absence of any temporary restraining order or preliminary or
permanent injunction issued by any court of competent
jurisdiction that prohibits or prevents the completion of the
merger, except that no party may assert this condition to avoid
its obligation to effect the merger unless it has used its
reasonable best efforts to prevent the order or injunction, and
to appeal the order or injunction promptly;
•
the expiration or termination of any applicable waiting period
under the HSR Act, which condition was satisfied upon expiration
of the applicable waiting period on May 22, 2009;
•
the approval for listing on the NYSE of the shares of Pulte
common stock to be issued in the merger and to be reserved for
issuance in connection with the merger;
•
the effectiveness under the Securities Act of the registration
statement on
Form S-4
of which this joint proxy statement/prospectus forms a part and
the absence of any stop order or proceedings initiated by the
SEC for that purpose;
•
(1) the accuracy and correctness, in all respects as so
qualified at and as of the date of the Merger Agreement and at
and as of the date of completion of the merger as though made at
and as of the date of completion of the merger (except with
respect to the foregoing to the extent that any representation
and warranty is made as of a particular date or period), of the
representations and warranties of the other party, subject to
certain exceptions, which are qualified by a “Material
Adverse Effect” qualification, (2) the accuracy and
correctness, at and as of the date of the Merger Agreement and
at and as of the date of completion of the merger as though made
at and as of the date of completion of the merger (except with
respect to the foregoing to the extent that any representation
and warranty is made as of a particular date or period), except
for such failures to be true and correct as are not having or
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on such party, of the
representations and warranties of the other party, subject to
exceptions, which are not qualified by a “Material Adverse
Effect” qualification, (3) the accuracy and
correctness, except for de minimis inaccuracies, on the
date of the Merger Agreement and on the date of completion of
the merger as if made on and as of such dates (except with
respect to the foregoing to the extent that any representation
and warranty is made as of a particular date or period), of
certain of the representations and warranties relating to the
capital structure of such party, (4) the accuracy and
correctness on the date of the Merger Agreement of the
representation relating to absence of certain changes between
December 31, 2008 and the date of the Merger Agreement, and
(5) the accuracy and correctness, in all respects on the
date of completion of the merger as if made on and as of such
date (except to the extent that any representation and warranty
is made as of a particular date or period) of the representation
relating to absence of certain changes after the date of the
Merger Agreement, and the receipt of a certificate from the
officers of the other party to that effect;
•
the other party’s having performed and complied with its
covenants in the Merger Agreement in all material respects prior
to the completion of the merger, and the receipt of a
certificate from the officers of the other party to that
effect; and
78
•
the receipt by each party of an opinion from its counsel that
the merger will be treated as a “reorganization”
within the meaning of Section 368(a) of the Internal
Revenue Code.
Pulte, Centex and Pi Nevada Building Company may elect to waive
certain of the foregoing conditions in accordance with the terms
of the merger agreement and applicable law. However, despite
their ability to do so, none of Pulte, Centex or Pi Nevada
Building Company currently expects to do so. The conditions to
completion of the merger relating to the approval of the Merger
Agreement by Centex stockholders, the approval of the proposal
to approve the charter amendment to increase the number of
authorized shares of common stock by Pulte’s shareholders,
the prohibition or prevention of the merger by a governmental
authority and the effectiveness under the Securities Act of the
registration statement on
Form S-4
may not be waived by any party to the Merger Agreement. If any
condition to completion of the merger is waived, Pulte and
Centex will evaluate the materiality of such waiver to determine
whether amendment of this joint proxy statement/prospectus and
resolicitation of proxies is necessary under applicable law or
the rules of the NYSE. If Pulte and Centex determine any such
waiver is not significant enough to require resolicitation of
proxies, they will have the discretion to complete the merger
without seeking further shareholder or stockholder approval.
Neither Pulte nor Centex will waive the receipt of the opinion
from its respective counsel that the merger will be treated as a
“reorganization” within the meaning of
Section 368(a) of the Internal Revenue Code as a condition
to its obligation to complete the merger without the approval of
Centex stockholders.
Neither the approval by Pulte shareholders of the proposal to
approve the charter amendment to change Pulte’s corporate
name nor the approval by Pulte shareholders of the Pulte meeting
adjournment proposal is a condition to completion of the merger.
“Material Adverse Effect,” when used in the Merger
Agreement in reference to Pulte or Centex, means any such event,
change, development, state of facts, condition, circumstance or
occurrence that is materially adverse to the business, financial
condition or continuing results of operations of such party and
its subsidiaries, taken as a whole. However, none of the
following events, changes, developments, facts, conditions,
circumstances or occurrences will be deemed to have a Material
Adverse Effect if they:
•
affect economic conditions generally (including changes in
interest rates) or the financial, mortgage or securities markets
in the United States or elsewhere in the world;
•
affect the industries in which such party or its subsidiaries
operate generally or in any specific jurisdiction or
geographical area;
•
result from or arise out of the announcement or the existence
of, or compliance with, or taking any action required or
permitted by the Merger Agreement or the transactions
contemplated by the Merger Agreement;
•
result from or arise out of the taking of any action at the
written request of the other party;
•
result from or arise out of any litigation arising from
allegations of a breach of fiduciary duty or other violation of
applicable law relating to the Merger Agreement or the
transactions contemplated by the Merger Agreement;
•
result from or arise out of changes in applicable law, GAAP or
accounting standards;
•
result from or arise out of any weather-related or other force
majeure event or outbreak or escalation of hostilities or acts
of war or terrorism, except to the extent that such party and
its subsidiaries are adversely affected in a disproportionate
manner relative to other participants in the industries in which
such party and its subsidiaries operate; or
•
result from or arise out of any changes in the share price or
trading volume of such party’s common stock, such
party’s credit rating or in any analyst’s
recommendations, or the failure of such party to meet
projections or forecasts (including any analyst’s
projections) (although the events, changes, effects,
79
developments, conditions or occurrences underlying such change
are not excluded to the extent they would otherwise constitute a
Material Adverse Effect).
The Merger Agreement provides that, except as described further
below, Centex and its subsidiaries may not and may not publicly
announce any intention to, and must direct their respective
representatives not to:
•
solicit, initiate or knowingly encourage any inquiries with
respect to, or the making or submission of, any alternative
proposal;
•
participate in any negotiations regarding an alternative
proposal with, or furnish any nonpublic information regarding an
alternative proposal to any person that has made or to
Centex’s knowledge is considering making an alternative
proposal;
•
engage in discussions regarding an alternative proposal with any
person;
•
submit to a vote of its stockholders, approve, endorse or
recommend any alternative proposal; or
•
enter into any letter of intent or agreement in principle or any
agreement providing for any alternative proposal.
Centex is also required to promptly notify Pulte if it receives
any alternative proposal, any indication or inquiry with respect
to or that would reasonably be expected to lead to an
alternative proposal, or any request for non-public information
relating to Centex or its subsidiaries, including in each case
the identity of the person making any such alternative proposal
or indication or inquiry and the material terms of any such
alternative proposal or indication or inquiry.
Centex may, however, before the Centex stockholders’
approval of the proposal to approve the Merger Agreement, in
response to an alternative proposal which constitutes a superior
proposal or which its board of directors determines, in good
faith, could reasonably be expected to result in a superior
proposal (1) furnish nonpublic information to the third
party making such acquisition proposal and (2) engage in
discussions or negotiations with such third party with respect
to the alternative proposal, if, and only if, prior to so
furnishing such information or engaging in discussions or
negotiations, it receives from such third party an executed
confidentiality agreement with confidentiality provisions no
less favorable to it than the confidentiality agreement entered
into by Pulte and Centex.
Centex has also agreed to terminate any discussions relating to
an alternative proposal that occurred prior to the date of the
Merger Agreement. It has further agreed to not terminate, amend,
modify or waive any standstill provision of any confidentiality
or standstill agreement between Centex and any other person that
relates to a transaction that could constitute an alternative
proposal and to use reasonable best efforts to enforce any
existing standstill agreements with third parties, unless the
Centex board of directors determines in good faith, after
consultation with Centex’s outside legal advisors, that
such action or inaction would be inconsistent with the
directors’ fiduciary obligations to Centex stockholders, or
is otherwise permitted by the section of the Merger Agreement
imposing restrictions on the solicitation of alternative
proposals.
An “alternative proposal” means any bona fide inquiry,
proposal or offer made by any person or group of persons prior
to the approval of the proposal to approve the Merger Agreement
by Centex’s stockholders (other than a proposal or offer by
Pulte or its subsidiaries) for:
•
a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, dissolution, liquidation
or similar transaction involving Centex;
•
a tender offer or exchange offer that, if completed, would
result in any person beneficially owning 20% or more of the
outstanding shares of Centex common stock;
•
the acquisition by any person or group of persons of 20% or more
of the assets of Centex and its subsidiaries, taken as a
whole; or
80
•
the direct or indirect acquisition by any person or group of
persons of 20% or more of the outstanding shares of Centex
common stock.
A “superior proposal” means an alternative proposal
(with references to 20% being replaced by references to 50%)
made by any person or group of persons on terms that
Centex’s board of directors determines in good faith, after
consultation with Centex’s financial and legal advisors, is
more favorable to Centex’s stockholders than the
transactions contemplated by the Merger Agreement.
Special
Meeting of Centex Stockholders; Recommendation of Centex Board
of Directors
Centex is required to hold a meeting of its stockholders to
consider the approval of the proposal to approve the Merger
Agreement. Centex has agreed to use reasonable best efforts to
solicit proxies in favor of the Merger Agreement, and its board
of directors has agreed to recommend that Centex’s
stockholders approve the proposal to approve the Merger
Agreement, unless, in each case, it has made a change of
recommendation as described below.
The Merger Agreement provides that, at any time prior to, but
not after, the Centex stockholders’ approval of the
proposal to approve the Merger Agreement, Centex’s board of
directors may change its recommendation that Centex’s
stockholders approve the proposal to approve the Merger
Agreement if:
•
Centex provides Pulte with written notice at least three
business days prior to making a change of recommendation that it
has received a superior proposal and specifying the material
terms and conditions of such superior proposal and the identity
of the person making such proposal, which notice period would be
extended by one business day to the extent any material
revisions are made to such superior proposal;
•
following Centex’s compliance with the advance notice
period described above, such proposal continues to constitute a
superior proposal; and
•
it determines in good faith, after consultation with its outside
legal and financial advisors, that failing to do so would be
inconsistent with the directors’ fiduciary duties under
applicable law.
Centex’s board of directors may also withdraw, modify or
qualify its recommendation at any time prior to the approval of
the proposal to approve the Merger Agreement by Centex’s
stockholders if it is required to do so under applicable law, so
long as it has provided Pulte notice of its intent to do so
three business days in advance.
Nothing in the Merger Agreement prohibits Centex or its board of
directors from taking and disclosing to its stockholders a
position contemplated by
Rules 14d-9
and 14e-2(a)
of the Exchange Act or from making any legally required
disclosure to Centex’s stockholders or taking any position
with respect to the merger if, in the good faith judgment of the
Centex board of directors, after consultation with Centex’s
outside legal advisors, failure to do so would be inconsistent
with the directors’ fiduciary obligations or obligations
under the rules and regulations of the NYSE. However, any such
action that would constitute a change of recommendation may only
be made in compliance with the provisions of the Merger
Agreement governing a change of recommendation.
Centex’s board of directors may not recommend any
acquisition proposal (other than the Merger Agreement and the
transactions contemplated by the Merger Agreement), except as
specifically contemplated by, and in accordance with the
restrictions and obligations described above under
“— Non-Solicitation of Alternative
Transactions” beginning on page 80.
Special
Meeting of Pulte Shareholders; Recommendation of Pulte Board of
Directors
Pulte is required to hold a meeting of its shareholders to
consider the proposal to approve the charter amendment to
increase the number of authorized shares of common stock and the
proposal to approve the issuance of shares in the merger and to
use reasonable best efforts to solicit proxies in favor of these
81
proposals. The Pulte board of directors also must recommend that
Pulte’s shareholders approve the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock and the proposal to approve the issuance of shares
in the merger, unless, in each case, it has made a change of
recommendation as described below.
Pulte’s board of directors may withdraw, modify or qualify
its recommendation at any time if it is required to do so under
applicable law, so long as it has provided Centex with written
notice at least three business days prior to doing so.
Both Pulte and Centex are required to use their reasonable best
efforts to take promptly all necessary or advisable actions
under applicable laws to complete the merger and the other
transactions contemplated by the Merger Agreement, including the
obtaining of necessary consents and approvals from governmental
entities and third parties and the defense of lawsuits
challenging the Merger Agreement or the transactions
contemplated by the Merger Agreement, subject to certain
exceptions.
The Merger Agreement provides that Pulte and Centex will make
any required filings under the HSR Act and will use reasonable
best efforts to take all actions that may be necessary or
advisable to complete the transaction, including taking all
further action as may be necessary to resolve any objections
that the FTC, the DOJ, state antitrust enforcement authorities
or other competition authorities may assert with respect to the
transactions contemplated by the Merger Agreement, including
(1) the sale, divestiture or disposition of assets or
businesses of Pulte or Centex and (2) otherwise taking or
committing to take actions that after the date of completion of
the merger would limit Pulte’s freedom of action with
respect to, or its ability to retain, one or more of its
businesses, product lines or assets, in each case as may be
required to avoid any prevention or material delay of the
closing. However, Pulte is not obligated to take any such action
that would have a Material Adverse Effect with respect to Pulte
or Centex.
Each of Pulte and Centex has agreed that, prior to the
completion of the merger or the termination of the Merger
Agreement, unless required by applicable law, consented to by
the other party (which consent may not be unreasonably withheld,
conditioned or delayed), contemplated or required by the Merger
Agreement, or previously agreed to by Centex and Pulte, it will
conduct its business in the ordinary course and use its
reasonable best efforts to:
•
maintain the services of its current officers, key employees and
consultants;
•
preserve its business organization and maintain its relations
and goodwill with customers, suppliers, distributors, creditors
and lessors;
•
maintain existing insurance policies (or similar replacement
policies); and
•
comply in all material respects with all applicable laws.
Restrictions
on Centex’s Interim Operations
Centex has further agreed to not take certain actions prior to
the completion of the merger or the termination of the Merger
Agreement unless the actions are required by applicable law,
consented to by Pulte (which consent may not be unreasonably
withheld, conditioned or delayed), contemplated or required by
the Merger Agreement, or previously agreed to by Centex and
Pulte. In particular, subject to the above exceptions, Centex
may not, and in certain cases may not permit any of its
subsidiaries to:
•
pay or authorize any dividends or distributions, or permit any
of its non-wholly owned subsidiaries to do so, except for
dividends and distributions paid on a pro rata basis by
subsidiaries;
•
redeem, repurchase, defease or cancel any indebtedness for
borrowed money, except (1) for transactions between Centex
and its wholly owned subsidiaries or between Centex’s
wholly owned subsidiaries,
82
(2) for certain required payments, or (3) with respect
to indebtedness of $1 million or less or certain other
indebtedness agreed to by Pulte;
•
acquire or agree to acquire any other entity or business, or
make any capital expenditures, loans, advances or capital
contributions to, or investments in, any other entity with a
value of more than $15 million in the aggregate, except
(1) for certain ordinary course land acquisitions,
including finished lots in an amount not to exceed
$8 million individually or $150 million in the
aggregate or raw land in an amount not to exceed
$20 million in the aggregate, (2) as required by
existing contracts or (3) as between Centex and its wholly
owned subsidiaries or between Centex’s wholly owned
subsidiaries;
•
split, combine, reclassify, subdivide or amend the terms of any
of its or its subsidiaries’ capital stock, or issue or
authorize any other securities in respect of its or its
subsidiaries’ capital stock, except by a wholly owned
subsidiary of Centex that remains a wholly owned subsidiary
after the transaction;
•
enter into any voting agreements with respect to its or its
subsidiaries’ capital stock;
•
increase compensation or benefits of Centex’s directors,
executive officers or employees, except as required by existing
agreements or benefit plans, as required by applicable law, or
as set forth under “— Employee Matters”;
•
enter into any employment, change of control, severance or
retention agreement with any employee, except as required by
existing agreements or benefit plans, as required by applicable
law, or as further described under “— Employee
Matters”, and subject to certain additional exceptions for
newly-hired employees, promotions, employment agreements
terminable on less than thirty days’ notice without penalty
and ordinary course severance agreements with non-executive
officers;
•
establish any plan, policy, program or arrangement for the
benefit of any current or former directors, officers or
employees or any of their beneficiaries, except as permitted
pursuant to the preceding bullet point, or for ordinary course
collective bargaining agreements or amendments;
•
materially change financial accounting policies or procedures,
except as required by GAAP, SEC rule or policy or applicable law;
•
except as required by a change in law, make, change or revoke
any material tax election, file any material amended tax return,
or settle or compromise any material tax liability or refund, if
such action could have an adverse effect that, individually or
in the aggregate, is material to Centex and its subsidiaries;
except for transactions between Centex and its wholly owned
subsidiaries or between Centex’s wholly owned subsidiaries,
issue, sell, pledge, dispose of, grant, transfer or encumber,
any shares of Centex’s or its subsidiaries’ capital
stock or other ownership interests, or any options or other
related securities, or take any action that would cause
otherwise unexercisable options to become exercisable (except as
permitted by the Merger Agreement or pursuant to certain options
or warrants outstanding on the date of the Merger Agreement),
other than certain issuances or sales of Centex common stock in
respect of certain Centex equity compensation awards, other
ordinary course grants of equity compensation awards in
accordance with Centex’s customary long-term compensation
award practices and as set forth under
“— Employee Matters”;
•
except for transactions between Centex and its wholly owned
subsidiaries or between Centex’s wholly owned subsidiaries,
purchase, redeem or otherwise acquire any shares of Centex or
its subsidiaries’ capital stock, or any options or other
related convertible or exchangeable securities;
•
incur, assume, guarantee, prepay or otherwise become liable for
any indebtedness for borrowed money, except for
(1) intercompany indebtedness, (2) indebtedness to
replace, renew, extend, refinance or refund any existing
indebtedness, (3) certain guarantees of indebtedness as
permitted by the Merger Agreement, (4) indebtedness
incurred in the ordinary course of business pursuant to funding
facilities
83
for Centex’s financial services subsidiaries and
(5) guarantees, letters of credit or surety bonds for the
benefit of commercial counterparties in the ordinary course of
business;
•
sell, pledge, lease, license, transfer, guarantee, exchange or
swap, mortgage (including securitizations), or otherwise dispose
of any material portion of its material properties or material
assets, including the capital stock of subsidiaries, except
(1) for sales of land or homes in the ordinary course of
business, (2) for transactions between Centex and its
wholly owned subsidiaries or between Centex’s wholly owned
subsidiaries, (3) pursuant to certain existing agreements,
or (4) as may be required by applicable law or any
governmental entity in connection with the merger;
•
adopt, adopt resolutions providing for, vote in support of,
consent to or approve any liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization of Centex, its subsidiaries or any joint venture,
other than the merger and any other mergers or reorganizations
that would not result in material adverse tax consequences or
material loss of tax benefits or loss of any material asset;
•
enter into any contract that would materially restrict, after
the completion of the merger, Pulte and its subsidiaries
(including Centex and its subsidiaries) from engaging or
competing in any line of business or in any geographic area;
•
settle or compromise any litigation, or otherwise dispose of any
claim, liability, obligation or arbitration, unless the
settlement (1) does not require Centex to pay more than
$15 million individually or $75 million in the
aggregate (excluding from the aggregate total any individual
claim involving a payment of less than $1 million), and
(2) does not involve any material injunctive or other
non-monetary relief or impose material restrictions on the
business or operations of Centex;
•
enter into interest rate swaps and other similar hedging
arrangements other than for purposes of offsetting a bona fide
exposure;
•
issue or forgive any loans to directors, officers, employees,
contractors or any of their respective affiliates, except for
any such issuances that would not violate the Sarbanes-Oxley
Act; or
•
authorize any of its subsidiaries or agree itself to take any of
the foregoing actions.
Restrictions
on Pulte’s Interim Operations
In addition to the covenants described above, Pulte has agreed
to not take certain actions prior to the completion of the
merger or the termination of the Merger Agreement unless the
actions are required by applicable law, consented to by Centex
(which consent may not be unreasonably withheld, conditioned or
delayed), contemplated or required by the Merger Agreement, or
previously agreed to by Centex and Pulte. In particular, subject
to the above exceptions, Pulte may not and in certain cases may
not permit any of its subsidiaries to:
•
except in the ordinary course of business, pay or authorize any
dividends or distributions, or permit any of its non-wholly
owned subsidiaries to do so, other than dividends and
distributions paid on a pro rata basis by subsidiaries;
•
acquire or agree to acquire any entity or business, other than
acquisitions that could not reasonably be expected to make it
materially more difficult to obtain any authorization, consent
or approval required in connection with the merger and that
could not reasonably be expected to prevent or materially delay
or impede the merger or the other transactions contemplated by
the Merger Agreement;
•
split, combine, reclassify, subdivide or amend the terms of any
of its or its subsidiaries’ capital stock, or issue or
authorize any other securities in respect of its or its
subsidiaries’ capital stock, except by a wholly owned
subsidiary of Centex that remains a wholly owned subsidiary
after the transaction;
•
enter into any voting agreements with respect to its or its
subsidiaries’ capital stock;
84
•
except for the amendment to Pulte’s Restated Articles of
Incorporation contemplated by the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock and an amendment to the Certificate of Designation
for Pulte’s Series A Junior Participating Preferred
Shares and an amendment to increase the number of shares, adopt
or propose to adopt any material amendments to its or its
subsidiaries’ articles of incorporation or by-laws or
similar applicable charter documents;
•
except for transactions between Pulte and its wholly owned
subsidiaries or between Pulte’s wholly owned subsidiaries,
issue, sell, pledge, dispose of, grant, transfer or encumber any
shares of Pulte’s or its subsidiaries’ capital stock
or other ownership interests, or any options or other related
securities, or take any action that would cause otherwise
unexercisable options to become exercisable (except as permitted
by the Merger Agreement or pursuant to certain options or
warrants outstanding on the date of the Merger Agreement), other
than certain issuances or sales of Pulte common stock in respect
of certain Pulte equity compensation awards, and other ordinary
course grants of equity compensation awards in accordance with
Pulte’s customary schedule;
•
adopt, adopt resolutions providing for, vote in support of,
consent to or approve any liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization of Pulte, its subsidiaries or any joint venture,
other than the merger and any other mergers or reorganizations
that would not result in material adverse tax consequences or
material loss of tax benefits or loss of any material
asset; or
•
authorize any of its subsidiaries or agree itself to take any of
the foregoing actions.
Under the Merger Agreement, after completion of the merger,
Pulte will provide to Centex employees not covered by collective
bargaining agreements compensation and benefits through
December 31, 2009 that are, in the aggregate, no less
favorable than the compensation and benefits provided to such
employees immediately prior to the completion of the merger
(without considering, for this purpose, benefits provided under
Centex’s Salary Continuation Plan). Thereafter, it is
Pulte’s intention over the long term that Centex employees
and similarly situated employees of Pulte will be treated alike
in terms of compensation and benefits. Without limiting the
immediately preceding sentence, Pulte has agreed that, during
calendar year 2010, any change in the salary or annual incentive
bonus of any Centex employee not covered by a collective
bargaining agreement will not affect such Centex employee in a
manner which is disproportionate to any change in the salary or
annual incentive bonus of any similarly-situated Pulte employee
over that period. From and after December 31, 2009, Pulte
has agreed to provide each Centex employee not covered by
collective bargaining agreements with pension and welfare
benefits (including medical, dental, pharmaceutical and vision
benefits) that are, in the aggregate, no less favorable than
those provided to similarly-situated Pulte employees over that
period.
Additionally, Pulte has agreed, with respect to Centex
employees, to:
•
credit years of service for all purposes under its employee
benefit plans and programs (but not for purposes of benefit
accrual under a defined benefit plan) to the same extent such
service was credited under similar Centex plans prior to the
completion of the merger, except where such credit would result
in duplication of benefits; provided, however, that prior
service will not be credited for purposes of the Seventy Year
Rule (as defined in Pulte’s equity compensation plans and
option award agreements issued thereunder) unless such employee
terminates employment after December 31, 2011;
•
make each Centex employee immediately eligible to participate,
without any waiting time, in any Pulte plan providing benefits
to Centex employees after the completion of the merger, to the
extent coverage under such plan is comparable to a plan in which
the Centex employee participated immediately prior to the
completion of the merger;
•
waive all limitations relating to pre-existing conditions and
exclusions under its welfare plans to the same extent that such
limitations would have been waived under a comparable Centex
plan, and
85
recognize any deductible, co-insurance and maximum out-of-pocket
expenses incurred by such employees during the portion of the
plan year of the Centex plan ending on the date such
employee’s participation in the corresponding Pulte plan
begins as if such amounts had been paid under its plans;
•
provide severance and paid time-off benefits through
December 31, 2010 that are no less favorable, in each case
on an
individual-by-individual
basis, than the severance and paid time-off benefits provided to
each Centex employee under the applicable Centex plan as of
immediately prior to the completion of the merger (except that
benefits under the Centex Salary Continuation Plan will be
disregarded for this purpose); and
•
permit Centex, prior to the completion of the merger, to
allocate an amount not to exceed $2,000,000 for purposes of
(1) increasing base salaries (other than the base salaries
of non-employee directors and executive officers that
participate in the CIC Severance Plan) in connection with
individually targeted salary adjustments, promotional raises and
retention bonuses and (2) establishing a retention plan to
be allocated to the employees of Centex, the terms of which will
be determined in consultation with Pulte.
Under the Merger Agreement, Centex is permitted to establish a
short-term incentive compensation program for the fiscal year
that commenced on April 1, 2009, and may establish, with
respect to each individual who participates in this program, a
target payout level no greater than 100% of the
individual’s target payout under the applicable Centex
short-term incentive program for the fiscal year ended
March 31, 2009. If the merger is completed, Pulte has
agreed to pay to each Centex employee participating in this
program (except for employees who participate in Centex’s
2003 Annual Incentive Compensation Plan) who is still employed
on December 31, 2009 a cash bonus equal to 75% of the
employee’s target bonus under the program as soon as
practicable after such date, but in no event later than
March 15, 2010. In addition, if the merger is completed,
Pulte has agreed to pay to each Centex employee (except for
employees who participate in Centex’s 2003 Annual Incentive
Compensation Plan) who experiences a severance-qualifying
termination of employment prior to December 31, 2009 an
amount equal to 75% of the employee’s target bonus under
the program, prorated for the portion of the period between
April 1, 2009 and December 31, 2009 during which the
employee rendered services. In accordance with Centex’s
2003 Annual Incentive Compensation Plan, each Centex senior
executive who participates in such plan will receive prior to
completion of the merger an amount equal to 100% of the
individual’s target bonus for the fiscal year that
commenced on April 1, 2009, provided that any severance
payable to any such individual under the CIC Severance Plan
will, in the event that the individual experiences a termination
of employment prior to March 31, 2010, be reduced by the
portion of the bonus payment attributable to the portion of the
year in which the termination occurs that the participant does
not work. Pulte also has agreed to provide a bonus opportunity
to Centex employees for its fiscal year commencing
January 1, 2010 that is consistent with its other
commitments with respect to benefits and compensation for Centex
employees.
The Merger Agreement also provides that Centex may grant to each
of its employees a long-term incentive award consisting of a
number of restricted shares having a fair market value on the
date of grant no greater than 100% of the total value on the
date of grant of the aggregate long-term incentive awards
granted to the employee with respect to Centex’s fiscal
year ended March 31, 2009. The Merger Agreement provides
that, if the merger is completed, 25% of the restricted shares
that were subject to these long-term incentive awards on the
grant date will be forfeited, 25% will vest on March 31,2010, 25% will vest on March 31, 2011 and 25% will vest on
March 31, 2012. The Merger Agreement also provides that if,
following the completion of the merger, the holder of a
long-term incentive award experiences a severance-qualifying
termination of employment, the next installment of the award
will vest immediately. In addition, under the Merger Agreement,
Pulte has agreed that, for calendar year 2010, it will provide
Centex employees long-term incentive awards that are no less
favorable than the awards provided to similarly-situated Pulte
employees.
Pulte has agreed to take all actions necessary to cause its
board of directors upon the completion of the merger to be
comprised of eight current Pulte directors and four current
Centex directors designated by Centex. Pulte has also agreed to
appoint each of the Centex designees to serve until Pulte’s
next annual
86
meeting of shareholders and to nominate each of the Centex
designees at its next annual meeting of shareholders, such that
one will be nominated to a term expiring at the second annual
meeting following the date of completion of the merger, one will
be nominated to a term expiring at the third annual meeting
following the date of completion of the merger and two will be
nominated to terms expiring at the fourth annual meeting
following the date of completion of the merger.
Upon completion of the merger, Mr. Dugas, currently
president and chief executive officer of Pulte, will also assume
the position of chairman of Pulte. The rest of Pulte’s
senior management team following completion of the merger will
include Steven C. Petruska as executive vice president and chief
operating officer, Roger A. Cregg as executive vice president
and chief financial officer, James R. Ellinghausen as executive
vice president, human resources, Debra W. Still as president and
chief executive officer of Pulte Mortgage LLC and Steven M. Cook
as senior vice president, general counsel and secretary, each of
whom currently hold such positions with Pulte. Mr. Eller
will join the Pulte board of directors as vice chairman and will
serve as a consultant to Pulte for two years following
completion of the merger. The Pulte board of directors will be
expanded to twelve directors and will include four members of
the current Centex board of directors, namely Mr. Eller,
Clint W. Murchison, III, James J. Postl and Thomas M. Schoewe,
and eight members of the current Pulte board of directors,
namely Pulte’s founder and current chairman William J.
Pulte, Mr. Dugas, Brian P. Anderson, Cheryl W. Grisé,
Debra J. Kelly-Ennis, David N. McCammon, Patrick J. O’Leary
and Bernard W. Reznicek. See “The Merger —
Management and Board of Directors of Pulte After the
Merger” beginning on page 70.
Pulte and Centex have agreed to take certain additional actions
pursuant to the Merger Agreement. In particular, Pulte and
Centex have agreed to:
•
afford the other party and its representatives reasonable access
during normal business hours throughout the period following the
date of the Merger Agreement and the earlier of the completion
of the merger or the date on which the Merger Agreement is
terminated to the personnel, properties, contracts, books and
records of the party granting such access, but only to the
extent that such access would not unreasonably disrupt the
operations of the party granting such access, cause a violation
of an existing agreement to which such party granting access is
a party or would cause a risk of a loss of privilege to the
disclosing party, or any of their subsidiaries or would
constitute a violation of any applicable law;
•
take certain actions under federal and state securities laws
necessary to complete the transactions contemplated by the
Merger Agreement, including the filing by Centex of this joint
proxy statement/prospectus and the filing by Pulte of a
registration statement on
Form S-4
with the SEC, of which this joint proxy statement/prospectus is
a part;
•
take any actions reasonably necessary to complete the
transactions contemplated by the Merger Agreement on the terms
contemplated by the Merger Agreement if any takeover statute
becomes applicable;
•
use reasonable efforts to consult with each other before issuing
any press release or making any public announcement primarily
relating to the Merger Agreement or the transactions
contemplated by the Merger Agreement;
•
take all steps required to cause dispositions of Centex common
stock or acquisitions of Pulte common stock resulting from the
transactions contemplated by the Merger Agreement by each
individual subject to the reporting requirements of
Section 16(a) of the Exchange Act to be exempt under
Rule 16b-3
of the Exchange Act;
•
not take any action, or knowingly fail to take any action, that
would prevent or impede, or be reasonably likely to prevent or
impede the merger from qualifying as a
“reorganization” within the meaning of
Section 368(a) of the Internal Revenue Code; and
87
•
not redeem the rights issued under their respective shareholder
or stockholder rights agreements, or amend or terminate such
rights agreements, subject to certain exceptions.
Pulte has further agreed to:
•
(1) maintain all rights to exculpation, indemnification and
advancement of expenses under Centex’s organizational
documents or agreements, (2) indemnify Centex’s
current and former directors, officers and employees against all
costs, expenses and other payments arising out of or relating to
any action or omission occurring before or after the completion
of the merger, and (3) for a period of six years from the
completion of the merger, maintain Centex’s existing
directors’ and officers’ liability insurance or a
“tail” policy with annual premiums not in excess of
300% of the last annual premium paid by Centex;
•
cause the shares of Pulte common stock to be issued in the
merger to be approved for listing on the NYSE; and
•
maintain an office in Dallas, Texas as a home office extension
of Pulte’s Detroit headquarters, with certain support
functions to be conducted from such office.
The Merger Agreement may be terminated and abandoned at any time
prior to the completion of the merger by the mutual written
consent of the Pulte and Centex. Also, either Pulte or Centex
may terminate the Merger Agreement and abandon the merger at any
time prior to the completion of the merger if:
•
the merger does not occur on or before November 7, 2009,
unless the party seeking to terminate the Merger Agreement for
this reason fails to perform or comply in all material respects
with its covenants and agreements set forth in the Merger
Agreement;
•
a governmental entity permanently enjoins or otherwise prohibits
the completion of the merger and such action becomes final and
non-appealable, so long as the party seeking to terminate the
Merger Agreement for this reason has used its reasonable best
efforts to remove or prevent such action;
•
the Centex special meeting concludes without the approval of the
proposal to approve the Merger Agreement by Centex’s
stockholders, except that Centex may not terminate the Merger
Agreement for this reason if the failure to obtain the approval
is caused by an action or failure to act by Centex that
constitutes a material breach of the Merger Agreement; or
•
the Pulte special meeting concludes without the approval of the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock and proposal to approve the
issuance of shares in the merger by Pulte’s shareholders,
except that Pulte may not terminate the Merger Agreement for
this reason if the failure to obtain the approvals is caused by
an action or failure to act by Pulte that constitutes a material
breach of the Merger Agreement.
Centex may terminate the Merger Agreement at any time prior to
the approval of the proposal to approve the Merger Agreement by
Centex’s stockholders in light of a superior proposal if:
•
Centex is not in material breach of the section of the Merger
Agreement imposing restrictions on the solicitation of
alternative proposals, including its obligation to notify Pulte
of the superior proposal, see “— Non-Solicitation
of Alternative Transactions” beginning on page 80;
•
the superior proposal continues to constitute a superior
proposal at the conclusion of a three business day period that
begins with notification to Pulte of the superior proposal,
subject to any extensions as contemplated by the Merger
Agreement; and
•
the Centex board of directors determines in good faith, after
consultation with Centex’s outside legal and financial
advisors, that recommending the proposal to approve the Merger
Agreement, or failing to change such recommendation in a manner
adverse to Pulte, would be inconsistent with their fiduciary
obligations to Centex stockholders under applicable law.
88
In addition, Centex may terminate the Merger Agreement at any
time prior to the completion of the merger if:
•
Pulte breaches or fails to perform in any material respect any
of its representations, warranties, covenants or other
agreements contained in the Merger Agreement, which breach or
failure to perform (1) would result in a failure of any of
the conditions to Centex’s obligation to complete the
merger, see “— Conditions to Completion of the
Merger” beginning on page 78, and (2) cannot be
cured by November 7, 2009, so long as Centex provides Pulte
with at least 30 days’ prior written notice of its
intent to terminate the Merger Agreement for this reason; or
•
Pulte’s board of directors changes its recommendation that
Pulte’s shareholders approve the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock and proposal to approve the issuance of shares in
the merger.
Pulte may terminate the Merger Agreement at any time prior to
the completion of the merger if:
•
Centex breaches or fails to perform in any material respect any
of its representations, warranties, covenants or other
agreements contained in the Merger Agreement, which breach or
failure to perform (1) would result in a failure of any of
the conditions to Pulte’s obligation to complete the
merger, see “— Conditions to Completion of the
Merger” beginning on page 78, and (2) cannot be
cured by November 7, 2009, so long as Pulte provides Centex
with at least 30 days’ prior written notice of its
intent to terminate the Merger Agreement for this reason; or
•
the Centex board of directors changes its recommendation that
Centex’s stockholders approve the Merger Agreement, or
recommends the approval or adoption of any alternative proposal
to Centex’s stockholders.
Termination
Fees
Centex would be required to pay Pulte a termination fee of
$24 million if Pulte or Centex terminates the Merger
Agreement because Centex stockholders, following a favorable
recommendation to approve the proposal to approve the Merger
Agreement by Centex’s board of directors, do not approve
this proposal at the Centex special meeting.
Centex would be required to pay Pulte a termination fee of
$48 million in the following circumstances:
•
if Pulte terminates the Merger Agreement because Centex’s
board of directors has changed its recommendation of the merger
or recommended the approval or adoption of an alternative
proposal to Centex’s stockholders;
•
if Centex terminates the Merger Agreement in light of a superior
proposal;
•
if Pulte or Centex terminates the Merger Agreement because
Centex stockholders, following a change of recommendation of the
proposal to approve the Merger Agreement by Centex’s board
of directors, do not approve this proposal at the Centex special
meeting;
•
if (1) Pulte or Centex terminates the Merger Agreement
because Centex stockholders do not approve the proposal to
approve the Merger Agreement at the Centex special meeting,
(2) prior to such termination an alternative proposal in
respect of at least 50% of Centex was publicly proposed and
(3) within 12 months of such termination, Centex
enters into a definitive agreement regarding, or otherwise
completes, any such alternative proposal in respect of at least
50% of Centex; or
•
if (1) Pulte or Centex terminates the Merger Agreement
because the merger has not occurred on or before
November 7, 2009 or Pulte terminates the Merger Agreement
because of an intentional breach of the Merger Agreement by
Centex, (2) prior to such termination an alternative
proposal in respect of at least 50% of Centex was publicly
proposed and (3) within 12 months of such termination,
Centex enters into a definitive agreement regarding, or
otherwise completes, any such alternative proposal in respect of
at least 50% of Centex.
89
Pulte would be required to pay Centex a termination fee of
$51 million if Pulte or Centex terminates the Merger
Agreement because Pulte’s shareholders, following a
favorable recommendation by Pulte’s board of directors to
approve the proposal to approve the charter amendment to
increase the number of authorized shares of common stock and the
proposal to approve the issuance of shares in the merger, do not
approve both of these proposals at the Pulte special meeting.
Pulte would be required to pay Centex a termination fee of
$102 million in the following circumstances:
•
if Centex terminates the Merger Agreement because Pulte’s
board of directors has changed its recommendation of the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock or proposal to approve the
issuance of shares in the merger; or
•
if Pulte or Centex terminates the Merger Agreement because Pulte
shareholders, following a change of recommendation of the
proposal to approve the charter amendment to increase the number
of authorized shares of common stock or proposal to approve the
issuance of shares in the merger by Pulte’s board of
directors, do not approve both of these proposals at the Pulte
special meeting.
Effect
of Termination
If the Merger Agreement is terminated as described above, the
Merger Agreement will terminate (except for the provisions
governing payment of the termination fees and certain other
miscellaneous provisions), and neither Pulte nor Centex will be
liable to the other except for liability arising out of an
intentional breach of the Merger Agreement, for fraud or as
provided for in the confidentiality agreement between Pulte and
Centex.
The Merger Agreement contains customary representations and
warranties of Pulte, Centex and Pi Nevada Building Company
relating to their respective businesses. These representations
and warranties have been made solely for the benefit of the
other party or parties, and such representations and warranties
should not be relied on by any other person. In addition, such
representations and warranties:
•
are qualified in their entirety by the information disclosed by
the applicable party in documents filed with the SEC since
January 1, 2007 and prior to the date of the Merger
Agreement, excluding any risk-factor disclosure, disclosure of
risks in any “forward-looking statements” disclaimer
and any other statements that are similarly predictive or
forward looking in nature;
•
have been further qualified by information contained in
disclosure schedules that the parties exchanged in connection
with the execution of the Merger Agreement;
•
will not survive completion of the merger or the termination of
the Merger Agreement;
•
are in certain cases subject to a materiality standard described
in the Merger Agreement which may differ from what may be viewed
as material by you; and
•
are in certain cases, qualified by the knowledge of the parties
making such representations and warranties.
Each of Pulte, Centex and Pi Nevada Building Company has made
customary representations and warranties relating to, among
other things:
•
organization and standing;
•
capital structure;
•
corporate power and authority;
•
conflicts, consents and approvals;
•
SEC filings and internal controls and procedures;
•
the absence of any undisclosed liabilities;
90
•
compliance with laws and the possession of necessary permits;
•
environmental matters;
•
employee benefit plans;
•
absence of certain changes or events;
•
investigations and litigation;
•
disclosure documents;
•
tax matters;
•
employment and labor matters;
•
intellectual property;
•
real property;
•
in the case of Centex, the required vote of Centex stockholders
to approve the proposal to approve the Merger Agreement, and, in
the case of Pulte, the required votes of Pulte shareholders to
approve the proposal to approve the charter amendment to
increase the number of authorized shares of common stock and
proposal to approve the issuance of shares in the merger;
the taking of all actions necessary to render such party’s
rights agreement inapplicable to the merger and the voting
agreements, and, in the case of Centex, to cause its rights
agreement to terminate as of the time the merger is completed.
Each of Pulte and Pi Nevada Building Company has also made
representations and warranties relating to the lack of ownership
of shares of Centex.
Centex has also made representations and warranties relating to
the inapplicability of state anti-takeover laws to the Merger
Agreement.
Each party is required to pay its own costs and expenses
incurred in connection with the merger, the Merger Agreement and
the transactions contemplated thereby, except that Pulte will
pay all fees in respect of the filing under the HSR Act, and
Pulte and Centex will share equally all costs and expenses
incurred in connection with the printing, filing and mailing of
this joint proxy statement/prospectus (including applicable SEC
filing fees).
The Merger Agreement is governed by, and is to be construed in
accordance with, the laws of Delaware, except that issues
involving the completion and effects of the merger are governed
by the laws of Nevada to the extent the application of Nevada
law is mandatory. All legal actions or proceedings with respect
to the Merger Agreement are to be brought and determined in the
Delaware Court of Chancery or, if the Delaware Court of Chancery
declines to accept jurisdiction over a particular matter, any
state or federal court within the State of Delaware. The parties
to the Merger Agreement are entitled to injunctions to prevent
breaches of the Merger Agreement and to specifically enforce the
terms of the Merger Agreement.
Pulte, Centex and Pi Nevada Building Company may amend or waive
any provision of the Merger Agreement at any time prior to the
completion of the merger. However, any amendment or waiver that
is made following the Centex special meeting will be subject to
approval by Centex stockholders if further approval is required
by applicable law or the rules and regulations of the NYSE.
At the Pulte special meeting, Pulte shareholders will consider
two proposed amendments to Pulte’s Restated Articles of
Incorporation, which are described below. A copy of the current
Pulte Restated Articles of Incorporation is attached to this
joint proxy statement/prospectus as Annex D. A copy of the form
of amendment to Pulte’s Restated Articles of Incorporation,
which reflects the proposed amendment to increase the number of
authorized shares of Pulte common stock, is attached to this
joint proxy statement/prospectus as Annex E. A copy of the form
of amendment to Pulte’s Restated Articles of Incorporation,
which reflects the proposed amendment to change Pulte’s
corporate name, is attached to this joint proxy
statement/prospectus as Annex F.
Proposal
to Approve the Charter Amendment to Increase the Number of
Authorized Shares of Common Stock
The Pulte board of directors has proposed, subject to
shareholder approval, to amend Pulte’s Restated Articles of
Incorporation to increase the number of shares of Pulte common
stock authorized for issuance from 400 million to
500 million. If the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock is approved by Pulte’s shareholders, Pulte would only
file the certificate of amendment to Pulte’s Restated
Articles of Incorporation reflecting the increased number of
authorized shares of common stock with the Michigan Department
of Energy, Labor and Economic Growth immediately prior to the
completion of the merger, but if the Merger Agreement is
terminated (and the merger is not completed), Pulte will not
file the certificate of amendment to Pulte’s Restated
Articles of Incorporation reflecting the increased number of
authorized shares of common stock with the Michigan Department
of Energy, Labor and Economic Growth and the amendment will not
become effective. If Pulte files the certificate of amendment
reflecting the increased number of authorized shares of common
stock with the Michigan Department of Energy, Labor and Economic
Growth and the merger is not completed, Pulte reserves the right
to abandon the amendment in accordance with the provisions of
the MBCA.
As of the Pulte record date, Pulte had 258,603,672 shares
of Pulte common stock issued and outstanding. As of such date,
there were 13,778,847 shares of Pulte common stock reserved
for issuance in respect of Pulte stock options. Based on the
number of shares of Centex common stock outstanding as of the
Centex record date, if the merger is completed, Pulte will issue
approximately 122,186,622 additional shares of Pulte common
stock to the Centex stockholders. Based on the options, other
equity-based awards and arrangements to purchase or issue Centex
common stock as of the Centex record date, if the merger is
completed, Pulte will reserve for issuance approximately
5.9 million additional shares of Pulte common stock. The
approval of the proposal to approve the charter amendment to
increase the number of authorized shares of common stock is
required to complete the merger because the existing number of
authorized but unissued shares of Pulte common stock is not
sufficient to support the number of shares of Pulte common stock
required to be issued to the holders of Centex common stock and
Centex equity-based awards pursuant to the terms of the Merger
Agreement. Although Pulte’s management currently has no
definitive plans for the issuance of any additional authorized
shares, the authorization of additional shares would permit the
issuance of shares for future stock dividends, stock splits,
possible acquisitions, stock option plans, and other appropriate
corporate purposes. The additional shares of Pulte common stock
will not be entitled to preemptive rights nor will existing
shareholders have any preemptive right to acquire any of those
shares when issued. Approval of the proposal to approve the
charter amendment to increase the number of authorized shares of
common stock requires the affirmative vote of a majority of the
outstanding shares of Pulte common stock entitled to vote on the
proposal. Pulte shareholders are entitled to one vote for each
share of Pulte common stock held as of the record date.
Abstentions and broker non-votes will have the same effect as a
vote against the amendment.
Under the Merger Agreement, approval of the proposal to approve
the charter amendment to increase the number of authorized
shares of common stock is a condition to the completion of the
merger. If the proposal to approve the charter amendment to
increase the number of authorized shares of common stock is not
approved, the merger will not be completed even if the proposal
to approve the issuance of shares in the merger is approved by
Pulte shareholders and the proposal to approve the Merger
Agreement is approved by Centex stockholders.
93
The Pulte board of directors unanimously recommends a vote
“FOR”the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock.
Proposal
to Approve the Charter Amendment to Change Pulte’s
Corporate Name
The Pulte board of directors has proposed, subject to
shareholder approval, to amend Pulte’s Restated Articles of
Incorporation to change Pulte’s corporate name from
“Pulte Homes, Inc.” to “PulteGroup, Inc.”
Pulte believes that the new corporate name will better reflect
the company’s new branding strategy, which it expects to
implement in the months following the Pulte special meeting,
whether or not the merger is completed.
Approval of the proposal to approve the charter amendment to
change Pulte’s corporate name by Pulte’s shareholders
is not a condition to the completion of the merger. Subject to
approval of this proposal by Pulte’s shareholders, Pulte
intends to change its corporate name regardless of whether or
not the merger is completed. Accordingly, if the proposal to
approve the charter amendment to change Pulte’s corporate
name is approved by Pulte’s shareholders, Pulte would file
a certificate of amendment to Pulte’s Restated Articles of
Incorporation reflecting the change of Pulte’s corporate
name with the Michigan Department of Energy, Labor and Economic
Growth at the appropriate time during the implementation of its
new branding strategy.
Approval of the proposal to approve the charter amendment to
change Pulte’s corporate name requires the affirmative vote
of a majority of the outstanding shares of Pulte common stock
entitled to vote on the proposal. Pulte shareholders are
entitled to one vote for each share of Pulte common stock held
as of the record date. Abstentions and broker non-votes will
have the same effect as a vote against the amendment.
The Pulte board of directors unanimously recommends a vote
“FOR”the proposal to approve the charter
amendment to change Pulte’s corporate name.
The following unaudited pro forma condensed combined financial
statements, which we refer to as the pro forma financial
statements, have been derived from the historical consolidated
financial statements of Pulte and Centex, both of which are
incorporated by reference into this joint proxy
statement/prospectus. The transaction is accounted for by
applying the acquisition method under Statement of Financial
Accounting Standards No. 141(R), Business
Combinations, which we refer to as SFAS 141(R), as
outlined in the accompanying notes to the unaudited pro forma
condensed combined financial statements, which we refer to as
the pro forma notes. In accordance with SFAS 141(R), Pulte
has been treated as the accounting acquirer in the proposed
transaction. See “The Merger — Accounting
Treatment” beginning on page 69.
The transactions reflected in the pro forma financial statements
include (1) the exchange of all outstanding shares of
Centex common stock at the exchange ratio; (2) the exchange
of all of Centex’s vested and unvested restricted stock for
Pulte common stock; (3) the exchange of unvested and vested
Centex stock options for vested Pulte stock options with
adjustments to reflect the exchange ratio; and (4) the
conversion of vested and unvested Centex restricted stock units.
The following unaudited pro forma condensed combined balance
sheet at March 31, 2009, which we refer to as the pro forma
balance sheet, is presented on a basis to reflect the merger and
related transactions as if they had occurred on March 31,2009. The pro forma balance sheet is prepared by combining the
balance sheet at March 31, 2009 for both Pulte and Centex.
The following unaudited pro forma condensed combined statements
of operations, which we refer to as the pro forma statements of
operations, for the three months ended March 31, 2009 and
year ended December 31, 2008 are presented on a basis to
reflect the merger and related transactions as if they had
occurred on January 1, 2008. The unaudited pro forma
statement of operations for the three months ended
March 31, 2009 is prepared by combining the statement of
operations of Pulte for the three months ended March 31,2009 with the statement of operations for Centex for the three
months ended March 31, 2009 and then making pro forma
adjustments. The unaudited pro forma statement of operations for
the twelve months ended December 31, 2008 is prepared by
combining the statement of operations of Pulte for the year
ended December 31, 2008 with the statement of operations
for Centex for the twelve months ended December 31, 2008
and then making pro forma adjustments. See Note (a) to the
pro forma financial statements for additional information.
The process of valuing Centex’s tangible and intangible
assets and liabilities, as well as evaluating accounting
policies for conformity, is still in the preliminary stages.
Accordingly, the purchase price allocation adjustments included
in the pro forma financial statements are preliminary and have
been made solely for the purpose of providing these pro forma
financial statements. For purposes of the pro forma financial
statements, Pulte and Centex have made preliminary allocations,
where sufficient information is available to make a fair value
estimate, to those tangible and intangible assets to be acquired
and liabilities to be assumed based on preliminary estimates of
their fair value as of March 31, 2009. For those assets and
liabilities where sufficient information is unavailable to make
a reasonable estimate of fair value, the pro forma financial
statements reflect the carrying value of these assets and
liabilities at March 31, 2009. Any remaining unallocated
purchase consideration has been reflected as excess purchase
price (goodwill) in the pro forma balance sheet at
March 31, 2009. In the event the fair value of the acquired
net assets exceeds the purchase price, the amount of such excess
would be recorded as a gain in post-merger operating results in
accordance with SFAS 141(R). A final determination of the
acquired fair values, which cannot be made prior to completion
of the merger, will be based on the actual fair value of Pulte
common stock and the net assets of Centex that exist on the date
of the completion of the merger. Pulte currently expects that
the process of determining fair value of the tangible and
intangible assets acquired and liabilities assumed will be
completed within one year of completion of the merger. Material
revisions to Pulte’s preliminary estimates could be
necessary as more information becomes available through the
completion of this final determination. The actual amounts
recorded following the completion of the merger may be
materially different from the information presented in these pro
forma financial statements due to a number of factors, including:
•
timing of completion of the merger;
•
changes in Pulte’s share price;
95
•
changes in the fair value of Centex’s senior notes;
•
changes in Centex’s share price as it relates to the
settlement of Centex performance units;
•
changes in the net assets of Centex;
•
changes in the market conditions and financial results impacting
cash flow projections in the valuation; and
•
other changes in market conditions which impact the fair value
of Centex’s net assets.
The pro forma financial statements should be read in conjunction
with the pro forma notes. The pro forma financial statements and
pro forma notes were based on, and should be read in conjunction
with:
•
Pulte’s unaudited consolidated financial statements for the
three months ended March 31, 2009 and the related notes in
Pulte’s Quarterly Report on
Form 10-Q
for the three months ended March 31, 2009;
•
Pulte’s historical audited consolidated financial
statements for the year ended December 31, 2008 and the
related notes included in Pulte’s Annual Report on
Form 10-K
for the year ended December 31, 2008;
•
Centex’s historical audited financial statements for the
years ended March 31, 2009 and 2008 and the related notes
included in Centex’s Annual Report on
Form 10-K
for the years ended March 31, 2009 and 2008; and
•
Centex’s unaudited consolidated financial statements for
the nine months ended December 31, 2008 and the related
notes in Centex’s Quarterly Report on
Form 10-Q
for the nine months ended December 31, 2008.
Pulte’s and Centex’s historical consolidated financial
information has been adjusted in the pro forma financial
statements to give effect to pro forma events that are
(1) directly attributable to the merger; (2) factually
supportable; and (3) with respect to the pro forma
statements of operations, expected to have a continuing impact
on the combined results. The pro forma financial statements do
not reflect any revenue enhancements or any cost savings from
operating efficiencies, synergies or other restructurings that
could result from the merger. The pro forma financial statements
also do not reflect any restructuring charges to be incurred in
connection with the merger, with the exception of estimated
severance costs related to certain members of Centex’s
senior management that will be incurred concurrently with or
shortly after completion of the merger. Pulte is continuing to
assess the magnitude of the facilities and systems consolidation
costs and other non-recurring employment-related costs that will
be required in connection with the merger and, therefore, is
unable to provide an estimate of these costs at this time. Such
costs are expected to primarily relate to cost saving measures
in corporate and field overhead. Therefore, these charges are
excluded from the pro forma financial statements as they are not
factually supportable at this time. In accordance with
SFAS 141(R), these costs will be expensed as incurred.
In addition, the pro forma financial statements do not reflect
any adjustments related to expected interest savings from
retirements of debt subsequent to completion of the merger.
Certain of these interest savings from retirements of debt are
expected to occur prior to December 31, 2009. The specific
amount and series of debt obligations to be retired for each
company will be determined in the future and will be
significantly influenced by future market conditions.
Accordingly, the potential impact of any retirement of debt has
been excluded from the pro forma financial statements as the
amount of such potential impact is not factually supportable at
this time.
The pro forma adjustments are based upon available information
and assumptions that the managements of Pulte and Centex believe
reasonably reflect the merger. We present the pro forma
financial statements for informational purposes only. The pro
forma financial statements are provided for illustrative
purposes only and do not purport to represent what the actual
consolidated results of operations or the consolidated financial
position of Pulte would have been had the merger occurred on the
dates assumed, nor are they necessarily indicative of future
consolidated results of operations or financial position.
96
Pulte and
Centex Unaudited
Pro Forma Condensed Combined Balance Sheet March 31, 2009
Condensed As
Adjusted Centex
Pro Forma
Pro Forma
Historical Pulte
(b)(c)
Adjustments
Combined
(amounts in thousands)
ASSETS
Cash and equivalents (including restricted cash)(l)
$
1,745,796
$
1,768,548
$
(30,000
)(d)
$
3,455,213
(21,019
)(d)
(20,000
)(e)
(9,629
)(f)
21,517
(g)
Unfunded settlements
5,821
6,850
—
12,671
House and land inventory
3,854,041
3,152,955
(610,000
)(d)
6,544,026
147,030
(g)
Land held for sale
101,020
—
—
101,020
Land, not owned, under option agreements
181,387
83,628
—
265,015
Residential mortgage loans available-for-sale
127,900
152,579
—
280,479
Investments in unconsolidated entities
91,754
138,908
(123,381
)(g)
107,281
Other assets
597,037
365,261
(14,148
)(d)
974,408
26,258
(g)
Goodwill
—
9,933
(9,933
)(d)
241,617
241,617
(d)
Intangibles
100,517
—
110,000
(d)
218,517
8,000
(d)
Income taxes receivable
9,660
239,452
—
(h)
249,112
Total assets
$
6,814,933
$
5,918,114
$
(283,688
)
$
12,449,359
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable
$
165,515
$
96,749
$
2,794
(g)
$
265,058
Customer deposits
40,889
27,792
—
68,681
Accrued and other liabilities
915,309
1,127,801
(3,514
)(d)
2,108,226
68,630
(g)
Collateralized short-term debt, recourse solely applicable to
non-guarantor subsidiary assets
66,968
119,052
—
186,020
Income tax liabilities(h)
131,853
526,118
—
(h)
657,971
Senior notes
3,166,612
3,102,788
(500,100
)(d)
5,769,300
Total liabilities
4,487,146
5,000,300
(432,190
)
9,055,256
Shareholders’ equity(j)(k)
2,327,787
917,814
1,090,410
(d)
3,394,103
5,535
(d)
(917,814
)(d)
(20,000
)(e)
(9,629
)(f)
Total liabilities and shareholders’ equity
$
6,814,933
$
5,918,114
$
(283,688
)
$
12,449,359
See accompanying notes to unaudited pro forma condensed
combined
financial statements, which are an integral part of these
statements.
97
Pulte and
Centex Unaudited Pro Forma
Condensed Combined Statement Of Operations
For the Three Months Ended March 31, 2009
Condensed As
Adjusted Centex
Pro Forma
Pro Forma
Historical Pulte
(a)(b)(c)
Adjustments
Combined
(amounts in thousands, except per share data)
Revenues:
Homebuilding
$
565,343
$
791,079
$
—
$
1,356,422
Financial Services
18,549
32,136
—
50,685
Other non-operating
3,528
3,600
—
7,128
Total revenues
587,420
826,815
—
1,414,235
Expenses:
Homebuilding, principally cost of sales
1,022,249
1,172,725
62,297
(g)
2,257,271
Financial Services
19,303
39,208
—
58,511
Other non-operating, net
7,593
34,144
24,000
(d)
67,112
1,375
(d)
Total expenses
1,049,145
1,246,077
87,672
2,382,894
Other income:
Equity income (loss)
(50,521
)
(51,854
)
62,297
(g)
(40,078
)
Loss from continuing operations before income taxes
(512,246
)
(471,116
)
(25,375
)
(1,008,737
)
Income taxes (benefit)
2,572
(65,603
)
—
(h)
(63,031
)
Loss from continuing operations
$
(514,818
)
$
(405,513
)
$
(25,375
)
$
(945,706
)
Loss per share (from continuing operations):
Basic(i)
$
(2.02
)
$
(3.26
)
$
(2.51
)
Diluted(i)
$
(2.02
)
$
(3.26
)
$
(2.51
)
Weighted average shares outstanding
Basic(i)
254,578
124,366
376,276
Diluted(i)
254,578
124,366
376,276
See accompanying notes to unaudited pro forma condensed
combined
financial statements, which are an integral part of these
statements.
98
Pulte and
Centex Unaudited Pro Forma
Condensed Combined Statement Of Operations
For the Year Ended December 31, 2008
Condensed As
Adjusted Centex
Pro Forma
Pro Forma
Historical Pulte
(a)(b)(c)
Adjustments
Combined
(amounts in thousands, except per share data)
Revenues:
Homebuilding
$
6,112,038
$
5,090,677
$
—
$
11,202,715
Financial Services
151,016
226,943
—
377,959
Other non-operating
26,404
16,093
—
42,497
Total revenues
6,289,458
5,333,713
—
11,623,171
Expenses:
Homebuilding, principally cost of sales
7,793,825
6,804,759
—
14,598,584
Financial Services
123,082
317,919
—
441,001
Other non-operating, net
42,337
88,472
96,000
(d)
232,309
5,500
(d)
Total expenses
7,959,244
7,211,150
101,500
15,271,894
Other income:
Equity loss
(12,813
)
(111,164
)
—
(123,977
)
Loss from continuing operations before income taxes
(1,682,599
)
(1,988,601
)
(101,500
)
(3,772,700
)
Income taxes (benefit)
(209,486
)
(45,888
)
—
(h)
(255,374
)
Loss from continuing operations
$
(1,473,113
)
$
(1,942,713
)
$
(101,500
)
$
(3,517,326
)
Loss per share (from continuing operations):
Basic(i)
$
(5.81
)
$
(15.65
)
$
(9.37
)
Diluted(i)
$
(5.81
)
$
(15.65
)
$
(9.37
)
Weighted average shares outstanding
Basic(i)
253,512
124,155
375,214
Diluted(i)
253,512
124,155
375,214
See accompanying notes to unaudited pro forma condensed
combined
financial statements, which are an integral part of these
statements.
99
Notes to
Unaudited Pro Forma
Condensed Combined Financial Statements
(a)
Conforming
Year Ends
Pulte’s fiscal year ends on December 31 while Centex’s
fiscal year ends on March 31. Therefore, Centex financial
information has been recast to conform with Pulte’s quarter
and year end. Centex’s historical statements of operations
for the three and twelve months ended March 31, 2009 and
December 31, 2008 were derived from Centex’s
historical statements of operations for the nine months ended
December 31, 2008 and the years ended March 31, 2009
and 2008, as follows:
Centex
Pro Forma Statement of Operations
For the Three Months Ended March 31, 2009
Loss from continuing operations before income taxes
(1,526,771
)
(1,055,655
)
(471,116
)
Income taxes (benefit)
(86,620
)
(21,017
)
(65,603
)
Loss from continuing operations
$
(1,440,151
)
$
(1,034,638
)
$
(405,513
)
(1)
Effective March 31, 2009, Centex adopted a revised
presentation for its statement of operations. Accordingly,
Centex’s previously reported results of operations have
been revised in the above table to conform with the presentation
adopted by Centex as of March 31, 2009.
The pro forma statement of operations for Centex excludes
amounts reported as discontinued operations in Centex’s
historical financial statements.
100
Centex
Pro Forma Statement of Operations
For the Twelve Months Ended December 31, 2008
Three Months Ended(1)
Twelve Months
March 31,
June 30,
September 30,
December 31,
Ended
2008
2008
2008
2008
December 31,
A
B
C
D
E = A+B+C+D
(amounts in thousands)
Revenues:
Homebuilding
$
2,245,226
$
1,049,699
$
952,596
$
843,156
$
5,090,677
Financial Services
69,079
76,423
52,409
29,032
226,943
Total revenues
2,314,305
1,126,122
1,005,005
872,188
5,317,620
Expenses:
Homebuilding
2,831,793
997,582
908,173
1,255,413
5,992,961
Financial Services
6,621
4,725
4,060
2,728
18,134
Total cost of revenues
2,838,414
1,002,307
912,233
1,258,141
6,011,095
Selling, general and administrative expenses
399,381
290,485
294,798
194,321
1,178,985
Interest expense
8,642
6,180
4,973
17,758
37,553
Other income:
Equity loss
(3,569
)
(20,297
)
(12,902
)
(74,396
)
(111,164
)
Other income
2,755
10,400
7,856
11,565
32,576
Loss from continuing operations before income taxes
(932,946
)
(182,747
)
(212,045
)
(660,863
)
(1,988,601
)
Income taxes (benefit)
(24,871
)
(13,635
)
(10,425
)
3,043
(45,888
)
Loss from continuing operations
$
(908,075
)
$
(169,112
)
$
(201,620
)
$
(663,906
)
$
(1,942,713
)
(1)
Effective March 31, 2009, Centex adopted a revised
presentation for its statement of operations. Accordingly,
Centex’s previously reported quarterly results of
operations have been revised in the above table to conform with
the presentation adopted by Centex as of March 31, 2009.
The pro forma statement of operations for Centex excludes
amounts reported as discontinued operations in Centex’s
historical financial statements.
101
(b)
Reclassifications
on the Pro Forma Balance Sheet and Pro Forma Statements of
Operations
Certain financial statement line items included in Centex’s
historical presentation have been reclassified to corresponding
line items as included in Pulte’s historical presentation
as follows:
Loss from continuing operations before income taxes
(1,988,601
)
—
(1,988,601
)
Income taxes (benefit)
(45,888
)
—
(45,888
)
Loss from continuing operations
$
(1,942,713
)
$
—
$
(1,942,713
)
103
The reclassifications presented in the Centex balance sheet as
of March 31, 2009 and the Centex statements of operations
for the three months ended March 31, 2009 and twelve months
ended December 31, 2008 are as follows:
Balance
sheet reclassifications:
•
Receivables: Includes the reclassification of
$152.6 million to mortgage loans available-for-sale,
$239.5 million to income taxes receivable, and
$6.9 million to unfunded settlements. In addition,
$129.5 million of trade and notes receivable and
$61.5 million of other loans receivable were reclassified
to other assets.
•
Unfunded settlements: Includes the
reclassification of $6.9 million from receivables.
•
House and land inventory: Includes the
reclassification of $462.5 million from land held for
development and sale and $21.2 million of other inventory
to other assets.
•
Land held for development and sale: Includes
the reclassification of $462.5 million to house and land
inventory along with $8.1 million of deposits and
pre-acquisition costs to other assets. Upon completion of the
merger, Pulte will determine which of Centex’s land parcels
meet the criteria for classification as held for sale assets and
classify them accordingly.
•
Land, not owned, under option
agreements: Includes the reclassification of
deposits and pre-acquisition costs totaling $24.0 million
to other assets.
•
Residential mortgage loans
available-for-sale: Includes the reclassification
of $152.6 million from receivables.
•
Investments in unconsolidated
entities: Includes the reclassification of cost
method investments totaling $2.4 million from other assets.
•
Other assets: Includes the reclassification of
$129.5 million of trade and notes receivable and
$61.5 million of other loans receivable from receivables.
Also includes the reclassification of $21.2 million of
other inventory from house and land inventory and
$8.1 million and $24.0 million of deposits and
pre-acquisition costs from land held for development and sale
and land, not owned, under option agreement, respectively. Also
includes the reclassification of $2.4 million in cost
method investments to investments in unconsolidated entities.
•
Income taxes receivable: Includes the
reclassification of $239.5 million from receivables.
•
Customer deposits: Includes the
reclassification of $27.8 million in customer deposits from
accrued and other liabilities.
•
Accrued and other liabilities: Includes the
reclassification of $526.1 million to income tax
liabilities and $27.8 million to customer deposits, offset
by the reclassification of $2.1 million from senior notes.
•
Income tax liabilities: Includes the
reclassification of $526.1 million from accrued and other
liabilities.
•
Senior notes: Includes the reclassification of
$2.1 million to accrued and other liabilities.
Statements
of operations reclassifications:
•
Revenues: Other non-operating: Includes the
reclassification of interest income totaling $3.6 million
for the three months ended March 31, 2009, and
$16.1 million for the twelve months ended December 31,2008, from other income.
•
Expenses: Homebuilding: Includes
the reclassification of selling, general and administrative
expenses totaling $158.5 million and $824.8 million
for the three months ended March 31, 2009 and twelve months
ended December 31, 2008, respectively, offset by other
Homebuilding income totaling
104
$0.7 million and $13.0 million for the three months
ended March 31, 2009 and twelve months ended
December 31, 2008, respectively, from other income
(expense).
•
Expenses: Financial
Services: Includes the reclassification of
selling, general and administrative expenses totaling
$37.0 million and $299.8 million during the three
months ended March 31, 2009 and twelve months ended
December 31, 2008, respectively.
•
Selling, general and administrative
expenses: Includes the reclassification of
$158.5 million and $824.8 million to Homebuilding
expenses for the three months ended March 31, 2009 and
twelve months ended December 31, 2008, respectively.
Includes the reclassification of $37.0 million and
$299.8 million to Financial Services expenses for the three
months ended March 31, 2009 and twelve months ended
December 31, 2008, respectively. Also includes the
reclassification of $9.7 million and $54.4 million for
the three months ended March 31, 2009 and twelve months
ended December 31, 2008, respectively, to other
non-operating, net.
•
Interest Expense: Includes the
reclassification of interest expense totaling $23.8 million
and $37.6 million for the three months ended March 31,2009 and twelve months ended December 31, 2009,
respectively, to other non-operating, net.
•
Other non-operating, net: Includes the
reclassification of interest expense totaling $23.8 million
and $37.6 million for the three months ended March 31,2009 and twelve months ended December 31, 2009,
respectively; the reclassification of selling, general and
administrative expenses totaling $9.7 million and
$54.4 million for the three months ended March 31,2009 and twelve months ended December 31, 2008,
respectively; and the reclassification of other income (expense)
totaling ($0.6 million) and $3.5 million for the three
months ended March 31, 2009 and twelve months ended
December 31, 2008, respectively.
•
Other income (expense): Includes the
reclassification of $3.6 million and $16.1 million in
interest income to other non-operating revenues for the three
months ended March 31, 2009 and twelve months ended
December 31, 2008, respectively; the reclassification of
$0.7 million and $13.0 million of other income to
Homebuilding expenses for the three months ended March 31,2009 and twelve months ended December 31, 2008,
respectively; and the reclassification of $0.6 million and
($3.5 million) for the three months ended March 31,2009 and twelve months ended December 31, 2008,
respectively, to other non-operating, net.
These reclassifications had no impact on the historical loss
from continuing operations reported by Centex, are preliminary,
and do not reflect the final identification of all differences
in presentation which may be identified by the time Pulte
completes its acquisition accounting, which Pulte currently
expects will be completed within one year of completion of the
merger. Material revisions to Pulte’s preliminary estimates
may be necessary as more information becomes available through
the completion of this final determination. The actual amounts
recorded following the completion of the merger may be
materially different from the information presented in the pro
forma financial statements.
(c)
Accounting
Policies
Differences in the accounting practices or policies applied by
Pulte and Centex may exist that would materially impact the pro
forma financial statements. Based on preliminary reviews of
Centex’s accounting policies and discussions with Centex
management, certain differences in historical accounting
practices and policies are known to exist, including those
related to the capitalization and allocation of certain
construction and land development costs. Given the long time
periods over which such costs are capitalized and allocated in
the homebuilding industry as a result of the long life cycles of
many communities, such differences are not readily quantifiable.
It is also not readily determinable whether such differences
would result in either an increase or a decrease to pro forma
expenses. Pulte does not believe that such differences would
have a material impact on the pro forma financial statements. As
part of the purchase price allocation process under
SFAS 141(R), Pulte will record all acquired inventory at
fair value, which will eliminate any differences in historical
accounting policies. Upon completion of the merger, Pulte will
perform a detailed evaluation of
105
Centex’s accounting policies. As a result of that review,
it may become necessary to harmonize the combined entity’s
financial statements to conform those accounting policies that
are determined to be more appropriate for the combined entity.
The pro forma financial statements do not reflect any potential
differences in accounting policies.
(d)
Preliminary
Purchase Price
Pulte is subject to the terms and conditions of the Merger
Agreement unanimously approved by the boards of directors of
both Pulte and Centex. Pursuant to the terms and conditions of
the Merger Agreement, Pulte will acquire all of the outstanding
shares of Centex common stock at the fixed exchange ratio of
0.975 shares of Pulte common stock for each share of Centex
common stock. In addition, each restricted share of Centex
common stock and restricted stock unit with respect to Centex
common stock granted under Centex’s employee and director
stock plans will vest and be converted per the exchange ratio
into Pulte common stock or units with respect to Pulte common
stock. Each outstanding vested and unvested Centex stock option
granted under Centex’s employee and director stock plans
will be converted into a vested option to purchase shares of
Pulte common stock, with adjustments to reflect the exchange
ratio. The Merger Agreement requires that, with respect to
Centex stock options that were granted with an exercise price
less than $40.00 per share, the terms of the converted, vested
options to purchase shares of Pulte common stock provide that,
if the holder of the option experiences a severance-qualifying
termination of employment during the two-year period following
the completion of the merger, the stock option will remain
exercisable until the later of (1) the third anniversary of
the date of the termination of employment and (2) the date
on which the option would cease to be exercisable in accordance
with its terms (or, in either case, if earlier, the expiration
of the scheduled term of the option). This provision will result
in incremental expense in the post-merger period. The valuation
of the incremental fair value attributable to this change in
exercise period has not been performed and thus has not been
reflected in the pro forma financial statements. The Merger
Agreement also provides that each outstanding Centex performance
unit award granted under Centex’s employee and director
stock plans will vest and be converted into the right to receive
an amount in cash equal to the fair market value of a share of
Centex common stock on the day immediately prior to the
completion of the merger, multiplied by the number of shares of
Centex common stock subject to such award (assuming the
achievement of all applicable performance goals at target
levels). For purposes of the pro forma financial statements, the
purchase price was computed using Centex’s publicly
available information and reflects the market value of Pulte
common stock to be issued in connection with the merger based on
Pulte’s common stock closing price of $8.96 per share on
June 25, 2009. Based on these assumptions, the purchase
price is estimated to be $1.1 billion, which includes the
issuance of Pulte common stock for the immediate vesting and
conversion of unvested restricted stock and restricted stock
units and the conversion of vested and unvested Centex stock
106
options into options to purchase Pulte common stock described
below. The purchase price as of March 31, 2009 is
calculated as follows:
Centex shares of common stock outstanding (including restricted
stock) as of March 31, 2009
124,437
Centex restricted stock units outstanding as of March 31,2009
381
Total Centex shares to be acquired
124,818
Exchange ratio
0.975
Number of shares of Pulte common stock to be issued in exchange
121,698
Assumed closing price per share of Pulte common stock, as of
June 25, 2009
$
8.96
Consideration attributable to common stock
1,090,410
Consideration attributable to Pulte stock options in exchange
for Centex stock options
5,535
Total purchase price
$
1,095,945
Purchase Price Sensitivity — The pro forma
financial statements reflect the closing share price of
Pulte’s common stock on June 25, 2009; however, the
actual purchase price will fluctuate with the market price of
Pulte’s common stock until the merger is completed, and as
a result, the final purchase price could differ significantly
from the current estimate, which could materially impact these
pro forma financial statements. The resulting sensitivity of the
purchase price due to changes in the price of Pulte common stock
are illustrated below:
Sensitivity
of the Purchase Price to Changes in Pulte’s Share Price
(amounts in thousands, except ratio and per share
data)
Centex transaction costs — Centex estimates
that its expenses for this transaction will be approximately
$30.0 million, which will be reflected as an expense in
Centex’s pre-merger historical consolidated financial
statements in the period the expense is incurred. These costs
include fees for investment banking services, legal, accounting,
due diligence, tax, valuation, printing and other various
services necessary to complete the transaction. These estimated
expenses of Centex are reflected in the pro forma balance sheet
as of March 31, 2009 as a reduction to cash of
$30.0 million and a charge to shareholders’ equity of
$30.0 million. This adjustment has also been reflected as a
decrease in the net assets of Centex in the application of
acquisition accounting.
Centex change in control payments — Certain
members of Centex’s management have entered into incentive
plan agreements with Centex that require a cash payment upon a
change in control. In addition, under the terms of the
performance unit plan, upon a change in control, all of the
outstanding performance units will vest and be converted into
the right to receive an amount of cash equal to the product of
(1) the total number of shares subject to such performance
units and (2) the fair value of Centex common stock just
prior to the date of completion of the merger. The change in
control cash payments have been reflected as a
107
one-time adjustment to the pro forma balance sheet as of
March 31, 2009 as a reduction to cash of
$21.0 million, a reduction of accrued expenses of
$3.5 million and a charge to shareholders’ equity of
$17.5 million. This adjustment has also been reflected as a
decrease in the net assets of Centex in the application of
acquisition accounting.
Centex restricted stock, restricted stock units and stock
options — For purposes of estimating the purchase
price, Pulte has assumed that at the date on which the merger is
completed, 100% of the unvested restricted stock, unvested
restricted stock units and unvested stock options granted by
Centex will vest and be exchanged for Pulte common stock and
Pulte common stock options, respectively, with adjustments
reflecting the exchange ratio. The vesting of the restricted
stock, restricted stock units and stock options upon the change
in control will result in accelerated compensation expense for
Centex of approximately $29.5 million. This estimated
expense is not reflected in the pro forma financial statements
at March 31, 2009 as it has no impact on Centex’s net
assets.
Estimate
of Assets to be Acquired and Liabilities to be Assumed
The following is a preliminary estimate of the assets to be
acquired and the liabilities to be assumed by Pulte in the
merger, reconciled to the estimate of consideration expected to
be transferred:
Centex change in control payments (cash of $21,019 net of
accrued liabilities of $3,514)
(17,505
)
Elimination of pre-existing debt issue costs
(14,148
)
Elimination of existing goodwill
(9,933
)
Adjusted book value of net assets acquired
846,228
Adjustments to:
House and land inventory
(610,000
)
Tradenames
110,000
Backlog
8,000
Debt
500,100
Excess purchase price (goodwill)
241,617
Total purchase price
$
1,095,945
Pulte has not yet finalized its detailed valuation analyses
necessary to determine the fair value of the Centex assets to be
acquired and liabilities to be assumed and the related
allocations of purchase price. For the purposes of the pro forma
financial statements, Pulte has made a preliminary estimate of
the fair value for certain of the assets and liabilities for
which sufficient information was available. These items include
inventory, tradenames, backlog, and senior notes, and their
estimated fair values have been based on the following
methodology:
•
House and Land Inventory: Pulte determined the
fair value of inventory primarily using a discounted cash flow
model. These estimated cash flows are significantly impacted by
estimates related to expected average selling prices and sales
incentives, expected sales paces and cancellation rates,
expected land development and construction timelines, and
anticipated land development, construction, and overhead costs.
Such estimates must be made for each individual community and
may vary significantly between communities. Due to uncertainties
in the estimation process, the significant volatility in demand
for new housing, and the long life cycles of many communities,
actual results could differ significantly from such estimates.
Pulte’s determination of fair value also required
discounting the estimated cash
108
flows at a rate commensurate with the inherent risks associated
with each of the assets and related estimated cash flow streams.
The discount rate used in determining each community’s fair
value depended on the stage of development of the community and
other specific factors that increase or decrease the inherent
risks associated with the community’s cash flow streams.
For example, communities that are entitled and near completion
generally require a lower discount rate than communities that
are not entitled and consist of multiple phases spanning several
years of development and construction activity. Discount rates
used in the pro forma fair value analysis ranged from 8% to 24%,
with an average discount rate of 15%.
The aggregate fair value adjustment of $(610.0) million as
of March 31, 2009 relates to all components of
Centex’s consolidated inventory balance of
$3.2 billion. This adjustment primarily relates to land
inventory, which was not impaired in the historical reporting of
Centex as of March 31, 2009 primarily because the
undiscounted cash flows were sufficient to recover the asset
value and therefore, under Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or
Disposal of Long Lived Assets, which we refer to as
SFAS 144, did not require the assets to be measured at fair
value. Applying a discount rate to these cash flows results in a
decrease in value due to the holding period of the asset.
Due to the significant volatility in demand for new housing that
has existed in recent years and the significant uncertainty that
currently exists in the U.S. economy and financial markets,
the fair value of inventory to be acquired in the merger may
fluctuate significantly between March 31, 2009 and the
final completion of the merger. The following analysis presents
the sensitivity of Centex’s inventory to hypothetical
changes in fair values as if these changes occurred at
March 31, 2009. The ranges of changes chosen for this
analysis reflect Pulte’s view of changes which are
reasonably possible through the expected date of completion of
the merger. Any such change would generally result in a
corresponding offsetting change in the amount of goodwill.
No adjustments have been made to the pro forma statements of
operations to remove inventory impairments taken by Centex over
the period. As discussed above, determining the fair value of
inventory in the homebuilding industry is complicated and relies
significantly on management judgments and estimates regarding
future market conditions and the operating performance of
individual communities over extended periods, which can range to
over ten years. While Pulte has estimated the fair value of
inventory at March 31, 2009, insufficient information is
available to perform a similar valuation as of January 1,2008. Additionally, any pro forma presentation of cost of sales
would require removing the inventory impairments taken by Centex
over the period, which were significant, performing pro forma
inventory impairment analyses at different points in time during
2008 and 2009, and then determining the impact of each of the
above on the average per lost cost attributable to units sold
during 2008 and 2009. Because Centex’s inventory impairment
analyses involve both undiscounted and fair value analyses as
required by SFAS 144, any such pro forma impairment
analyses would be complex and influenced by market conditions
and management’s judgments and estimates. Given the
significant volatility in the demand for new housing and in both
Pulte’s and Centex’s historical and expected future
operating results, such a presentation in the pro forma
statements of operations may not be indicative of future
operating results.
•
Tradenames: The fair value of tradenames was
estimated using a relief-from-royalty approach. The underlying
premise of this method is that the economic value of the asset
is directly related to the amount and timing of the future net
cash flows resulting from the asset. A hypothetical construct is
used to represent what a firm would be willing to pay, in the
form of a royalty fee, for example, to continue to use the asset
in business operations if the firm no longer had legal ownership
of the asset. Since ownership of the asset
109
relieves the business from being required to make these
payments, financial results are improved to the extent the
royalty payments are avoided. The hypothetical royalties are
discounted to present value and are adjusted for the present
value of the hypothetical tax amortization benefit to arrive at
the indication of the asset’s fair value. The hypothetical
royalties are estimated based on market participant assumptions
and the discount rate utilized for calculating present value
represents a risk-adjusted discount rate.
•
Backlog: The fair value of the backlog was
estimated using an excess earnings method. The principle behind
this method is that the value of an intangible asset is equal to
the present value of the incremental after-tax cash flows
attributable only to the subject intangible asset. The
incremental after-tax cash flows attributable to the subject
intangible asset are then discounted to their present value
(after accounting for charges on contributory assets) and are
adjusted for the present value of the tax amortization benefit
to arrive at the indication of the asset’s fair value. The
discount rate utilized for calculating present value represents
a risk-adjusted discount rate, and the charges for contributory
assets are based on either the after-tax royalty rate for the
asset or the fair values of the assets and their risk-adjusted
discount rates. No adjustments have been made to the pro forma
statement of operations for the fair value adjustments made to
backlog as these adjustments are not expected to have an
on-going impact on the results of operations beyond twelve
months.
•
Senior Notes: The fair value of Centex’s
senior notes was estimated using a market approach. The market
approach is used to estimate fair value through the analysis of
recent sales of comparable liabilities with matching terms.
Certain types of liabilities, such as the senior notes, trade in
active secondary markets. As such, sale price information is
readily available for a comparative analysis with the subject
liabilities.
•
Fair Value Sensitivity Analysis for Senior
Notes: The following analysis presents the
sensitivity of the market value of Centex’s senior notes to
hypothetical changes in interest rates as if these changes
occurred at March 31, 2009. The ranges of changes chosen
for this analysis reflect Pulte’s view of changes which are
reasonably possible through the expected date of completion of
the merger. The table below captures the potential change in the
fair value of debt to isolated hypothetical movements in market
values along with the impact such changes would have on the pro
forma financial statements.
As of June 25, 2009, the fair value of the senior notes
approximated $2.9 billion as compared with the fair value
of approximately $2.6 billion at March 31, 2009
reflected in the above table and in the pro forma financial
statements. The fair value of the senior notes may continue to
fluctuate significantly through the date of completion of the
merger based on changes in interest rates and the market’s
expectations regarding Pulte’s intentions to retire certain
series of Centex’s senior notes.
The carrying values of current assets and liabilities, such as
cash, trade receivables, accounts payable and certain accrued
liabilities, approximate fair value.
For certain other acquired assets and assumed liabilities,
including land option agreements, lease contracts, non-compete
agreements, investments in joint ventures, property and
equipment, mortgage loans, and contingent liabilities, Pulte has
assumed that the carrying value approximates fair value, with
the remaining unallocated purchase price being characterized as
excess purchase price (goodwill). Once Pulte finalizes its
purchase price allocation, these assumptions may change and
estimates of fair values may change. Additionally, Pulte may
identify adjustments to the pro forma statements of operations,
for example, due to additional depreciation of property and
equipment or amortization of identified intangibles assets, or
may
110
identify additional tangible or intangible assets or liabilities
that have not been included on the pro forma balance sheet, all
of which could have a material impact on the pro forma financial
statements.
The merger is reflected in the pro forma balance sheet as
follows:
•
the reduction of Centex’s pre-merger net assets for
transaction costs resulting in a $30.0 million reduction in
cash and change in control payments resulting in a
$21.0 million reduction in cash and a $3.5 million
reduction in accrued and other liabilities;
•
the allocation of fair value for assets and liabilities
resulting in a decrease of $610.0 million in house and land
inventory, an increase of $110.0 million in tradenames, an
increase of $8.0 million in backlog, a decrease of
$14.1 million in capitalized debt issuance costs, and a
decrease of $500.1 million in senior notes;
•
the excess purchase price over the book value of the assets
acquired and liabilities assumed, which has not been allocated
of $241.6 million is reflected as an asset (goodwill);
•
the issuance of 121.7 million shares of Pulte common stock,
which increases shareholders’ equity by
$1,090.4 million;
•
the issuance of Pulte stock options, which increases
shareholders’ equity by $5.5 million; and
•
the acquisition and cancellation of Centex’s common stock
and elimination of Centex equity, which reduces
shareholders’ equity by $917.8 million.
The merger is reflected in the pro forma statement of operations
as follows:
•
a reclassification of $62.3 million from equity income
(loss) to Homebuilding expenses for the three months ended
March 31, 2009 related to the consolidation of a joint
venture;
•
an increase of $1.4 million and $5.5 million in
amortization expense for the three months ended March 31,2009 and the year ended December 31, 2008, respectively,
related to the amortization of acquired tradenames over the
estimated useful life of 20 years; and
•
an increase of $24.0 million and $96.0 million in
interest expense for the three months ended March 31, 2009
and the year ended December 31, 2008, respectively, related
to the accretion of the fair value adjustment of senior notes to
their value at maturity. Pro forma interest expense was
determined by applying the effective interest rates of the
assumed senior notes as of March 31, 2009, the aggregate
average of which was 11.1%, to the fair values of such notes as
of March 31, 2009 and eliminating the amortization of
pre-existing debt issue costs recorded during the applicable
periods.
(e)
Pulte
Transaction Costs
Pulte estimates that its expenses for this transaction will be
approximately $20.0 million, which will be reflected as an
expense of Pulte in the period the expense is incurred. These
costs include fees for investment banking services, legal,
accounting, due diligence, tax, valuation, printing and other
various services necessary to complete the transaction. These
estimated expenses of Pulte are reflected in the pro forma
balance sheet as of March 31, 2009 as a reduction to cash
of $20.0 million and a charge to retained earnings of
$20.0 million.
The Merger Agreement also provides for certain termination
rights that may result in either Pulte or Centex paying a
termination fee. The pro forma financial statements have been
prepared under the assumption that the merger will be completed
and reflect an estimate of those costs to be incurred by each
company in connection with the merger. The pro forma financial
statements do not reflect any potential termination fees that
could be required if the merger was not completed.
(f)
Severance
Payments
Certain of Centex’s executive officers have entered into
agreements with Centex that require cash payments upon
termination of employment under certain circumstances. The
combined company expects to incur a severance cost relating to
certain senior executive positions at Centex. These severance
cash payments
111
have been reflected as a one-time adjustment to the pro forma
balance sheet as of March 31, 2009 as a reduction to cash
of $9.6 million and a charge to retained earnings of
$9.6 million.
(g)
Entities
of Common Ownership Between Pulte and Centex
Pulte and Centex have common ownership in two land development
joint ventures which historically have been reflected in each
company’s respective historical consolidated financial
statements under the equity method. Upon completion of the
merger, the combined entity will hold greater than 50% ownership
in both of these joint ventures. The pro forma financial
statements have been adjusted to present the two joint ventures
historically accounted for as equity method investments as
consolidated subsidiaries, resulting in the following
adjustments to the pro forma balance sheet:
Total adjustments to liabilities and shareholders’ equity
$
71,424
Both of these joint ventures represent land development
agreements between Pulte and Centex that had only minimal
expenses. Accordingly, the pro forma statement of operations for
the year ended December 31, 2008 does not reflect the
impact of consolidating these entities. However, one of these
entities incurred a loss of $62.3 million during the three
months ended March 31, 2009, primarily related to inventory
impairments. Such loss is reflected in the pro forma statement
of operations for the three months ended March 31, 2009 as
a reclassification from equity income (loss) to Homebuilding
expenses to reflect the consolidation of this entity. There were
no other material transactions between Pulte and Centex during
the periods presented in the pro forma financial statements that
would need to be eliminated or otherwise adjusted.
(h)
Income
Taxes
During 2008, Pulte and Centex recognized tax benefits related to
NOL carryback claims. At March 31, 2009, both Pulte and
Centex reported a valuation allowance in their historical
consolidated financial statements in regards to future tax
benefits. No pro forma tax adjustments have been reflected in
the pro forma financial statements as the adjustments would
require an immediate reassessment of the valuation allowance,
which would result in an offsetting change in the valuation
allowance eliminating any tax impact on the pro forma balance
sheet and pro forma statement of operations. In addition, Centex
has recorded provisions for uncertain tax positions. In
accordance with SFAS 141(R), income taxes are an exception
to both the recognition and fair value measurement principles;
they continue to be accounted for under the guidance of
Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. On May 18, 2009, Centex
and the IRS settled several disputed tax issues relating to the
audit of the Company’s federal income tax returns filed for
fiscal years 2001 through 2004. As a result of the settlement
with the IRS and the recognition of the uncertain tax benefits
related to the disputed issues, Centex will record an income tax
benefit and an increase to shareholders’ equity of
approximately $270 million in the three months ending
June 30, 2009. This increase to shareholders’ equity
will result in a corresponding decrease to pro forma goodwill.
It is reasonably possible that Centex’s liability for
unrecognized tax benefits could be further reduced by as much as
$170 million within the next twelve months as a result of
the resolution of various federal and state tax matters.
112
(i)
Net Loss
Per Share Attributable to Pulte
The unaudited pro forma net loss per share attributable to Pulte
is calculated based on the assumed exchange of all outstanding
Centex common stock for Pulte common stock. This exchange
includes the conversion of Centex unvested restricted stock and
restricted stock units. The outstanding share information for
Centex utilizes the number of common shares outstanding and
information related to unvested restricted stock at
March 31, 2009 and December 31, 2008. The incremental
number of common shares that are assumed to be issued by Pulte
in the merger are 121.7 million at January 1, 2008.
The weighted average shares outstanding used in the pro forma
net loss per share attributable to Pulte calculations for the
period are summarized below:
Pro forma weighted average basic and diluted common shares
376,276
375,214
Basic and diluted net loss per common share attributable to Pulte
$
(2.51
)
$
(9.37
)
For the twelve months ended December 31, 2008, the loss per
share for the Centex equivalent period has been calculated by
dividing the equivalent loss from continuing operations by the
sum of (1) the weighted average Pulte common shares
outstanding for the three months ended March 31, 2008
multiplied by 25% (period outstanding), and (2) the
weighted average Pulte common shares outstanding for the nine
months ended December 31, 2008 multiplied by 75% (period
outstanding).
(j)
Common
Stock and Preferred Stock
For a summary of the authorized and the issued and outstanding
common stock of Centex and Pulte as well as the preferred stock
of Pulte, see “Description of Pulte Capital Stock”
beginning on page 119 and “Comparison of Stockholder
Rights and Corporate Governance Matters” beginning on
page 125.
(k)
Stock
Options
Pursuant to the terms and conditions of the Merger Agreement,
upon the completion of the merger, vested and unvested Centex
stock options will be converted into vested options to purchase
shares of Pulte common stock with the same terms and conditions
as the applicable Centex stock options, except that (i) the
exercise period following certain terminations of employment
will be extended for stock options granted with an exercise
price less than $40.00 per share and (ii) the number of
shares of stock subject to the option and the exercise price
will each be adjusted to reflect the exchange ratio. To
determine the amount to be included in the purchase
consideration, Pulte will value the options to purchase shares
of its common stock using the same terms as the Centex stock
options being converted. As noted above, certain stock options
to purchase shares of Pulte common stock will have a longer
exercise period following certain terminations of employment
than the original Centex option, which will impact the fair
value of the option on the date of completion of the merger. The
incremental value by which the fair value of the options to
purchase Pulte common stock exceeds the fair value of Centex
stock options will be treated as post-merger compensation
expense and will be recognized over the implied service period.
The valuation of the incremental fair value attributable to this
change in exercise period has not been performed and thus has
not been reflected in the pro forma financial statements.
At the merger announcement date, the Centex stock options were
deep out of the money, which implies that there may be a derived
service period because the employee may be required to provide
service for some period to obtain value from the award.
Therefore, a portion of the fair value of Centex stock options,
along
113
with the incremental value by which the fair value of the
options to purchase Pulte common stock exceeds the fair value of
the Centex stock options, may need to be recognized in the
post-merger period over the derived service period. These
amounts have not been finalized and thus have not been reflected
in the pro forma financial statements. For the purposes of the
pro forma financial statements, the entire fair value of Centex
stock options has been included in the purchase consideration.
The portion of the fair value of Centex stock options that may
need to be recognized in the post-merger period is not expected
to be material to the pro forma financial statements.
(l)
Cash and
Equivalents
Cash and equivalents includes amounts related to cash with
certain restrictions pursuant to insurance-related regulatory
requirements, customer deposits that are temporarily restricted
in accordance with regulatory requirements, and required cash
balances for secured financing arrangements. Of the total cash
and equivalents balance, approximately $66.0 million is
believed to be legally restricted as to withdrawal or usage.
Cash and equivalents also includes $746.8 million
maintained in liquidity reserve accounts in connection with
Pulte and Centex’s revolving credit facilities. Pulte and
Centex are required to maintain such liquidity reserve accounts
due to the failure to satisfy the interest coverage tests as set
forth in their respective revolving credit facility agreements.
While Pulte and Centex’s access to and utilization of such
funds is not restricted, failure to maintain sufficient balances
within the liquidity reserve accounts would restrict
Pulte’s and Centex’s ability to utilize their
respective revolving credit facilities. Upon completion of the
merger, the amount required to be maintained in the liquidity
reserve accounts will be based on Pulte’s consolidated
interest coverage ratio.
Pulte and Centex are including in this joint proxy
statement/prospectus certain financial forecasts that Pulte and
Centex shared with one another in the course of their mutual due
diligence. The financial forecasts were not prepared with a view
toward public disclosure or compliance with published guidelines
of the SEC or the American Institute of Certified Public
Accountants for preparation and presentation of prospective
financial information or GAAP.
The financial forecasts of Pulte and Centex included in this
joint proxy statement/prospectus were prepared by, and are the
responsibility of, Pulte management and Centex management,
respectively. Neither Pulte’s nor Centex’s independent
auditors, nor any other independent auditors, have compiled,
examined or performed any procedures with respect to the
prospective financial information contained in the financial
forecasts, nor have they expressed any opinion or given any form
of assurance on the financial forecasts or their achievability.
The auditors’ reports incorporated by reference into this
joint proxy statement/prospectus relate to Pulte’s and
Centex’s historical financial information. The
auditors’ reports do not extend to prospective financial
information and should not be read to do so. In addition,
Pulte’s and Centex’s financial advisors did not
prepare, and assume no responsibility for, the financial
forecasts. Furthermore, the financial forecasts:
•
necessarily make numerous assumptions, many of which are beyond
the control of Pulte and Centex and may not prove to be accurate;
•
do not necessarily reflect revised prospects for Pulte’s
and Centex’s businesses, changes in general business or
economic conditions, or any other transaction or event that has
occurred or that may occur and that was not anticipated at the
time the forecasts were prepared;
•
are not necessarily indicative of current values or future
performance, which may be significantly more favorable or less
favorable than as set forth below; and
•
should not be regarded as a representation that the financial
forecasts will be achieved.
These financial forecasts were prepared by the respective
managements of Pulte and Centex based on information they had at
the time of preparation and are not a guarantee of future
performance. Financial forecasts involve risks, uncertainties
and assumptions. The future financial results of Pulte, Centex
and, if the merger is completed, the combined company, may
materially differ from those expressed in the financial
forecasts due to factors that are beyond Pulte’s
and/or
Centex’s ability to control or predict. Neither Pulte nor
Centex can assure you that their respective financial forecasts
will be realized or that their respective future financial
results will not materially vary from the financial forecasts.
The financial forecasts cover multiple years and such
information by its nature becomes subject to greater uncertainty
with each successive year. The financial forecasts do not take
into account any circumstances or events occurring after the
date they were prepared. Pulte and Centex do not intend to
update or revise the financial forecasts.
The financial forecasts are forward-looking statements. For more
information on factors which may cause Pulte’s and
Centex’s future financial results to materially vary from
those projected in the financial forecasts, see “Cautionary
Statement Concerning Forward-Looking Statements” beginning
on page 26 and “Risk Factors” beginning on
page 19. Pulte’s and Centex’s management have
prepared their respective financial forecasts using accounting
policies consistent with their respective annual and interim
financial statements, as well as any changes to those policies
known to be effective in future periods. The financial forecasts
do not reflect the effect of any proposed or other changes in
GAAP that may be made in the future. Any such changes could have
a material impact to the information shown below.
Pulte
Financial Forecasts
Pulte provided two sets of financial forecasts to Centex in the
course of their mutual due diligence, which we refer to as the
Pulte strategic-case forecast and the Pulte liquidity-case
forecast. The Pulte strategic-case forecast was prepared to
assist the Pulte board of directors in its evaluation of the
strategic rationale for the merger and also was provided to
Pulte’s financial advisor for purposes of its financial
analysis in connection
115
with its opinion, and the Pulte liquidity-case forecast was
prepared to assist the Pulte board of directors in its
evaluation of the combined company’s ability to service its
debt obligations in the event of a more sustained downturn in
the homebuilding industry. Both the Pulte strategic-case
forecast and the Pulte liquidity-case forecast assumed that
there would not be any improvement in the homebuilding market
until late 2010 or early 2011. In addition, both the Pulte
strategic-case forecast and the Pulte liquidity-case forecast
assumed limited average home selling price growth during the
period covered by the forecasts and the same amount of sales
volume growth. The primary difference between the Pulte
strategic-case forecast and the Pulte liquidity-case forecast
was that the Pulte liquidity-case forecast relied upon operating
metrics that more closely reflected the current market
performance experienced by Pulte while the Pulte strategic-case
forecast reflected improvement in these operating metrics to
levels that had been historically achieved by Pulte. In
addition, the Pulte liquidity-case forecast primarily reflected
more conservative assumptions by Pulte than the Pulte
strategic-case forecast regarding homebuilding revenue growth
rates, average home selling prices, gross margins and inventory
turn rates. The Pulte strategic-case forecast and the Pulte
liquidity-case forecast present Pulte’s Homebuilding Net
Sales and Homebuilding EBIT on a stand-alone basis and, in the
case of the Pulte liquidity-case forecast, Pulte’s Total
Assets and Total Liabilities on a stand-alone basis.
Homebuilding EBIT refers to earnings of the homebuilding segment
before interest and income taxes. Homebuilding EBIT is not a
measure of performance under GAAP and should not be considered
as an alternative to operating income or net income as a measure
of operating performance or cash flows or as a measure of
liquidity.
Centex
Financial Forecasts
Centex provided two sets of financial forecasts to Pulte in the
course of their mutual due diligence, a base case and a high
case. The base case reflected Centex management’s
assumptions regarding future housing industry conditions, and
the high case reflected more optimistic assumptions including
with respect to home selling prices and inventory turn rates.
Both the base case and the high case assumed that there would
not be any improvement in the homebuilding market until late
2010 or early 2011. The base case assumed modest average home
selling price growth and sales volume growth during the period
covered by the forecasts, while the high case assumed modest
average home selling price growth and increased sales volume
growth during the period covered by the forecasts. Both the base
case and high case show a significant increase in net income
beginning in 2010 as a result of anticipated improvement in the
homebuilding market and operational improvements. The base case
and high case both present Centex’s Homebuilding Revenues,
Net Income, Total Assets and Total Liabilities on a stand-alone
basis.
The Pulte and Centex forecasts were created utilizing different
assumptions regarding future housing industry conditions,
including homebuilding revenue growth rates, average home
selling prices, inventory turn rates, selling, general and
administrative expenses and costs of goods sold. Both
Pulte’s and Centex’s managements therefore made
adjustments to the financial forecasts provided by the other to
reconcile such forecasts with their own assumptions. These
adjusted forecasts were presented by Pulte’s and
Centex’s managements to their respective boards of
directors, together with the actual forecasts of Pulte and
Centex provided by each other during due diligence. The
adjustments made by Pulte’s and Centex’s respective
managements are discussed below.
Pulte’s
Adjustments to the Centex Financial Forecasts
Pulte’s management adjusted the Centex base case forecasts
provided by Centex’s management to reconcile such forecasts
with the assumptions used by Pulte’s management to create
Pulte’s forecasts. Thus, Pulte’s management created
two sets of adjusted Centex financial forecasts, which we refer
to as the Centex strategic-case forecasts and the Centex
liquidity-case forecasts. The Centex strategic-case forecasts
were prepared to assist the Pulte board of directors in its
evaluation of the strategic rationale for the merger and also
were provided to Pulte’s financial advisor for purposes of
its financial analysis in connection with its opinion, and the
Centex liquidity-case forecasts were prepared to assist the
Pulte board of directors in its evaluation of the combined
company’s ability to service its debt obligations in the
event of a more sustained downturn in the homebuilding industry.
Consistent with the assumptions underlying Pulte’s
forecasts, Pulte management assumed more conservative
homebuilding revenue growth estimates than those included in the
Centex base case forecasts provided by Centex management. Pulte
management also made certain adjustments to the Centex base case
forecasts for both the Centex strategic-case forecasts and the
Centex liquidity-case forecasts to more closely reflect the
operating metrics such as sales volumes and gross margins that
had been historically achieved by Pulte and which were more
conservative than those included in the Centex base case
forecasts.
For 2009, Pulte’s management estimated Centex’s
homebuilding revenue and earnings before interest and income
taxes on an annualized basis based upon the six-month base case
forecasts for 2009 provided by Centex’s management.
Pulte’s management also extended the base case forecasts
provided by Centex’s management to cover fiscal years 2015
through 2017 to take into account, when combined with internal
forecasts for Pulte’s business, debt maturities for the
combined company through fiscal year 2017. In addition,
117
Pulte’s management attributed to Centex’s business the
cost synergies that it anticipated would result from the merger
(not including the projected interest expense savings).
Homebuilding EBIT refers to earnings of the homebuilding segment
before interest and income taxes. Homebuilding EBIT is not a
measure of performance under GAAP and should not be considered
as an alternative to operating income or net income as a measure
of operating performance or cash flows or as a measure of
liquidity.
(2)
The Homebuilding Revenues and Homebuilding EBIT amounts for 2009
are presented on an annualized basis based upon the six-month
base case forecasts for 2009 provided to Pulte by Centex’s
management.
Centex’s
Adjustments to the Pulte Financial Forecasts
Centex’s management adjusted the Pulte strategic-case
forecasts provided by Pulte’s management to reconcile such
forecasts with the assumptions used by Centex’s management
to create Centex’s forecasts. Thus, Centex’s
management created one set of adjusted Pulte financial
forecasts, which we refer to as the Pulte adjusted-case
forecast. The Pulte adjusted-case forecasts were prepared to
assist the Centex board of directors in its evaluation of the
strategic rationale for the merger, in order to reconcile
Pulte’s forecasts with Centex’s management’s
assumptions regarding homebuilding revenue growth rates, average
home selling prices, inventory turn rates and costs of goods
sold. Consistent with the assumptions underlying Centex’s
forecasts, Centex management assumed more optimistic
homebuilding revenue growth estimates than those included in the
Pulte strategic-case forecasts provided by Pulte management.
Homebuilding EBIT refers to earnings of the homebuilding
segments before interest and income taxes. Homebuilding EBIT is
not a measure of performance under GAAP and should not be
considered as an alternative to operating income or net income
as a measure of operating performance or cash flows or as a
measure of liquidity.
The authorized capital stock of Pulte consists of
(1) 400,000,000 shares of common stock, par value
$0.01 per share, and (2) 25,000,000 shares of
preferred stock, par value $0.01 per share, of which 400,000
have been designated Series A Junior Participating
Preferred Shares. If the proposal to approve the charter
amendment to increase the number of authorized shares of common
stock is approved at the Pulte special meeting, immediately
prior to the completion of the merger, Pulte’s authorized
shares of common stock will increase to 500,000,000. In
addition, immediately prior to the completion of the merger,
Pulte will increase the total number of authorized shares of its
Series A Junior Participating Preferred Stock from 400,000
to 500,000. As of July 10, 2009, 258,603,672 shares of
common stock and no shares of preferred stock were issued and
outstanding.
The following summary description of Pulte’s capital stock
does not purport to be complete and is qualified in its entirety
by reference to Pulte’s Restated Articles of Incorporation
and by-laws, the Section 382 Rights Agreement, dated as of
March 5, 2009, between Pulte and Computershare
Trust Company, N.A., as rights agent, and the First
Amendment to Section 382 Rights Agreement, dated as of
April 7, 2009, between Pulte and Computershare
Trust Company, N.A., as rights agent, which we refer to
collectively as the Pulte shareholder rights agreement, and the
MBCA. If you would like more information on the common stock,
preferred stock purchase rights and preferred stock of Pulte,
you should review those documents, each of which Pulte has filed
or incorporated by reference as an exhibit to filings
incorporated by reference into this joint proxy
statement/prospectus. See “Additional
Information — Where You Can Find More
Information” beginning on page 134.
Common
Stock
Subject to the prior dividend rights as may be fixed by the
Pulte board of directors in creating a new series of preferred
stock, holders of Pulte common stock are entitled to receive,
from funds legally available therefor, dividends when and as
declared by the Pulte board of directors. Holders of Pulte
common stock are entitled to one vote for each share on all
matters voted on by shareholders, including the election of
directors, and do not have any cumulative voting rights. Holders
of Pulte common stock do not have any conversion, sinking fund,
redemption or preemptive rights. In the event of a dissolution,
liquidation or winding up of Pulte, holders of Pulte common
stock will be entitled to share ratably in any assets remaining
after the satisfaction in full of the prior rights of creditors,
including holders of indebtedness, and the aggregate liquidation
preference of any preferred stock then outstanding. The
outstanding shares of Pulte common stock are, and the shares of
Pulte common stock to be issued in the merger will be, fully
paid and nonassessable.
Pulte common stock is listed on the NYSE and is traded under the
symbol “PHM”. Pursuant to the Merger Agreement, Pulte
will apply to have the shares of Pulte common stock to be issued
in the merger approved for listing on the NYSE. Computershare
Trust Company, N.A. is the transfer agent and registrar for
Pulte’s common stock.
Preferred
Share Purchase Rights
Each outstanding share of Pulte common stock has, and each share
of Pulte common stock that will be issued in the merger will
have, attached to it one right, which we refer to in this
section as a right, to purchase from Pulte one one-thousandth of
a share of Series A Junior Participating Preferred Stock at
a purchase price of $50 per right, subject to adjustment, which
we refer to in this section as the purchase price.
Until a “distribution date,” as described below,
occurs, the rights are not exercisable and remain attached to,
and trade with, the underlying shares of Pulte common stock.
Subject to certain exceptions, the rights become exercisable and
trade separately from the shares of Pulte common stock only upon
the “distribution date,” which occurs upon the earlier
of:
•
10 days following a public announcement that a person or
group of persons has become an acquiring person (as described
below) or such earlier date as a majority of the Pulte board of
directors becomes aware of the existence of an acquiring person
(the “share acquisition date”) (unless, prior to the
119
expiration of Pulte’s right to redeem the rights, such
person or group is determined by the Pulte board of directors to
be an exempted person (as described below), in which case the
share acquisition date will be deemed not to have
occurred); or
•
10 business days (or later date if determined by the Pulte board
of directors prior to such time as any person or group becomes
an acquiring person) following the commencement of a tender
offer or exchange offer which, if completed, would result in a
person or group becoming an acquiring person.
As soon as practicable after the distribution date, separate
certificates or book-entry statements will be mailed to record
holders of Pulte common stock as of the close of business on the
distribution date. From and after the distribution date, the
separate rights certificates or book-entry statements alone will
represent the rights. Except as otherwise provided in the Pulte
shareholder rights agreement, only Pulte common stock issued
prior to the distribution date will be issued with rights.
An “acquiring person” is any person, entity or group
who, together with its affiliates and associates, is the
beneficial owner of 4.9% or more of Pulte securities, but does
not include:
•
Pulte, any subsidiary of Pulte or any employee benefit plan or
other compensation arrangement of Pulte or of any subsidiary of
Pulte or any entity organized, appointed or established by Pulte
or any subsidiary of Pulte for or pursuant to the terms of any
such plan or compensation arrangement;
•
any grandfathered person (as described below);
•
any exempted person;
•
William J. Pulte, any spouse of William J. Pulte, any descendant
of William J. Pulte and any spouse of such descendant, any
estate of any of the foregoing or any trust or other arrangement
for the benefit of any of the foregoing or any charitable
organization established by any of the foregoing, which we refer
to as the Pulte Family;
•
any group which includes any member or members of the Pulte
Family if a majority of the securities of such group are
beneficially owned by a member of the Pulte Family;
•
any person or group who becomes the beneficial owner of 4.9% or
more of Pulte securities as a result of an exempted transaction
(as described below); or
•
any person whom or which the Pulte board of directors in good
faith determines has inadvertently acquired beneficial ownership
of 4.9% or more of Pulte securities, so long as such person
promptly enters into, and delivers to Pulte, an irrevocable
commitment to divest as promptly as practicable, and thereafter
divests as promptly as practicable, a sufficient number of Pulte
securities so that such person would no longer be a beneficial
owner of 4.9% or more of Pulte securities.
In addition, the Pulte shareholder rights agreement was amended
immediately prior to the execution and delivery of the Merger
Agreement to provide that an “acquiring person” does
not include Centex or any of its affiliates, associates or
stockholders, or the general partners, limited partners or
members of such stockholders, which we refer to as the Centex
Holders, solely by virtue of or as a result of the transactions
contemplated by the Merger Agreement and the voting agreements
between Centex and certain of Pulte’s directors and
officers, unless and until such time with respect to any Centex
Holder that such Centex Holder (together with its affiliates and
associates) acquires the beneficial ownership of any additional
Pulte securities.
A Pulte shareholder who together with its affiliates and
associates beneficially owned 4.9% or more of Pulte securities
as of March 5, 2009 is deemed not to be an “acquiring
person,” so long as such shareholder does not acquire any
additional Pulte securities without the prior written approval
of Pulte, other than pursuant to or as a result of (1) a
reduction in the amount of Pulte securities outstanding;
(2) the exercise of any options, warrants, rights or
similar interests to purchase Pulte securities granted by Pulte
to its directors, officers and employees; (3) any
unilateral grant of any Pulte securities by Pulte or
(4) any issuance of Pulte securities by Pulte or any share
dividend, share split or similar transaction effected by Pulte
in which all holders of Pulte securities are treated equally.
Such a shareholder is a “grandfathered person” for
purposes of the Pulte shareholder rights agreement.
120
An “exempted person” is any person, as determined by
the Pulte board of directors at any time prior to the time at
which the rights are no longer redeemable, whose beneficial
ownership would not jeopardize, endanger or limit (in timing or
amount) the availability of Pulte’s NOL carryforwards and
other tax benefits. The Pulte board of directors, in its sole
discretion, may subsequently make a contrary determination and
such person would then become an acquiring person.
An “exempted transaction” is a transaction that the
Pulte board of directors determines is an exempted transaction
and, unlike the determination of an exempted person, such
determination is irrevocable.
The rights are not exercisable until the distribution date and,
unless earlier redeemed or exchanged by Pulte as described
below, will expire upon the earliest of:
the close of business on the effective date of the repeal of
Section 382 of the Internal Revenue Code or any successor
statute if the Pulte board of directors determines that the
shareholder rights agreement is no longer necessary or desirable
for the preservation of certain tax benefits;
•
the close of business on the first day of a taxable year to
which the Pulte board of directors determines that certain tax
benefits may not be carried forward; and
•
the close of business on the date on which the Pulte board of
directors determines that the shareholder rights agreement is no
longer in the best interests of Pulte and its shareholders.
If a person or group becomes an acquiring person, which we refer
to as a flip-in event, each holder of a right (other than any
acquiring person and certain transferees of an acquiring person,
whose rights automatically become null and void) will have the
right to receive, upon exercise, shares of Pulte common stock
having a value equal to two times the exercise price of the
right. If an insufficient number of shares of Pulte common stock
are available for issuance, then the Pulte board of directors is
required to substitute cash, property or other securities of
Pulte for the shares of Pulte common stock. The rights may not
be exercised following a flip-in event while Pulte has the
ability to cause the rights to be redeemed, as described below.
At any time after there is an acquiring person and prior to the
acquisition by the acquiring person of 50% or more of the
outstanding shares of Pulte common stock, Pulte may exchange the
rights (other than rights owned by the acquiring person and
certain transferees thereof which will have become void), in
whole or in part, at an exchange ratio of one share of Pulte
common stock, or one one-thousandth of a share of Pulte
preferred stock (or of a share of a class or series of Pulte
preferred stock having equivalent rights, preferences and
privileges), per right (subject to adjustment).
The exercise price payable, and the number of shares of
preferred stock or other securities or property issuable, upon
exercise of the rights are subject to adjustment from time to
time to prevent dilution. With certain exceptions, no adjustment
in the exercise price will be required until cumulative
adjustments amount to at least 1% of the exercise price. No
fractional shares of preferred stock will be issued, and, in
lieu thereof, an adjustment in cash will be made based on the
market price of the preferred stock on the last trading day
prior to the date of exercise.
In general, Pulte may redeem the rights in whole, but not in
part, at a price of $0.001 per right (subject to adjustment and
payable in cash, Pulte common stock or other consideration
deemed appropriate by the Pulte board of directors) at any time
until ten days following the share acquisition date. Immediately
upon the action of the Pulte board of directors authorizing any
redemption, the rights will terminate, and the only right of the
holders of rights will be to receive the redemption price.
Until a right is exercised, its holder will have no rights as a
shareholder of Pulte, including, without limitation, the right
to vote or to receive dividends.
The terms of the rights may be amended by the Pulte board of
directors without the consent of the holders of the rights,
including, without limitation, to extend the expiration date of
the Pulte shareholder rights agreement and to increase or
decrease the purchase price. Once there is an acquiring person,
however, no amendment can adversely affect the interests of the
holders of the rights.
121
Pursuant to the amendment to the Pulte shareholder rights
agreement entered into immediately prior to the execution and
delivery of the Merger Agreement, neither the Merger Agreement,
the voting agreements between Centex and certain of Pulte’s
directors and officers, nor any of the transactions contemplated
thereby will cause the rights to be distributed or to become
exercisable, or result in any rights becoming void or require an
adjustment to the number or types of securities issuable upon
exercise of the rights.
Preferred
Shares
The Pulte board of directors is authorized to provide for the
issuance from time to time of shares of preferred stock in one
or more series and to fix the rights and preferences of any
series so established, including the number of shares, dividend
rights, redemption, liquidation preferences, voting rights,
conversion rights, purchase, retirement or sinking fund
provisions, and any other preferences, rights, qualifications,
limitations or restrictions.
Transfer
Restrictions
Pulte’s by-laws impose certain restrictions on the transfer
of Pulte securities. In particular, a holder of Pulte securities
may not transfer any Pulte securities if such transfer would
result in any person or group owning 4.9% or more of
Pulte’s then-outstanding common stock, which we refer to as
a 4.9-percent Shareholder, or if such transfer would
increase the percentage ownership interest of a
4.9-percent Shareholder, and any such transfer will void.
These transfer restrictions are subject to certain exceptions,
including an exception for transfers approved by the Pulte board
of directors or a committee thereof, and are applicable to
transfers made, or pursuant to agreements entered into, between
April 7, 2009 and such date as may be determined by
Pulte’s board of directors in accordance with
Article IX of Pulte’s by-laws. Pulte has taken actions
necessary to render these transfer restrictions inapplicable to
the merger, the Merger Agreement and the transactions
contemplated thereby.
Voting
Rights
Pulte’s Restated Articles of Incorporation provide that the
board of directors will be divided into three classes, with each
class consisting, as nearly as may be possible, of one-third of
the total number of directors. Currently, the Pulte board of
directors consists of 10 persons who were elected to
three-year terms. Pulte’s Restated Articles of
Incorporation provide that to the extent holders of preferred
stock are given the right, voting separately or by class or
series, to elect directors, such directors shall not be divided
into the foregoing classes.
Pursuant to the terms of the Merger Agreement, Pulte has agreed
to take all actions necessary to cause its board of directors
upon completion of the merger to be comprised of eight current
Pulte directors and four current Centex directors designated by
Centex. Pulte has also agreed to nominate each of these Centex
directors at its next annual meeting of shareholders, such that
one will be reelected to a term expiring at the second annual
meeting following the date of completion of the merger, one will
be reelected to a term expiring at the third annual meeting
following the date of completion of the merger and two will be
reelected to terms expiring at the fourth annual meeting
following the date of completion of the merger.
Pulte’s Restated Articles of Incorporation require, in
addition to any vote required by law, the affirmative vote of
the holders of at least 69.3% of the shares voting at a meeting
of shareholders in connection with (1) any merger or
consolidation of Pulte or any subsidiary with any
“Interested Shareholder,” as defined therein, or any
corporation which is, or after the merger or consolidation would
be, an “Affiliate,” as defined therein, of an
Interested Shareholder that was an Interested Shareholder prior
to the transaction; (2) certain transfers to any Interested
Shareholder or Affiliate of an Interested Shareholder, other
than Pulte or any of its subsidiaries, of any assets of Pulte or
any subsidiary having an aggregate book value of 10% or more of
Pulte’s consolidated net worth; (3) certain transfers
by Pulte or any subsidiary of “Equity Securities,” as
defined therein, of Pulte or any subsidiary which have an
aggregate market value of 5% or more of the total market value
of Pulte’s outstanding shares to any Interested Shareholder
or Affiliate of an Interested Shareholder, other than Pulte or
its subsidiaries (subject to certain exceptions); (4) the
adoption of any plan or
122
proposal for Pulte’s liquidation or dissolution proposed by
or on behalf of an Interested Shareholder or any Affiliate of an
Interested Shareholder, (5) any reclassification of
securities or recapitalization of Pulte, or any merger,
consolidation or share exchange by Pulte with any of its
subsidiaries which has the effect of increasing the
proportionate amount of the outstanding shares of any class of
Equity Securities of Pulte or any subsidiary which is owned by
an Interested Shareholder or any Affiliate of an Interested
Shareholder (each of the Transactions referred to in
clauses (1) through (5), a “Business
Combination”); or (6) any agreement, contract or
arrangement providing for one or more of the foregoing. An
“Interested Shareholder” generally includes any
beneficial owner of 10% or more of the voting power of Pulte or
any of its Affiliates that at any time within the two year
period prior to the date in question was the beneficial owner of
10% or more of the voting power of Pulte.
The foregoing supermajority vote is not required if (1) the
Pulte board of directors approves such Business Combination and
either the Interested Shareholder has been an Interested
Shareholder for at least two years prior to the date of such
approval or such proposed transaction was approved by the Pulte
board of directors prior to the time the Interested Shareholder
became an Interested Shareholder or (2) a majority of the
outstanding stock of such other corporation is owned by Pulte or
its subsidiaries.
The foregoing supermajority provisions may only be amended by
the affirmative vote of 69.3% of the shares voting on the
proposed amendment at a meeting of shareholders, in addition to
any vote otherwise required by law.
Certain
Provisions of the Michigan Business Corporation Act
Chapter 7A of the MBCA may affect attempts to acquire
control of Pulte. Pursuant to Pulte’s Restated Articles of
Incorporation, Pulte has expressly elected not to be subject to
the provisions of Chapter 7A of the MBCA; however, the
Pulte board of directors may terminate this election in whole or
in part by action of the majority of directors then in office.
Chapter 7A applies to “business combinations,”
defined to include, among other transactions, certain mergers,
substantial sales of assets or securities and recapitalizations
between covered Michigan business corporations or their
subsidiaries and an “interested shareholder”
(generally a beneficial owner of 10% or more of the voting power
of the corporation’s outstanding voting stock). In general,
Chapter 7A requires, for any business combination, an
advisory statement from the board of directors, the approval of
holders of at least 90% of each class of the shares entitled to
vote and the approval of holders of at least two-thirds of such
voting shares not held by the interested shareholder, its
affiliates and associates. These requirements do not apply,
however, where the interested shareholder satisfies certain
“fair price,” form of consideration and other
requirements and at least five years have elapsed after the
person involved became an interested shareholder. Pulte’s
board of directors has the power to elect to be subject to
Chapter 7A as to specifically identified or unidentified
interested shareholders.
Corporate
Governance Recommendations by Pulte’s Nominating and
Governance Committee
At the 2009 annual meeting of Pulte’s shareholders, Debra
J. Kelly-Ennis, Bernard W. Reznicek and Richard G. Wolford
received a greater number of votes “withheld” than
votes “for” his or her election. In accordance with
Pulte’s Director Resignation Policy, which we refer to as
the policy, each tendered a resignation to Pulte’s Chairman
of the Board. In accordance with the policy, Pulte’s
Nominating and Governance Committee, which we refer to as the
committee (with Ms. Kelly-Ennis recusing herself),
considered each resignation at a meeting on May 29, 2009.
Based significantly upon the committee’s judgment,
following inquiry by Pulte of a number of significant Pulte
shareholders who are not officers or directors of Pulte, that
the withheld votes were a reflection of concerns with two
corporate governance issues relating to the classification of
Pulte’s board of directors and Pulte’s shareholder
rights agreement, the committee recommended that the Pulte board
of directors:
•
reject the resignations of Ms. Kelly-Ennis and
Messrs. Reznicek and Wolford;
•
propose for approval at the 2010 annual meeting of Pulte
shareholders a charter amendment that, if approved by
Pulte’s shareholders, would begin the phase out of the
classified board of directors beginning with the class of
directors to be elected in 2011; and
123
•
adopt an amendment to the Pulte shareholder rights agreement
requiring it to terminate if not approved by a majority of
shares voting at the 2010 annual meeting of Pulte shareholders.
The committee further recommended that its first recommendation
be acted upon immediately, but that Pulte board of directors
action on its second and third recommendations be deferred until
after the completion of the pending merger with Centex, so that
the newly constituted board of directors would have the
opportunity to act on those issues. The recommendation by the
committee of a phased out declassification (rather than one-step
declassification) was based upon the committee’s belief
that it would be important to both preserve the benefits of the
classified board of directors during the post-merger period,
when critical integration is to take place, and to ensure a
smooth transition to annual elections for directors. On
June 2, 2009, the Pulte board of directors (with
Ms. Kelly-Ennis and Messrs. Reznicek and Wolford
recusing themselves) unanimously rejected the resignations of
Ms. Kelly-Ennis and Messrs. Reznicek and Wolford. The
Pulte board of directors also determined to consider the
recommendations pertaining to board of directors
declassification and the Pulte shareholder rights agreement in
time to permit action by Pulte’s shareholders at the 2010
annual meeting of shareholders.
Pulte is incorporated in the State of Michigan and the rights of
Pulte shareholders are governed by Michigan law and by
Pulte’s Restated Articles of Incorporation and by-laws.
Centex is incorporated in the State of Nevada and the rights of
Centex stockholders are governed by Nevada law and by
Centex’s Amended and Restated Articles of Incorporation and
by-laws. After the merger, stockholders of Centex will become
shareholders of Pulte, and their rights will be governed by
Michigan law and Pulte’s Restated Articles of Incorporation
and by-laws.
The following is a summary of the material differences between
the rights of Pulte shareholders and the rights of Centex
stockholders. Although Pulte and Centex believe that this
summary covers the material differences between the two, this
summary may not contain all of the information that is important
to you. This summary is not intended to be a complete discussion
of the respective rights of Pulte shareholders and Centex
stockholders, and it is qualified in its entirety by reference
to Michigan law, Nevada law, and the various documents of Pulte
and Centex referenced in this summary. You should carefully read
this entire joint proxy statement/prospectus and the other
documents referenced in this joint proxy statement/prospectus
for a more complete understanding of the differences between
being a shareholder of Pulte and being a stockholder of Centex.
Copies of the respective companies’ constituent documents
have been filed with the SEC. To find out where copies of these
documents can be obtained, see the section entitled
“Additional Information — Where You Can Find More
Information” beginning on page 134.
Pulte
Centex
Authorized Capital Stock
The authorized capital stock of Pulte currently is (1)
400,000,000 shares of common stock, par value $0.01 per
share, and (2) 25,000,000 shares of preferred stock, par
value $0.01 per share. Because it is a condition to the merger
that the proposal to approve the charter amendment to increase
the number of authorized shares of common stock is approved by
Pulte shareholders, the authorized shares of Pulte common stock
upon completion of the merger will be 500,000,000.
Pulte’s Restated Articles of Incorporation provide that the
relative rights, preferences and limitations of preferred stock
may be determined by the board of directors without further
shareholder approval. In connection with the Pulte shareholder
rights agreement, Pulte established a series of preferred stock
designated as Series A Junior Participating Preferred Shares, of
which 400,000 shares have been authorized. Immediately
prior to the completion of the merger Pulte will increase the
total number of authorized shares of its Series A Junior
Participating Preferred Stock from 400,000 to 500,000.
Currently, no Pulte preferred stock is issued or outstanding.
The authorized capital stock of Centex is (1)
300,000,000 shares of common stock, par value $0.25 per
share, and (2) 5,000,000 shares of preferred stock, par
value to be determined from time to time by the board of
directors.
Centex’s articles of incorporation provide that the
relative rights, preferences and limitations of preferred stock
may be determined by the board of directors without further
stockholder approval. In connection with the Centex stockholder
rights agreement, Centex established a series of preferred stock
designated as Junior Participating Preferred Stock, Series D, of
which 250,000 shares have been authorized. Currently, no
Centex preferred stock is issued or outstanding.
Number of Directors; Classified Board; Removal; Vacancies
Number of Directors. Pulte’s Restated
Articles of Incorporation provide that the board of directors
shall consist of not fewer than three nor more than fifteen
directors, the exact number of directors to be determined from
time to time by the board of directors. There are currently ten
positions authorized,
Number of Directors. Centex’s by-laws
provide that the board of directors shall consist of not fewer
than three nor more than thirteen directors, the exact number of
directors to be determined from time to time by the board of
directors. There are currently ten
125
Pulte
Centex
and ten directors serving, on the Pulte board of directors.
Immediately following the completion of the merger, there will
be twelve positions authorized, and twelve directors serving, on
the Pulte board of directors.
positions authorized, and ten directors serving, on the Centex
board of directors.
Classified Board. Pulte’s Restated
Articles of Incorporation provide that the board of directors is
to be divided into three classes of directors, with the classes
having an equal or near equal number of directors. The directors
of each class are entitled to serve for three-year terms.
Classified Board. Centex’s by-laws
provide that the board of directors is to be divided into three
classes of directors, with the classes having an equal or near
equal number of directors. The directors of each class are
entitled to serve for three-year terms.
Removal. Pulte’s by-laws provide that a
director may be removed with or without cause by the affirmative
vote of a majority of the shares entitled to vote at an election
of directors.
Removal. Centex’s by-laws provide that,
subject to the rights of any preferred holder, a director may be
removed with or without cause by the affirmative vote of the
holders of 66- 2/3% or more of the outstanding voting power.
Vacancies. Pulte’s Restated Articles of
Incorporation provide that vacancies and newly created
directorships are filled by a majority of the directors then in
office. If the number of directors then in office is less than a
quorum, vacancies are filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining
director.
Vacancies. Centex’s by-laws provide that,
subject to the rights of any preferred holder, vacancies and
newly created directorships are filled by a majority of the
remaining directors then in office, although less than a quorum,
or by a sole remaining director. Any director so appointed must
stand for election at the next annual meeting following the
director’s election.
Shareholder Action by Written Consent
Pulte’s Restated Articles of Incorporation and by-laws
permit shareholder action by written consent if signed by
holders having not less than the minimum number of votes
required to authorize the action at a meeting at which all
shares entitled to vote were present and voted.
Centex’s articles of incorporation and by- laws prohibit
stockholder action by written consent, subject to the rights of
any preferred holder that may have a preference over the common
stock as to dividends or upon liquidation.
Special Meetings of Shareholders
Pulte’s by-laws provide that special meetings may be called
only by the board of directors, the president or the secretary
or upon a request in writing by a majority of the board of
directors or by the holders of not less than 20% of the
outstanding capital stock entitled to vote thereat.
Centex’s by-laws provide that special meetings may be
called only by the chairman of the board of directors or by a
majority of the board of directors.
Under the MBCA, an amendment to Pulte’s Restated Articles
of Incorporation must be proposed by the board of directors and
approved by (unless the articles provide for a higher voting
requirement) the holders of a majority of the outstanding stock
entitled to vote upon the proposed amendment and, if any class
or series of shares is entitled to vote on the
Under the NRS, an amendment to Centex’s articles of
incorporation must be proposed by the board of directors and
approved by (unless the articles provide for a higher voting
requirement) the holders of a majority of the voting power.
amendment as a class, the approval of a majority of the
outstanding shares of that class or series.
Pulte’s Restated Articles of Incorporation provide that the
provisions of the Restated Articles of Incorporation relating to
certain business combinations with interested shareholders may
only be altered, amended, changed or repealed by the affirmative
vote of 69.3% of the shares voting at a meeting of shareholders.
be amended, altered or repealed by the affirmative vote of the
holders of 66- 2/3% of the outstanding voting power, and that
the provisions of the articles of incorporation related to
transactions with interested stockholders may only be amended by
the affirmative vote of the holders of 66- 2/3% of the
outstanding voting power and the affirmative vote of a majority
of the outstanding voting power held by disinterested
stockholders.
Pulte’s by-laws provide that the by-laws may be altered,
amended or repealed by the shareholders or by the board of
directors. Under the MBCA, the by-laws may be altered, amended
or repealed by the affirmative vote of shareholders holding a
majority of the votes cast by shareholders at a meeting at which
the normal quorum requirements are met. Pulte’s
shareholders may, from time to time, specify particular
provisions of the by-laws that may not be altered, amended or
repealed by the board of directors.
Centex’s articles of incorporation and by- laws provide
that the by-laws may be altered, amended, repealed or rescinded,
or new by-laws may be adopted, by the affirmative vote of
stockholders holding 66- 2/3% or more of the voting power or,
except with respect to amendments to the provisions of the
by-laws relating to amendments to the by-laws, by the vote of a
majority of the entire board of directors.
Notice of Shareholder Nominations and Proposals
Pulte’s by-laws provide that any shareholder entitled to
vote in the election of directors generally may nominate one or
more persons for election as directors at a meeting if the
shareholder provides timely notice of the shareholder’s
intent to make such nomination. To be timely, the notice must be
given to the Secretary not later than 60 days in advance of
such meeting. However, if public disclosure of the meeting is
made less than 70 days prior to the meeting, the notice
need only be received within 10 days following such public
disclosure.
The
notice must contain specific information concerning the person
to be nominated as well as specific information concerning the
shareholder making the nomination.
Pulte’s by-laws do not require advance notice of business
other than nominations.
Centex’s by-laws provide that nominations of persons for
election to the board of directors may be made at any annual
meeting of stockholders or at a special meeting of stockholders
at which directors are to be elected as provided in the notice
of meeting (1) by or at the direction of the board of directors
or (2) by any stockholder who is entitled to vote and complies
with the advance notice procedures set forth in the by- laws.
The
advance notice procedures of the by-laws require that a
stockholder intending to nominate a person for election to the
board of directors give timely notice. For an annual meeting,
the notice must be delivered to or mailed to and received at the
principal executive offices of Centex at least 90 days
prior to the first anniversary of the preceding year’s
annual meeting of stockholders. However, if neither notice of
the date of the annual meeting is given nor public disclosure of
the date of the meeting is made at least 100 days prior to
such anniversary, the stockholder’s notice must be received
by the later of 90 days prior to such anniversary or the
10th day following the day on which notice was given or
public disclosure was made, or, if the annual meeting is to be
held as of a date that is more than 30 days prior to such
anniversary, notice must be received by the 10th day
following the day on which the date of the annual meeting is
disclosed. For a special meeting, the notice must be delivered
or mailed and received at the
127
Pulte
Centex
principal executive offices of Centex by the later of
60 days prior to such special meeting or the 10th day
following the day on which notice was given or disclosure was
made.
The
notice must contain specific information concerning the person
to be nominated and the stockholder making the nomination.
Centex’s by-laws provide that no business may be transacted
at an annual meeting of stockholders, other than business that
is (1) specified in the notice of meeting given by or at the
direction of the board of directors, (2) otherwise properly
brought before the annual meeting by or at the direction of the
board of directors or (3) otherwise properly brought before the
annual meeting by any stockholder who is entitled to vote and
complies with the advance notice procedures set forth in the
by-laws.
The
advance notice procedures of the by-laws require that a
stockholder intending to bring business before an annual meeting
give timely notice. The notice must be delivered to or mailed to
and received at the principal executive offices of Centex at
least 90 days prior to the first anniversary of the
preceding year’s annual meeting of stockholders. However,
if neither notice of the date of the annual meeting is given nor
public disclosure of the date of the meeting is made at least
100 days prior to such anniversary, the stockholder’s
notice must be received by the later of 90 days prior to
such anniversary or the 10th day following the day on which
notice was given or public disclosure was made, or, if the
annual meeting is to be held as of a date that is more than
30 days prior to such anniversary, notice must be received
by the 10th day following the day on which the date of the
annual meeting is disclosed.
The
notice must contain specific information concerning the matter
to be brought before the meeting and the stockholder submitting
the proposal.
Limitation of Personal Liability of Directors and
Officers
Pulte’s Restated Articles of Incorporation provide that a
director of Pulte shall not be liable to Pulte or its
shareholders for breach of the directors’ fiduciary duty,
with specified exceptions. Any repeal or modification of this
provision will be prospective only and will not adversely affect
any limitation on personal liability existing at the time of
such repeal or modification.
Centex’s by-laws provide that a director or officer of
Centex shall not be individually liable to Centex or its
stockholders or creditors for any damages as a result of any act
or failure to act in his or her capacity as a director or
officer, with specified exceptions.
Indemnification of Directors and Officers
Pulte’s by-laws provide that Pulte shall, to the fullest
extent permissible under the MBCA, (1) indemnify
(1) Centex’s by-laws provide that Centex must indemnify any
current or former officer, director, or
128
Pulte
Centex
any person who was, is or is threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) by
reason of the fact that such person is or was a director or
officer of Pulte, or is or was serving at the request of Pulte
as a director, officer, employee or agent of another entity and
(2) pay or reimburse the reasonable expenses incurred by such
person. Under the MBCA, a corporation may only indemnify an
indemnitee if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful.
Indemnification may not be made for a claim, issue, or matter in
which the person has been found liable to the corporation,
unless a court determines that the person is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, in which case indemnification is limited
to reasonable expenses incurred.
designated employee who was or is a party or is threatened to
be made a party to any threatened, pending or completed action,
suit, arbitration, alternative dispute resolution,
investigation, inquiry, administrative hearing, appeal or any
other actual, threatened or completed proceedings with or
brought in the right of Centex or otherwise and whether civil,
criminal, administrative or investigative in nature, except an
action by or in the right of Centex, by reason of the fact that
he or she is or was serving or acting as a director, officer,
employee or agent of Centex or as a director, manager, officer,
trustee, general partner, member, fiduciary, employee or agent
of another enterprise. Such indemnification covers expenses
(including attorney’s fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred if the
director, officer or designated employee is not liable pursuant
to NRS 78.138 or acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of Centex and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
Pulte’s by-laws also provide for the reimbursement of fees
and expenses in specified circumstances.
(2)
Centex’s by-laws provide that Centex must indemnify any
current or former officer, director, or designated employee 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 Centex by reason of the fact that he or she is or was
serving or acting as a director, officer, employee or agent of
Centex or as a director, manager, officer, trustee, general
partner, member, fiduciary, employee or agent of another
enterprise. Such indemnification covers expenses (including
attorney’s fees) and amounts paid in settlement thereof, if
the director, officer or designated employee is not liable
pursuant to NRS 78.138 or acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of Centex. However, no indemnification will be made
for any claim, issue or matter as to which the person has been
adjudged liable to Centex, unless the court in which such action
or suit was brought determines that in view of all the
circumstances the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Centex’s by-laws also provide for the reimbursement of fees
and expenses in specified circumstances.
Centex’s by-laws provide that indemnification provided in
Article VI is not exclusive of any rights to which such
indemnitee may be entitled under the law, the articles of
incorporation or any agreement, and such indemnification will
continue as to a person who has ceased to be a director,
officer, employee or agent.
129
Pulte
Centex
Non-Shareholder Constituency Statute
The MBCA does not expressly authorize directors, in exercising
their duties, to consider the interests of constituencies other
than shareholders.
Under Nevada law, directors and officers, in exercising their
respective powers to further the interests of the corporation,
may consider the interests of the corporation’s employees,
suppliers, creditors and customers, as well as the economy of
the state and the nation; the interests of the community and of
society; and the long- and short-term interests of the
corporation and its stockholders, including the possibility that
these interests may be best served by the continued independence
of the corporation.
Transfer Restrictions
To preserve Pulte’s NOL carryforwards and other tax
benefits, Pulte’s by-laws provide that any attempted
transfer of Pulte securities shall be prohibited and void ab
initio to the extent that, as a result of such transfer, either
(1) any person or persons would own 4.9% or more of Pulte’s
then-outstanding common shares or (2) the ownership of any
person or persons owning 4.9% or more of Pulte’s
then-outstanding common shares would be increased.
Centex’s by-laws and articles of incorporation do not
impose any transfer restrictions to preserve Centex’s NOL
carryforwards and other tax benefits.
Shareholder Rights Plans
Pulte is party to a Rights Agreement, by and between Pulte and
Computershare Trust Company, N.A., as rights agent, dated as of
March 5, 2009, as amended, which we refer to as the Pulte
shareholder rights agreement. In connection therewith, the Pulte
board of directors declared a dividend distribution of one right
for each outstanding common share to shareholders of record at
the close of business on March 16, 2009. As long as the rights
are attached to Pulte common stock, Pulte will issue one right
(subject to adjustment) with each new share of Pulte common
stock so that all shares of Pulte common stock will have
attached rights.
Centex is party to a Rights Agreement, by and between Centex and
Mellon Investor Services LLC, as rights agent, dated as of
February 24, 2009, which we refer to as the Centex stockholder
rights agreement. In connection therewith, the Centex board of
directors declared a dividend of one preferred share purchase
right for each outstanding common share to stockholders of
record at the close of business on March 6, 2009. As long as the
rights are attached to Centex common stock, Centex will issue
one right (subject to adjustment) with each new share of Centex
common stock so that all shares of Centex common stock will have
attached rights.
If a
person or group, together with its affiliates and associates,
become an acquiring person, defined as the beneficial owner of
4.9% or more of Pulte securities, each holder of a right (other
than the person or group who has become the beneficial owner of
4.9% or more of Pulte securities) will have the right to
receive, upon exercise, shares of Pulte common stock having a
value equal to two times the exercise price of the right. Until
a right is exercised, the holder of the right has no right to
vote or receive dividends or any other rights as a shareholder
as a result of holding the right. The rights trade automatically
with shares of Pulte common stock until a “distribution
date” occurs, as described under “Description of Pulte
Capital Stock — Preferred
If a
person or group, together with its affiliates and associates,
become an acquiring person, defined as the beneficial owner of
4.9% or more of Centex securities, each holder of a right (other
than the person or group who has become the beneficial owner of
4.9% or more of Centex securities) will have the right to
receive, upon exercise, Centex common shares having a value
equal to two times the exercise price of the right. Until a
right is exercised, the holder of the right has no right to vote
or receive dividends or any other rights as a stockholder as a
result of holding the right. The rights trade automatically with
shares of Centex common stock. Certain persons and transactions
are exempted from the definition of acquiring person. The Centex
Board
130
Pulte
Centex
Share Purchase Rights” beginning on page 119. Certain
persons and transactions are exempted from the definition of
acquiring person.
The
rights are intended to protect shareholder value by attempting
to protect against a possible limitation on Pulte’s ability
to use its NOL carryforwards and certain other tax benefits to
reduce potential future U.S. federal tax obligations.
The
description and terms of the rights set forth above is not
complete and is qualified in its entirety by reference to the
Pulte shareholder rights agreement. Unless redeemed or
exchanged, the rights expire on the earliest of (1) March 16,2019, (2) the repeal of Section 382 of the Internal Revenue Code
or a successor statute if the Pulte board of directors
determines that the Pulte shareholder rights agreement is no
longer necessary for the preservation of tax benefits, (3) the
beginning of the taxable year of Pulte to which the Pulte board
of directors determines that no tax benefits may be carried
forward, and (4) when the Pulte board of directors determines
that the Pulte shareholder rights agreement is no longer in the
best interest in Pulte and its shareholders.
The
Pulte shareholder rights agreement was amended immediately prior
to the execution and delivery of the Merger Agreement to render
the Pulte rights agreement inapplicable to the Merger Agreement
and the voting agreements between Centex and certain directors
and officers of Pulte.
may, by action taken prior to a person’s or group’s
becoming an acquiring person, exempt such person or group from
being deemed an acquiring person for purposes of Centex’s
stockholder rights agreement if it determines the acquisition by
such person or group will not jeopardize tax benefits or is
otherwise in Centex’s best interests.
Centex’s adoption of a stockholder rights agreement on
February 24, 2009 was intended to preserve stockholder
value by attempting to protect against a possible limitation on
Centex’s ability to use its NOL carryforwards and certain
other tax benefits to reduce potential future U.S. federal tax
obligations, and without regard to its consideration of a
potential business combination transaction.
The
description and terms of the rights set forth above is not
complete and is qualified in its entirety by reference to the
Centex stockholder rights agreement. Unless redeemed or
exchanged, the rights expire on the earliest of (1) February 24,2019, (2) the repeal of Section 382 of the Internal Revenue Code
or a successor statute if the Centex board of directors
determines that the Centex stockholder rights agreement is no
longer necessary for the preservation of tax benefits, (3) the
beginning of the taxable year of Centex to which the board of
directors determines that no tax benefits may be carried
forward, and (4) February 24, 2010, if stockholder approval has
not been obtained for the Centex stockholder rights agreement.
Anti-Takeover Provisions
Restrictions on Business Combinations.
Pulte’s Restated Articles of Incorporation require the
affirmative vote of not less than 69.3% of the shares voting to
approve the following transactions:
•
a merger or consolidation with a shareholder
owning 10% or more of the voting power, which we refer to as a
Pulte 10% interested shareholder;
• any sale, lease, transfer or other
distributions, except in the usual course of business, to any
Pulte 10% interested shareholder;
• the issuance or transfer to any Pulte
10% interested shareholder of Pulte securities having an
aggregate market value of 5% or more of the total market value
of the outstanding shares of Pulte;
• the adoption of any plan or proposal for
the liquidation or dissolution of Pulte proposed by or on behalf
of a Pulte 10% interested shareholder;
• any reclassification, recapitalization
or reorganization which increases the Pulte 10%
Restrictions on Business Combinations.
Centex’s articles of incorporation require the
affirmative vote of not less than 66-2/3% of the outstanding
voting power to approve the following transactions:
•
a merger or consolidation with a stockholder
owning 20% or more of the voting power, which we refer to as a
Centex 20% interested stockholder;
• any sale, lease, transfer, dividend or
distribution, except for pro rata distributions, to, with or
from a Centex 20% interested stockholder;
• the issuance or transfer to any Centex
20% interested stockholder of Centex securities having an
aggregate fair market value of $40 million or more;
• the adoption of any plan or proposal for
the liquidation or dissolution of Centex proposed by or on
behalf of a Centex 20% interested stockholder;
• any reclassification, recapitalization
or reorganization which increases the Centex 20%
131
Pulte
Centex
interested shareholder’s proportionate share of
Pulte’s outstanding securities; or
interested stockholder’s proportionate share of
Centex’s outstanding securities; or
•
any agreement providing for one or more of
the foregoing.
• any agreement providing for one or
more of the foregoing.
The
69.3% requirement will not apply if (1) the transaction is
approved by the board of directors and the Pulte 10% interested
shareholder shall have been a Pulte 10% interested shareholder
for at least two years; (2) the transaction is approved by the
board of directors prior to the time the Pulte 10% interested
shareholder became a Pulte 10% interested shareholder; or (3)
the transaction is approved by a majority of the outstanding
shares.
In
addition, Chapter 7A of the MBCA generally prohibits any
business combination with a Pulte 10% interested shareholder,
unless approved by (1) 90% of the votes of each class of stock
entitled to vote and (2) two-thirds of the votes of each class
of stock entitled to be cast by the shareholders other than the
Pulte 10% interested shareholder. Pulte has elected not to be
subject to Chapter 7A of the MBCA.
The
66-2/3% requirement will not apply if the transaction is
approved by a majority of the disinterested directors or the
transaction satisfies certain “fair price”
requirements.
In
addition, Sections 78.411 to 78.444 of the NRS restrict certain
business combinations with a shareholder owning 10% or more of
the voting power, which we refer to as a Centex 10% interested
stockholder, for three years unless the transaction resulting in
a person becoming a Centex 10% interested stockholder, or the
business combination, is approved by the board of directors
prior to that person becoming a Centex 10% interested
stockholder. After the three-year restricted period, the Centex
10% interested stockholder may effect a business combination if
the combination is approved by a majority of the outstanding
voting stock not beneficially owned by the Centex 10% interested
stockholder or if certain fair price requirements are met.
Control Share Acquisitions. Sections 78.378
through 78.3793 of the NRS limit the voting rights of certain
acquired shares in a corporation. The provisions apply to any
acquisition of outstanding voting securities of a Nevada
corporation that has 200 or more stockholders, at least 100 of
which are Nevada residents and that conducts business in Nevada,
resulting in ownership of one of the following categories of
such corporation’s voting securities: (1) twenty percent or
more but less than thirty-three percent; (2) thirty- three
percent or more but less than fifty percent; or (3) fifty
percent or more. The securities acquired in such acquisition are
denied voting rights unless the holders of a majority of the
voting power of the corporation approve the granting of such
voting rights. In addition, if the control shares are accorded
voting power representing a majority or more of all the voting
power, all stockholders other than the owner of the control
shares may have their shares repurchased by the corporation at
fair value.
Pulte held its 2009 annual meeting of shareholders on
May 14, 2009. The deadline for submitting a shareholder
proposal to Pulte for inclusion in the Pulte proxy statement and
form of proxy pursuant to
Rule 14a-8
under the Exchange Act for the Pulte 2010 annual meeting of
shareholders is December 8, 2009. Shareholder proposals
that are intended to be presented at Pulte’s 2010 annual
meeting, but that are not intended to be considered for
inclusion in Pulte’s proxy statement and proxy related to
that meeting, must have been received by February 21, 2009.
Any nominations must have provided the information required by
Pulte’s by-laws and comply with any applicable laws and
regulations.
Pulte’s by-laws limit the business that may be transacted
at a special meeting of shareholders to matters germane to the
purpose or purposes for which the special meeting was called.
Accordingly, Pulte’s shareholders may not submit other
proposals for consideration at the special meeting.
All submissions should be made to the corporate secretary at
Pulte’s principal offices at 100 Bloomfield Hills Parkway,
Suite 300, Bloomfield Hills, Michigan48304.
Centex
Centex held its 2008 annual meeting on July 10, 2008.
Centex plans to hold an annual meeting in 2009 only if the
merger is not completed. The deadline for submitting a
stockholder proposal to Centex for inclusion in the Centex proxy
statement and form of proxy pursuant to
Rule 14a-8
under the Exchange Act for the Centex 2009 annual meeting of
stockholders was February 6, 2009. Stockholder proposals
that are intended to presented at Centex’s 2009 annual
meeting, but that are not intended to be considered for
inclusion in Centex’s proxy statement and proxy related to
that meeting, must have been received by April 11, 2009.
Any nominations must have provided the information required by
Centex’s by-laws and comply with any applicable laws and
regulations.
Centex’s by-laws limit the business that may be transacted
at a special meeting of stockholders to matters specified in the
notice of meeting. Accordingly, Centex’s stockholders may
not submit other proposals for consideration at the special
meeting.
All submissions should be made to the corporate secretary at
Centex’s principal offices at 2728 N. Harwood
Street, Dallas, Texas75201.
The validity of Pulte common stock offered by this joint proxy
statement/prospectus is being passed upon for Pulte by Sidley
Austin LLP, Chicago, Illinois.
The consolidated financial statements of Pulte Homes, Inc.
appearing in Pulte Homes, Inc.’s Annual Report
(Form 10-K)
for the year ended December 31, 2008 and the effectiveness
of Pulte Homes, Inc.’s internal control over financial
reporting as of December 31, 2008 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein, and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in
reliance upon such reports given on the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of Centex Corporation
appearing in Centex Corporation’s Annual Report
(Form 10-K)
for the year ended March 31, 2009 and the effectiveness of
Centex Corporation’s internal control over financial
reporting as of March 31, 2009 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein, and incorporated
133
herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and
auditing.
Pulte and Centex file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may
read and copy these reports, statements or other information
filed by either Pulte or Centex 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 rooms. The SEC
filings of Pulte and Centex are also available to the public
from commercial document retrieval services and at the website
maintained by the SEC at
http://www.sec.gov.
Pulte has filed a registration statement on
Form S-4
to register with the SEC the Pulte common stock to be issued to
Centex stockholders in the merger. This joint proxy
statement/prospectus is a part of that registration statement
and constitutes a prospectus of Pulte, in addition to being a
proxy statement of Pulte and Centex for their respective special
meetings. The registration statement, including the attached
annexes, exhibits and schedules, contains additional relevant
information about Pulte, Pulte common stock and Centex. As
allowed by SEC rules, this joint proxy statement/prospectus does
not contain all the information you can find in the registration
statement or the exhibits to the registration statement.
The SEC allows Pulte and Centex to “incorporate by
reference” information into this joint proxy
statement/prospectus. This means that Pulte and Centex can
disclose important information to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this
joint proxy statement/prospectus, except for any information
that is superseded by information that is included directly in
this joint proxy statement/prospectus or incorporated by
reference subsequent to the date of this joint proxy
statement/prospectus. Neither Pulte nor Centex is incorporating
the contents of the websites of the SEC, Pulte, Centex or any
other entity into this joint proxy statement/prospectus. Pulte
and Centex are providing information about how you can obtain
documents that are incorporated by reference into this joint
proxy statement/prospectus at these websites only for your
convenience.
This joint proxy statement/prospectus incorporates by reference
the documents listed below that Pulte and Centex have previously
filed with the SEC. They contain important information about
Pulte and Centex and their financial conditions. The following
documents, which were filed by Pulte with the SEC, are
incorporated by reference into this joint proxy
statement/prospectus:
proxy statement of Pulte on Schedule 14A, dated
April 7, 2009, filed with the SEC on April 7, 2009, as
supplemented by the definitive additional materials of Pulte
filed with the SEC on April 14, 2009 and May 13, 2009;
•
quarterly report of Pulte on
Form 10-Q
for the quarterly period ended March 31, 2009, filed with
the SEC on May 8, 2009;
description of Pulte Series A Junior Participating
Preferred Share Purchase Rights contained in its registration
statement on
Form 8-A
filed with the SEC on March 6, 2009, as amended and
supplemented by Amendment No. 1 to such registration
statement filed with the SEC on April 20, 2009.
134
The following documents, which were filed by Centex with the
SEC, are incorporated by reference into this joint proxy
statement/prospectus:
•
annual report of Centex on
Form 10-K
for the fiscal year ended March 31, 2009, filed with the
SEC on May 21, 2009;
•
proxy statement of Centex on Schedule 14A, dated
June 6, 2008, filed with the SEC on June 6, 2008;
•
current reports of Centex on
Form 8-K,
dated April 2, 2009, April 8, 2009, April 10,2009 and May 15, 2009 (other than with respect to
information furnished under Items 2.02 and 7.01 of any
Current Report on
Form 8-K,
including the related exhibits under Item 9.01);
•
description of the Centex common stock contained in its
registration statement on
Form S-3,
dated November 6, 2008, including any amendments and
reports filed for the purpose of updating such
description; and
•
description of Centex Preferred Stock Purchase Rights contained
in its registration statement on
Form 8-A
filed with the SEC on February 25, 2009.
In addition, Pulte and Centex incorporate by reference
additional documents that either may file with the SEC pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
between the date of this joint proxy statement/prospectus and
the date of the Pulte and Centex special meetings, respectively.
These documents include periodic reports, such as annual reports
on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K,
excluding any information furnished pursuant to Items 2.02
and 7.01 of any current report on
Form 8-K
solely for purposes of satisfying the requirements of
Regulation FD or Regulation G under the Exchange Act,
as well as proxy statements.
Pulte and Centex also incorporate by reference the Merger
Agreement attached to this joint proxy statement/prospectus as
Annex A.
Pulte has supplied all information contained in or incorporated
by reference into this joint proxy statement/prospectus relating
to Pulte, and Centex has supplied all information contained in
or incorporated by reference into this joint proxy
statement/prospectus relating to Centex.
You can obtain any of the documents incorporated by reference
into this joint proxy statement/prospectus from Pulte or Centex,
as applicable, or from the SEC, through the SEC’s website
at www.sec.gov. Documents incorporated by reference are
available from Pulte and Centex without charge, excluding any
exhibits to those documents, unless the exhibit is specifically
incorporated by reference as an exhibit in this joint proxy
statement/prospectus. Pulte shareholders and Centex stockholders
may request a copy of such documents in writing or by telephone
by contacting the applicable department at:
In addition, you may obtain copies of some of this information
by accessing Pulte’s website at www.pulte.comunder
the heading “Investor Relations,” under the link
“Financials,” and then under the link “SEC
Filings.”
You may also obtain copies of some of this information by
accessing Centex’s website at www.centex.comunder
the heading “Investors” and then under the link
“SEC Filings.”
In order for you to receive timely delivery of the documents
in advance of the Pulte and Centex special meetings, Pulte or
Centex, as applicable, should receive your request no later than
five business days before your company’s special
meeting.
We have not authorized anyone to give any information or make
any representation about the merger or our companies that is
different from, or in addition to, that contained in this joint
proxy statement/prospectus
135
or in any of the materials that we have incorporated into this
joint proxy statement/prospectus. Therefore, if anyone does give
you information of this kind, you should not rely on it. If you
are in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities
offered by this joint proxy statement/prospectus or the
solicitation of proxies is unlawful, or if you are a person to
whom it is unlawful to direct these types of activities, then
the offer presented in this joint proxy statement/prospectus
does not extend to you. The information contained in this joint
proxy statement/prospectus is accurate only as of the date of
this joint proxy statement/prospectus unless the information
specifically indicates that another date applies.
AGREEMENT AND PLAN OF MERGER, dated as of April 7, 2009
(the “Agreement”), among Pulte Homes, Inc., a
Michigan corporation (“Parent”), Pi Nevada
Building Company, a Nevada corporation and a direct wholly owned
subsidiary of Parent (“Merger Sub”) and Centex
Corporation, a Nevada corporation (the
“Company”).
WHEREAS, the parties intend that Merger Sub be merged with and
into the Company (the “Merger”), with the
Company surviving the Merger as a wholly owned subsidiary of
Parent;
WHEREAS, the Board of Directors of the Company (the
“Company Board”) has (a) determined that
it is in the best interests of the Company and its stockholders,
and declared it advisable, to enter into this Agreement,
(b) adopted this Agreement and approved the consummation of
the transactions contemplated hereby, including the Merger, upon
the terms and subject to the conditions set forth herein and
(c) resolved to recommend approval of this Agreement and
the transactions contemplated hereby by the stockholders of the
Company;
WHEREAS, the Board of Directors of Parent (the “Parent
Board”) has (a) determined that it is in the best
interests of Parent and its stockholders, and declared it
advisable, to enter into this Agreement, (b) approved the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including
the Merger, and (c) resolved to recommend to its
stockholders approval of the Charter Amendment and the Stock
Issuance;
WHEREAS, Parent, as the sole stockholder of Merger Sub, has
approved this Agreement and the transactions contemplated
hereby, including the Merger;
WHEREAS, as an inducement to the parties entering into this
Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement
certain of the directors and officers of the Company and Parent
are entering into separate Voting Agreements pursuant to which
they have agreed to support the Merger upon the terms and
conditions set forth therein (collectively, the “Voting
Agreements”);
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a “reorganization” within
the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the “Code”), and that this
Agreement will be, and hereby is, adopted as a plan of
reorganization; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements
specified herein in connection with this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained
herein, and intending to be legally bound hereby, Parent, Merger
Sub and the Company agree as follows:
Section 1.1 The
Merger. At the Effective Time, upon the terms
and subject to the conditions set forth in this Agreement and in
accordance with the applicable provisions of the Nevada Revised
Statutes (the “NRS”), Merger Sub shall be
merged with and into the Company, whereupon the separate
corporate existence of Merger Sub shall cease, and the Company
shall continue its corporate existence under Nevada law as the
surviving corporation in the Merger (the “Surviving
Corporation”) and a direct wholly owned subsidiary of
Parent.
Section 1.2 Closing. The
closing of the Merger (the “Closing”) shall
take place at the offices of Sidley Austin LLP, One South
Dearborn, Chicago, Illinois at 10:00 a.m., local time, on a
date to be specified by the parties (the “Closing
Date”) which shall be no later than the second business
day after the satisfaction or waiver (to the extent permitted by
applicable Law) of the conditions set forth in Article VI
(other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or
waiver of such conditions), or at such other place, date and
time as the Company and Parent may agree in writing.
A-1
Section 1.3 Effective
Time. On the Closing Date, the Company and
Merger Sub shall file the articles of merger (the
“Articles of Merger”), executed in accordance
with, and containing such information as is required by, the
relevant provisions of the NRS with the Secretary of State of
the State of Nevada. The Merger shall become effective at such
time as the Articles of Merger is duly filed with the Secretary
of State of the State of Nevada, or at such later time as is
agreed between the parties and specified in the Articles of
Merger in accordance with the applicable provisions of the NRS
(such date and time is hereinafter referred to as the
“Effective Time”).
Section 1.4 Effects
of the Merger. The effects of the Merger
shall be as provided in this Agreement and in the applicable
provisions of the NRS. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all of
the property, rights, privileges, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the
Surviving Corporation, all as provided under the NRS.
Section 1.5 Articles
of Incorporation and By-laws of the Surviving
Corporation.
(a) At the Effective Time, the articles of incorporation of
Merger Sub as in effect immediately prior to the Effective Time,
in the form attached hereto as Exhibit A, shall be
the articles of incorporation of the Surviving Corporation until
thereafter amended in accordance with the provisions thereof and
hereof and applicable Law, in each case consistent with the
obligations set forth in Section 5.10; provided,
however, that Section 1 of the articles of
incorporation of the Surviving Corporation shall be amended in
its entirety to read as follows: “Name of Corporation:
Centex Corporation.”
(b) At the Effective Time, the by-laws of Merger Sub as in
effect immediately prior to the Effective Time, in the form
attached hereto as Exhibit B, shall be the by-laws
of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and hereof and applicable
Law, in each case consistent with the obligations set forth in
Section 5.10.
Section 1.6 Directors. Subject
to applicable Law, the directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the
Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their
earlier death, resignation or removal.
Section 1.7 Officers. The
officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and
shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or
removal.
ARTICLE II
CONVERSION
OF SHARES; EXCHANGE OF CERTIFICATES
Section 2.1 Effect
on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the
Company, Merger Sub or the holders of any securities of the
Company or Merger Sub:
(a) Conversion of Company Common
Stock. Subject to Sections 2.1(b) and
2.1(d), each issued and outstanding share of common stock, par
value $.25 per share, of the Company (together with the
preferred share purchase rights granted pursuant to the CompanyRights Agreement (the “Company Rights”))
outstanding immediately prior to the Effective Time (such
shares, collectively, “Company Common Stock,”
and each, a “Share”), other than any Cancelled
Shares shall thereupon be converted automatically into and shall
thereafter represent the right to receive 0.975 (the
“Exchange Ratio”) fully paid and nonassessable
shares of common stock, par value $0.01 per share
(“Parent Common Stock”), including the
preferred share purchase rights granted pursuant to the Parent
Rights Agreement (the “Parent Rights”), of
Parent (the “Merger Consideration”). All
references in this Agreement to Parent Common Stock shall be
deemed to include the associated Parent Rights unless the
context requires otherwise. As a result of the Merger, at the
Effective Time, each holder of Shares shall cease to have any
rights with respect thereto, except the right to receive the
Merger Consideration payable in respect of such Shares which are
A-2
issued and outstanding immediately prior to the Effective Time,
any cash in lieu of fractional shares of Parent Common Stock
payable pursuant to Section 2.1(d) and any dividends or
other distributions payable pursuant to Section 2.2(c), all
to be issued or paid, without interest, in consideration
therefor upon the surrender of such Shares in accordance with
Section 2.2(b).
(b) Cancellation of Shares. Each
Share that is owned by Parent or Merger Sub immediately prior to
the Effective Time or held by the Company immediately prior to
the Effective Time (in each case, other than any other Shares
held on behalf of third parties) (the “Cancelled
Shares”) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled and
retired and shall cease to exist, and no consideration shall be
delivered in exchange for such cancellation and retirement.
(c) Conversion of Merger Sub Common
Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder
thereof, each share of common stock, par value $0.01 per share,
of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of the Surviving Corporation and shall
constitute the only outstanding shares of capital stock of the
Surviving Corporation. From and after the Effective Time, all
certificates representing the common stock of Merger Sub shall
be deemed for all purposes to represent the number of shares of
common stock of the Surviving Corporation into which they were
converted in accordance with the immediately preceding sentence.
(d) Fractional Shares. No
fractional shares of Parent Common Stock shall be issued in the
Merger, but in lieu thereof each holder of Shares otherwise
entitled to a fractional share of Parent Common Stock will be
entitled to receive, from the Exchange Agent in accordance with
the provisions of this Section 2.1(d), a cash payment in
lieu of such fractional share of Parent Common Stock equal to
the product obtained by multiplying (A) such fractional
share interest to which such holder (after taking into account
all fractional share interests then held by such holder, and
rounding such fractional share interest to four decimal places)
would otherwise be entitled by (B) the per share value
calculated as the average of the closing sale prices of one
share of Parent Common Stock for the five most recent days that
the Parent Common Stock has traded ending on the last full
trading day immediately prior to the Effective Time. The parties
acknowledge that payment of cash in lieu of fractional shares of
Parent Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Parent of issuing fractional shares
and does not represent separately bargained-for consideration.
As promptly as practicable after the determination of the
aggregate amount of cash, if any, to be paid to holders of
Shares that would otherwise receive fractional shares of Parent
Common Stock, the Exchange Agent shall so notify Parent, and
Parent shall reasonably promptly thereafter deposit such amount
with the Exchange Agent and shall cause the Exchange Agent to
forward payments to such holders without interest, subject to
and in accordance with the terms of Section 2.2.
(e) Adjustments to the Exchange
Ratio. If at any time during the period
between the date of this Agreement and the Effective Time, any
change in the outstanding shares of capital stock of the Company
or Parent shall occur as a result of any reclassification, stock
split (including a reverse stock split) or combination, exchange
or readjustment of shares, or any stock dividend or stock
distribution with a record date during such period, the Exchange
Ratio, the Merger Consideration and any other similarly
dependent items shall be equitably adjusted to reflect such
change.
Section 2.2 Exchange
of Shares.
(a) Exchange Agent. Prior to the
Effective Time, Parent shall appoint Computershare
Trust Company, N.A. or such other exchange agent reasonably
acceptable to the Company (the “Exchange
Agent”) for the purpose of exchanging Shares for the
Merger Consideration. Prior to the Effective Time, Parent shall
deposit, or shall cause to be deposited, with the Exchange
Agent, in trust for the benefit of holders of the Shares, the
Restricted Shares and Restricted Stock Units, certificates
representing the shares of Parent Common Stock issuable pursuant
to Sections 2.1(a) and 5.6(a)(ii) (or appropriate
alternative arrangements shall be made by Parent if
uncertificated shares of Parent Common Stock will be issued).
Following the Effective Time, Parent agrees to make available to
the Exchange Agent, from time to time as needed, cash sufficient
to pay any
A-3
dividends and other distributions pursuant to
Section 2.2(c). All certificates representing shares of
Parent Common Stock (including the amount of any dividends or
other distributions payable with respect thereto pursuant to
Section 2.2(c) and cash in lieu of fractional shares of
Parent Common Stock to be paid pursuant to Section 2.1(d))
are hereinafter referred to as the “Exchange
Fund.”
(b) Exchange Procedures. As soon
as reasonably practicable after the Effective Time and in any
event not later than the third business day following the
Effective Time, Parent shall cause the Exchange Agent to mail to
each holder of Shares, which at the Effective Time were
converted into the right to receive the Merger Consideration
pursuant to Section 2.1, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and that
risk of loss and title to the Shares shall pass, only upon
delivery of the Shares to the Exchange Agent and which shall be
in form and substance reasonably satisfactory to Parent and the
Company) and (ii) instructions for use in effecting the
surrender of the Shares in exchange for certificates
representing whole shares of Parent Common Stock (or appropriate
alternative arrangements shall be made by Parent if
uncertificated shares of Parent Common Stock will be issued),
cash in lieu of any fractional shares of Parent Common Stock
pursuant to Section 2.1(d) and any dividends or other
distributions payable pursuant to Section 2.2(c). Upon
surrender of Shares for cancellation to the Exchange Agent,
together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto,
and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Shares shall be entitled to
receive in exchange therefor that number of whole shares of
Parent Common Stock (after taking into account all Shares
surrendered by such holder) to which such holder is entitled
pursuant to Section 2.1 (which shall be in uncertificated
book entry form unless a physical certificate is requested),
payment by cash or check in lieu of fractional shares of Parent
Common Stock which such holder is entitled to receive pursuant
to Section 2.1(d) and any dividends or distributions
payable pursuant to Section 2.2(c), and the Shares so
surrendered shall forthwith be cancelled. If any portion of the
Merger Consideration is to be registered in the name of a person
other than the person in whose name the applicable surrendered
Share is registered, it shall be a condition to the registration
thereof that the surrendered Share be in proper form for
transfer and that the person requesting such delivery of the
Merger Consideration pay any transfer or other similar Taxes
required as a result of such registration in the name of a
person other than the registered holder of such Share or
establish to the satisfaction of the Exchange Agent that such
Tax has been paid or is not payable. Until surrendered as
contemplated by this Section 2.2(b), each Share shall be
deemed at any time after the Effective Time to represent only
the right to receive the Merger Consideration (and any amounts
to be paid pursuant to Section 2.1(d) or
Section 2.2(c)) upon such surrender. No interest shall be
paid or shall accrue on any amount payable pursuant to
Section 2.1(d) or Section 2.2(c). If any certificate
representing any Share(s) shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate or evidence of
shares in book-entry form representing Parent Common Stock,
require the owner of such lost, stolen or destroyed
certificate representing any Share(s) to provide a customary
affidavit and to deliver a bond in a reasonable amount as Parent
may reasonably direct as indemnity against any claim that may be
made against the Exchange Agent, Parent or the Surviving
Corporation with respect to such certificate representing such
Share(s).
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions
with respect to shares of Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any
unsurrendered Share with respect to the shares of Parent Common
Stock represented thereby, and no cash payment in lieu of
fractional shares of Parent Common Stock shall be paid to any
such holder pursuant to Section 2.1(d), until in either
case, such Share has been surrendered in accordance with this
Article II. Following surrender of any such Share, there
shall be paid to the recordholder thereof, without interest,
(i) promptly after such surrender, the number of whole
shares of Parent Common Stock issuable in exchange therefor
pursuant to this Article II, together with any cash payable
in lieu of a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 2.1(d) and the
amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time and a
payment date subsequent to such surrender payable with respect
to such whole shares of Parent Common Stock. The Exchange Agent,
Parent or the Surviving Corporation, as applicable, shall be
entitled to deduct and withhold from the consideration otherwise
A-4
payable under this Agreement to any holder of Shares or holder
of Restricted Shares or Restricted Stock Units, such amounts as
are required to be withheld or deducted under the Code or any
provision of U.S. state or local Tax Law with respect to
the making of such payment. To the extent that amounts are so
withheld or deducted and paid over to the applicable
Governmental Entity, such withheld or deducted amounts shall be
treated for all purposes of this Agreement as having been paid
to the person in respect of which such deduction and withholding
were made.
(d) No Further Ownership Rights in Company Common
Stock; Closing of Transfer Books. All shares
of Parent Common Stock issued upon the surrender for exchange of
Shares in accordance with the terms of this Article II and
any cash paid pursuant to Section 2.1(d) or
Section 2.2(c) shall be deemed to have been issued (or
paid) in full satisfaction of all rights pertaining to the
Shares previously represented by such Shares. After the
Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the
Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Shares are presented to the
Surviving Corporation or the Exchange Agent for any reason, they
shall be cancelled and exchanged as provided in this
Article II.
(e) Termination of Exchange
Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof) that remains
undistributed to the former holders of Shares for one year after
the Effective Time shall be delivered to the Surviving
Corporation upon demand, and any holders of Shares who have not
theretofore complied with this Article II shall thereafter
look only to Parent for payment of their claim for the Merger
Consideration, any cash in lieu of fractional shares of Parent
Common Stock pursuant to Section 2.1(d) and any dividends
or distributions pursuant to Section 2.2(c), subject to
applicable abandoned property, escheat or similar Law. If any
certificate representing any Share shall not have been
surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any shares of
Parent Common Stock or any dividends or other distributions
payable to the holder of such certificate representing any Share
would otherwise escheat to or become the property of any
Governmental Entity), any such shares of Parent Common Stock,
dividends or other distributions in respect of such certificate
representing any Share shall, to the extent permitted by
applicable Law, become the property of Parent, free and clear of
all claims or interest of any person previously entitled thereto.
(f) No Liability. Notwithstanding
anything in this Agreement to the contrary, none of the Company,
Parent, Merger Sub, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former holder
of Shares for any amount properly delivered to a public official
pursuant to any applicable abandoned property, escheat or
similar Law.
Except as disclosed in the Company SEC Documents filed or
furnished with the SEC since January 1, 2007 but prior to
the date hereof (but excluding any risk factor disclosures
contained under the heading “Risk Factors,” any
disclosure of risks included in any “forward-looking
statements” disclaimer or any other statements that are
similarly predictive or forward-looking in nature, other than,
in the case of any such disclosures or other statements, any
factual or historical information contained therein) or in the
disclosure schedule delivered by the Company to Parent
immediately prior to the execution of this Agreement (the
“Company Disclosure Schedule”), the Company
represents and warrants to Parent and Merger Sub as follows:
Section 3.1 Qualification;
Organization, Subsidiaries, etc.
(a) Each of the Company and its Subsidiaries is a legal
entity duly organized, validly existing and in good standing
under the Laws of its respective jurisdiction of organization
and has all requisite corporate or similar power and authority
to own, lease and operate its properties and assets and to carry
on its business as presently conducted and is qualified to do
business and is in good standing as a foreign legal entity in
each jurisdiction where the ownership, leasing or operation of
its assets or properties or conduct of its business requires
such qualification, except where the failure to be so organized,
validly existing, qualified or in good
A-5
standing, or to have such power or authority, is not having or
would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. As used in this
Agreement, a “Company Material Adverse Effect”
means an event, change, effect, development, state of facts,
condition, circumstance or occurrence that is materially adverse
to the business, financial condition or continuing results of
operations of the Company and its Subsidiaries, taken as a
whole, but shall not be deemed to include any event, change,
effect, development, state of facts, condition, circumstance or
occurrence: (i) in or affecting economic conditions
generally (including changes in interest rates) or the
financial, mortgage or securities markets in the United States
or elsewhere in the world, (ii) in or affecting the
industries in which the Company or its Subsidiaries operate
generally or in any specific jurisdiction or geographical area
or (iii) resulting from or arising out of (A) the
announcement or the existence of, or compliance with, or taking
any action required or permitted by this Agreement or the
transactions contemplated hereby, (B) any taking of any
action at the written request of Parent or Merger Sub,
(C) any litigation arising from allegations of a breach of
fiduciary duty or other violation of applicable Law relating to
this Agreement or the transactions contemplated hereby,
(D) any adoption, implementation, promulgation, repeal,
modification, reinterpretation or proposal of any rule,
regulation, ordinance, order, protocol or any other Law of or by
any national, regional, state or local Governmental Entity,
(E) any changes in GAAP or accounting standards or
interpretations thereof, (F) any weather-related or other
force majeure event or outbreak or escalation of hostilities or
acts of war or terrorism, except to the extent that the Company
and its Subsidiaries are adversely affected in a
disproportionate manner relative to other participants in the
industries in which the Company or its Subsidiaries operate, or
(G) any changes in the share price or trading volume of the
Shares, in the Company’s credit rating or in any
analyst’s recommendations, or the failure of the Company to
meet projections or forecasts (including any analyst’s
projections) (provided that the event, change, effect,
development, condition or occurrence underlying such change
shall not be excluded to the extent such event, change, effect,
development, condition or occurrence would otherwise constitute
a Company Material Adverse Effect).
(b) The Company has made available to Parent prior to the
date of this Agreement a true and complete copy of the
Company’s amended and restated articles of incorporation
and by-laws, each as amended through the date hereof
(collectively, the “Company Organizational
Documents”).
Section 3.2 Capital
Stock.
(a) The authorized capital stock of the Company consists of
300,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock (“Company
Preferred Stock”). As of the close of business on
April 2, 2009 (the “Company Capitalization
Date”), (i) 127,760,487 shares of Company
Common Stock were issued and outstanding (including 831,146
Restricted Shares), (ii) 3,323,454 shares of Company
Common Stock were held in treasury,
(iii) 5,949,993 shares of Company Common Stock were
issuable pursuant to the Company Stock Plans in respect of
Company Stock Options, (iv) 355,163 shares of Company
Common Stock were issuable pursuant to the Company Stock Plans
in respect of Restricted Stock Units, (v) no shares of
Company Preferred Stock were issued or outstanding and
(vi) 250,000 shares of Company Preferred Stock were
reserved and available for issuance pursuant to the CompanyRights Agreement. All outstanding shares of Company Common Stock
are, and all shares of Company Common Stock reserved for
issuance as noted in clauses (iii) and (iv), when issued in
accordance with the respective terms thereof, will be duly
authorized, validly issued, fully paid and nonassessable and
free of pre-emptive rights.
(b) From the close of business on the Company
Capitalization Date through the date of this Agreement, there
have been no issuances of shares of the capital stock or equity
securities of the Company or any other securities of the Company
other than issuances of shares of Company Common Stock pursuant
to the exercise of Company Stock Options or the settlement of
Restricted Stock Units outstanding as of the Company
Capitalization Date under the Company Stock Plans. Except as set
forth in Section 3.2(a), as of the date hereof, there are
no outstanding subscriptions, options, warrants, calls,
convertible securities or other similar rights, agreements or
commitments relating to the issuance of capital stock to which
the Company or any of its Subsidiaries is a party obligating the
Company or any of its Subsidiaries to (i) issue, transfer
or sell any shares of capital stock or other equity interests of
the Company or any Subsidiary of the Company or securities
convertible into or exchangeable or exercisable for such shares
or equity interests, (ii) grant, extend or enter into any
such subscription, option, warrant, call, convertible securities
or other similar right, agreement or
A-6
commitment, (iii) redeem or otherwise acquire any such
shares of capital stock or other equity interests or
(iv) provide a material amount of funds to, or make any
material investment (in the form of a loan, capital contribution
or otherwise) in, any Subsidiary.
(c) Except for awards to acquire shares of Company Common
Stock under the Company Stock Plans, neither the Company nor any
of its Subsidiaries has outstanding bonds, debentures, notes or
other obligations, the holders of which have the right to vote
(or which are convertible into or exchangeable or exercisable
for securities having the right to vote) with the stockholders
of the Company on any matter.
(d) There are no outstanding obligations of the Company or
any of its Subsidiaries restricting the transfer of, containing
any right of first refusal or granting any antidilution rights
with respect to, any shares of capital stock or other ownership
interests of the Company or any of its Subsidiaries. There are
no voting trusts or other agreements or understandings to which
the Company or any of its Subsidiaries is a party with respect
to the voting of the capital stock or other equity interest of
the Company or any of its Subsidiaries. No Subsidiary of the
Company owns any shares of capital stock of the Company.
Section 3.3 Corporate
Authority Relative to This Agreement; No
Violation.
(a) The Company has the requisite corporate power and
authority to enter into this Agreement and, subject to receipt
of the Company Stockholder Approval, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Company Board, and the Company Board has (i) determined
that it is in the best interests of the Company and its
stockholders, and declared it advisable, to enter into this
Agreement and (ii) adopted this Agreement and approved the
consummation of the transactions contemplated hereby, including
the Merger, upon the terms and subject to the conditions set
forth herein. Except for the Company Stockholder Approval, no
other corporate proceedings on the part of the Company are
necessary to authorize the consummation of the transactions
contemplated hereby. As of the date hereof, the Company Board
has resolved to recommend that the Company’s stockholders
approve this Agreement and the transactions contemplated hereby
(the “Company Recommendation”) and directed
that this Agreement be submitted to the holders of Company
Common Stock for approval. This Agreement has been duly and
validly executed and delivered by the Company and, assuming this
Agreement constitutes the legal, valid and binding agreement of
Parent and Merger Sub, constitutes the legal, valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms.
(b) Other than in connection with or in compliance with
(i) the NRS, (ii) the Securities Exchange Act of 1934
(the “Exchange Act”), (iii) the Securities
Act of 1933 (the “Securities Act”),
(iv) the rules and regulations of the New York Stock
Exchange (the “NYSE”) and (v) the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the “HSR
Act”) and, subject to the accuracy of the
representations and warranties of Parent and Merger Sub in
Section 4.21, no authorization, consent or approval of, or
filing with, any United States, state of the United States or
foreign governmental or regulatory agency, commission, court,
body, entity or authority (each, a “Governmental
Entity”) is necessary, under applicable Law, for the
consummation by the Company of the transactions contemplated by
this Agreement, except for such authorizations, consents,
approvals or filings that, if not obtained or made, would not
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(c) The execution and delivery by the Company of this
Agreement do not, and, except as described in
Section 3.3(b), the consummation of the transactions
contemplated hereby and compliance with the provisions hereof
will not (i) result in any violation of, or result in a
default (with or without notice or lapse of time, or both)
under, or require any consent or approval under, or give rise to
a right of termination, cancellation, acceleration or amendment
of any material obligation under, or give rise to (except with
respect to any Company Benefit Plans or other compensatory
programs or arrangements) any vesting, guaranteed payment or
loss of a material benefit under, any loan, guarantee of
indebtedness or credit agreement, note, bond, mortgage,
indenture, lease, agreement, contract, instrument, permit,
concession, franchise, right or license (each, a
“Contract”) binding upon or inuring to the
benefit of the Company or any of its Subsidiaries or result in
the creation of any liens, claims, mortgages, encumbrances,
pledges, security interests, equities or charges of any kind
(each, a “Lien”), other than any such Lien
(A) for Taxes or governmental assessments, charges or
claims
A-7
of payment not yet due, being contested in good faith or for
which adequate accruals or reserves have been established,
(B) which is a carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s or other
similar lien arising in the ordinary course of business or
(C) which would not reasonably be expected to materially
impair the continued use of a Company Owned Real Property or a
Company Leased Real Property as currently operated, upon any of
the properties or assets of the Company or any of its
Subsidiaries, (ii) conflict with or result in any violation
of any provision of the articles of incorporation or by-laws or
other equivalent organizational document, in each case as
amended, of the Company or any of its Subsidiaries or
(iii) conflict with or violate any applicable Laws, other
than, in the case of clauses (i) and (iii), any such
consent, approval, violation, conflict, default, termination,
cancellation, acceleration, amendment, right, loss or Lien that
would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.4 Reports
and Financial Statements.
(a) From December 31, 2007 through the date of this
Agreement, the Company has filed or furnished all forms,
documents and reports required to be filed or furnished by it
with the Securities and Exchange Commission (the
“SEC”) (the “Company SEC
Documents”). None of the Company’s Subsidiaries is
required to make any filings with the SEC. As of their
respective dates or, if amended prior to the date hereof, as of
the date of the last such amendment, the Company SEC Documents
complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the
applicable rules and regulations promulgated thereunder, and
none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
(b) The consolidated financial statements (including all
related notes and schedules) of the Company included in the
Company SEC Documents (i) have been prepared from, and are
based upon the books and records of the Company and its
consolidated subsidiaries and (ii) fairly present in all
material respects the consolidated financial position of the
Company and its consolidated subsidiaries, as at the respective
dates thereof, and the consolidated results of their operations
and their consolidated cash flows for the respective periods
then ended (subject, in the case of the unaudited statements, to
normal year-end audit adjustments and to any other adjustments
described therein, including the notes thereto) in conformity
with United States generally accepted accounting principles
(“GAAP”) (except, in the case of the unaudited
statements, as permitted by the SEC) applied on a consistent
basis during the periods involved (except as may be indicated
therein or in the notes thereto).
(c) To the knowledge of the Company, as of the date of this
Agreement, there are no SEC inquiries or investigations, other
governmental inquiries or investigations or internal
investigations pending or threatened, in each case regarding any
accounting practices of the Company.
Section 3.5 Internal
Controls and Procedures.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, of
Rule 13a-15
under the Exchange Act) as required by
Rule 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 of 2002 (the “Sarbanes-Oxley
Act”). The Company’s management has completed an
assessment of the effectiveness of the Company’s disclosure
controls and procedures in accordance with
Rule 13a-15
and, to the extent required by applicable Law, presented in any
applicable Company SEC Document that is a report on
Form 10-K
or
Form 10-Q
its conclusions about the effectiveness of the disclosure
controls and procedures as of the end of the period covered by
such report based on such evaluation. Based on the
Company’s management’s most recently completed
evaluation of the Company’s internal control over financial
reporting prior to the date of this Agreement, (i) to the
knowledge of the Company, the Company had no significant
deficiencies or material weaknesses in the design or operation
of its internal control over financial reporting that would
reasonably be
A-8
expected to adversely affect the Company’s ability to
record, process, summarize and report financial information and
(ii) the Company does not have knowledge of any fraud,
whether or not material, that involves management or other
employees who have a significant role in the Company’s
internal control over financial reporting.
Section 3.6 No
Undisclosed Liabilities. Except (a) as
reflected or reserved against in the Company’s consolidated
balance sheets (or the notes thereto) included in the Company
SEC Documents filed with the SEC prior to the date hereof,
(b) as permitted or contemplated by this Agreement,
(c) for liabilities and obligations incurred in the
ordinary course of business since December 31, 2008 and
(d) for liabilities or obligations which have been
discharged or paid in full in the ordinary course of business,
as of the date hereof, neither the Company nor any Subsidiary of
the Company has any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be
required by GAAP to be reflected on a consolidated balance sheet
of the Company and its consolidated Subsidiaries (or in the
notes thereto), other than those which are not having or would
not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.7 Compliance
with Law; Permits.
(a) The Company and each of its Subsidiaries are in
compliance with and are not in default under or in violation of
any applicable federal, state, local or foreign law, statute,
ordinance, rule, regulation, judgment, order, injunction, decree
or agency requirement of any Governmental Entity (collectively,
“Laws” and each, a “Law”),
except where such non-compliance, default or violation is not
having or would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(b) The Company and its Subsidiaries are in possession of
all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for
the Company and its Subsidiaries to own, lease and operate their
properties and assets or to carry on their businesses as they
are now being conducted (the “Company
Permits”), except for any of the foregoing franchises,
grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders related
to the residential construction activities of the Company and
its Subsidiaries that the Company or such Subsidiaries have
applied for or are endeavoring to obtain in the ordinary course
of business and except where the failure to have any of the
Company Permits is not having or would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect. All Company Permits are in full force
and effect, except where the failure to be in full force and
effect is not having or would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect.
(c) Notwithstanding anything contained in this
Section 3.7, no representation or warranty shall be deemed
to be made in this Section 3.7 in respect of the matters
referenced in Section 3.4 or 3.5, or in respect of
environmental, Tax, employee benefits or labor Law matters.
Section 3.8 Environmental
Laws and Regulations.
(a) Except as is not having or would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect: (i) since January 1, 2006, no
notice, notification, demand, request for information, citation,
summons, complaint or order has been received, no penalty has
been assessed, no action, claim, suit or proceeding is pending,
and, to the knowledge of the Company, no action, claim, suit or
proceeding is threatened nor is any investigation or review
pending or threatened, in each case, by any Governmental Entity
or other person relating to the Company or any of its
Subsidiaries and relating to or arising out of any Environmental
Law; (ii) the Company and its Subsidiaries are in
compliance with all Environmental Laws with respect to their
properties and operations, and are in compliance with all
permits required under Environmental Laws for the conduct of
their respective businesses (“Environmental
Permits”); (iii) neither the Company nor any of
its Subsidiaries is obligated to conduct or pay for, and is not
conducting or paying for, any response or corrective action
under any Environmental Law at any location; and
(iv) neither the Company nor any of its Subsidiaries is
party to any order, judgment or decree that imposes any
obligations under any Environmental Law.
A-9
(b) For purposes of this Agreement:
(i) “Environment” means any ambient
air, surface water, drinking water, groundwater, land surface
(whether below or above water), wetlands, subsurface strata,
sediment, plant or animal life and natural resources.
(ii) “Environmental Law” means any
Law, any common law theory of liability or any binding agreement
issued or entered by or with any Governmental Entity relating
to: (A) the Environment, including pollution,
contamination, cleanup, preservation, protection, mitigation and
reclamation of the Environment; (B) any discharge,
emission, release or threatened release of any Hazardous
Materials, including investigation, assessment, testing,
monitoring, mitigation, containment, removal, remediation and
cleanup of any such emission, discharge, release or threatened
release or the protection of human health from exposure to
Hazardous Materials; (C) the management of any Hazardous
Materials, including the use, labeling, processing, disposal,
storage, treatment, transport or recycling of any Hazardous
Materials; or (D) the presence of Hazardous Materials in
any building, physical structure, product or fixture.
(iii) “Hazardous Materials” means
any pollutant or contaminant (including any constituent, raw
material, product or by-product thereof), petroleum, asbestos or
asbestos-containing material, polychlorinated biphenyls, lead
paint, any hazardous, industrial or solid waste, any toxic,
radioactive, infectious or hazardous substance, material or
agent, or any other substance or waste regulated under or for
which liability or standards of care are imposed by any
Environmental Law.
Section 3.9 Employee
Benefit Plans.
(a) Section 3.9(a) of the Company Disclosure Schedule
lists all material Company Benefit Plans. For purposes of this
Agreement, “Company Benefit Plans” means all
compensation or employee benefit plans, programs, policies,
agreements or other arrangements, whether or not “employee
benefit plans” (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974
(“ERISA”), whether or not subject to ERISA),
providing cash- or equity-based incentives, including bonus,
profit-sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock options, phantom stock,
restricted stock, restricted stock units, performance stock,
performance stock units, stock appreciation rights, health,
medical, dental, vision, disability, accident or life insurance
benefits or vacation, sick leave, holiday pay, fringe benefit,
severance, retirement, pension or savings benefits, that are
sponsored, maintained or contributed to by the Company or any of
its Subsidiaries for the benefit of current or former employees
or directors of the Company or its Subsidiaries and all employee
agreements providing compensation, vacation, holiday pay,
severance or other benefits to any current or former officer or
employee of the Company or its Subsidiaries.
(b) Each Company Benefit Plan has been maintained and
administered in compliance with its terms and with applicable
Law, including ERISA and the Code to the extent applicable
thereto, except for such non-compliance which is not having or
would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Any Company
Benefit Plan intended to be qualified under Section 401(a)
or 401(k) of the Code has received a determination letter from
the Internal Revenue Service (the “IRS”) and,
to the knowledge of the Company, after consultation with
employees of the Company who are responsible for the
day-to-day
administration of such Company Benefit Plans, (i) there are
no circumstances likely to result in the revocation of any such
favorable determination letter and (ii) there are no
circumstances indicating that any such plan is not so qualified
in operation. To the knowledge of the Company, no prohibited
transaction described in Section 406 of ERISA or
Section 4975 of the Code has occurred, except as is not
having or would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries maintains or contributes
to any plan or arrangement which provides retiree medical or
welfare benefits nor has any liability or obligation to provide
such benefits, except as required by applicable Law. There is no
pending, or to the knowledge of the Company, threatened
litigation or claims (other than routine claims for benefits)
relating to the Company Benefit Plans which are having or would
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
A-10
(c) None of the Company, any of its Subsidiaries or any
other person or entity that together with any other person or
entity is treated as a single employer under Section 414 of
the Code or Section 4001 of ERISA (each, an “ERISA
Affiliate”) contributes to or maintains an
“employee benefit plan” (within the meaning of
Section 3(3) of ERISA) (an “ERISA Plan”)
subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code or have contributed to or
maintained any such plan at any time during the past six years
and no liability has been or is expected to be incurred by the
Company or any of its Subsidiaries with respect to any such
plan. None of the Company, any of its Subsidiaries or any ERISA
Affiliate of the Company or its Subsidiaries has contributed, or
been obligated to contribute, to any “multiemployer
plan” (within the meaning of Section 3(37) of ERISA)
at any time during the past six years and no liability has been
or is expected to be incurred by the Company or any Subsidiary
with respect to any such plan.
(d) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee,
consultant or officer of the Company or any of its Subsidiaries
to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement or as
required by applicable Law or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due
any such employee, consultant or officer, except as expressly
provided in this Agreement.
Section 3.10 Absence
of Certain Changes or Events.
(a) From December 31, 2008 through the date of this
Agreement, (i) the businesses of the Company and its
Subsidiaries have been conducted, in all material respects, in
the ordinary course of business, and (ii) there has not
been any event, change, effect, development, state of facts,
condition, circumstance or occurrence that has had, individually
or in the aggregate, a Company Material Adverse Effect.
(b) Since the date of this Agreement, there has not been
any event, change, effect, development, state of facts,
condition, circumstance or occurrence that is having or would
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.11 Investigations;
Litigation. (a) There is no
investigation or review pending (or, to the knowledge of the
Company, threatened) by any Governmental Entity with respect to
the Company or any of its Subsidiaries, and (b) there are
no actions, suits, inquiries, investigations or proceedings
pending (or, to the knowledge of the Company, threatened)
against or affecting the Company or any of its Subsidiaries, or
any of their respective properties at law or in equity before,
and there are no orders, judgments or decrees of, or before, any
Governmental Entity which, in the case of clause (a) or
(b), are having or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect.
Section 3.12 Information
Supplied. None of the information provided by
the Company for inclusion or incorporation by reference in
(a) the registration statement on
Form S-4
to be filed with the SEC by Parent in connection with the
issuance of Parent Common Stock in the Merger (including any
amendments or supplements, the
“Form S-4”)
will, at the time the
Form S-4
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 to make the
statements therein not misleading or (b) the proxy
statement/prospectus relating to the Company Stockholders’
Meeting and the proxy statement relating to the Parent
Stockholders’ Meeting (such proxy statements together, in
each case as amended or supplemented from time to time, the
“Joint Proxy Statement”) will, at the date it
is first mailed to the Company’s stockholders and
Parent’s stockholders or at the time of the Company
Stockholders’ Meeting or the Parent 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 light of
the circumstances under which they were made, not misleading.
The Joint Proxy Statement (other than the portion thereof
relating solely to the Parent Stockholders’ Meeting) and
the
Form S-4
(solely with respect to the portion thereof relating to the
Company Stockholders’ Meeting) will comply as to form in
all material respects with the requirements of the Securities
Act and the Exchange Act. Notwithstanding the foregoing
provisions of this Section 3.12, no representation or
warranty is made by the Company with respect to information or
statements made or incorporated by reference in the
Form S-4
or the Joint Proxy Statement which were not supplied by or on
behalf of the Company.
A-11
Section 3.13 Tax
Matters.
(a) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, (i) other than with respect to matters contested in
good faith or for which adequate reserves have been established
in accordance with GAAP (A) the Company and each of its
Subsidiaries have prepared and timely filed (taking into account
any extension of time within which to file) all Tax Returns
required to be filed by any of them and all such filed Tax
Returns are complete and accurate, and (B) the Company and
each of its Subsidiaries have paid all Taxes that are required
to be paid by any of them, (ii) all deficiencies asserted
or assessed by a taxing authority against the Company or any of
its Subsidiaries have been paid in full or are adequately
reserved, in accordance with GAAP, (iii) as of the date of
this Agreement, there are not pending or, to the knowledge of
the Company, threatened in writing any audits, examinations,
investigations or other proceedings in respect of income or
franchise Taxes and there are no currently effective waivers (or
requests for waivers) of the time to assess any Taxes,
(iv) there are no Liens for income or franchise Taxes on
any of the assets of the Company or any of its Subsidiaries
other than Company Permitted Liens, (v) the Company has not
been a “controlled corporation” or a
“distributing corporation” in any distribution
occurring during the three-year period ending on the date hereof
(or otherwise as part of a “plan (or series of related
transactions)” within the meaning of Section 355(e) of
the Code of which the Merger is also a part) that was purported
or intended to be governed by Section 355 of the Code,
(vi) neither the Company nor any of its Subsidiaries
(A) is a party to or is bound by any Tax sharing,
allocation or indemnification agreement with persons other than
wholly owned Subsidiaries of the Company or (B) has any
liability for Taxes of any other person (other than the Company
and its Subsidiaries) pursuant to Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law), as a
transferee or successor, by contract or otherwise, (vii) as
of the date hereof, neither the Company nor any of its
Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code, no such adjustment
has been proposed by the IRS and no pending request for
permission to change any accounting method has been submitted by
the Company or any of its Subsidiaries, (viii) neither the
Company nor any of its Subsidiaries has participated in any
“listed transaction” within the meaning of Treasury
Regulation Section 1.6011-4(b)(2)
and (ix) to the knowledge of the Company, as of the date
hereof and without regard to this Agreement, the Company has not
undergone an “ownership change” within the meaning of
Section 382 of the Code.
(b) As used in this Agreement, “Taxes”
means any and all domestic or foreign, federal, state, local or
other taxes of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Entity, including
taxes on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital
stock, payroll, employment, unemployment, social security,
workers’ compensation, margin or net worth, and taxes in
the nature of excise, withholding, ad valorem or value added.
(c) As used in this Agreement, “Tax
Return” means any return, report or similar document
(including any attached schedules) filed or required to be filed
with respect to Taxes, including any information return, claim
for refund, amended return or declaration of estimated Taxes.
Section 3.14 Employment
and Labor Matters. Except for such matters
which are not having or would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect, (a) (i) there are no strikes or lockouts
with respect to any employees of the Company or any of its
Subsidiaries (“Company Employees”),
(ii) the Company and its Subsidiaries are not parties to
any collective bargaining agreement and, to the knowledge of the
Company, there is no union organizing effort pending or
threatened against the Company or any of its Subsidiaries,
(iii) there is no labor dispute (other than routine
individual grievances) or labor arbitration proceeding pending
or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, (iv) there is no
slowdown or work stoppage in effect or, to the knowledge of the
Company, threatened with respect to Company Employees, and
(v) to the knowledge of the Company, there is no charge,
complaint, or investigation pending or threatened by any
Governmental Entity against the Company or any of its
Subsidiaries concerning any alleged violation of any applicable
Law respecting employment or employment practices, workplace
health and safety, terms and conditions of employment, wages and
hours, or unfair labor practices, and (b) the Company and
its Subsidiaries are in
A-12
compliance with all applicable Laws respecting
(i) employment and employment practices,
(ii) workplace health and safety, (iii) terms and
conditions of employment and wages and hours, and
(iv) unfair labor practices. Neither the Company nor any of
its Subsidiaries has any liabilities or is in breach of any
obligations under the Worker Adjustment and Retraining
Notification Act of 1988 (the “WARN Act”) or
any similar state or local Law as a result of any action taken
by the Company (other than at the written direction of Parent)
that would reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect. It is agreed
and understood that no representation or warranty is made by the
Company in respect of labor matters in any section of this
Agreement other than this Section 3.14.
Section 3.15 Intellectual
Property. Except as is not having or would
not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, either the Company
or a Subsidiary of the Company owns, or is licensed or otherwise
possesses legally enforceable rights to use, all material
trademarks, trade names, service marks, service names, mark
registrations, logos, assumed names, registered and unregistered
copyrights, patents or applications and registrations used in
their respective businesses as currently conducted
(collectively, the “Intellectual Property”).
Except as is not having or would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect, (a) there are no pending or, to the
knowledge of the Company, threatened claims by any person
alleging infringement by the Company or any of its Subsidiaries
for their use of the Intellectual Property of the Company or any
of its Subsidiaries, (b) to the knowledge of the Company,
the conduct of the business of the Company and its Subsidiaries
does not infringe any intellectual property rights of any
person, (c) neither the Company nor any of its Subsidiaries
has any claim pending of a violation or infringement by others
of its rights to or in connection with the Intellectual Property
of the Company or any of its Subsidiaries and (d) to the
knowledge of the Company, no person is infringing any
Intellectual Property of the Company or any of its Subsidiaries.
Section 3.16 Real
Property.
(a) With respect to the real property owned by the Company
or any Subsidiary (such property collectively, the
“Company Owned Real Property”), except as is
not having or would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, (i) either the Company or a Subsidiary of the
Company has good and valid title to such Company Owned Real
Property, free and clear of all Liens other than any such Lien
(A) for Taxes or governmental assessments, charges or
claims of payment not yet due, being contested in good faith or
for which adequate accruals or reserves have been established,
(B) which is a carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s, or other
similar lien arising in the ordinary course of business,
(C) which is disclosed on the most recent consolidated
balance sheet of the Company or notes thereto included in the
Company SEC Documents filed prior to the date hereof or securing
liabilities reflected on such balance sheet, (D) which was
incurred in the ordinary course of business since the date of
such recent consolidated balance sheet of the Company or
(E) which would not reasonably be expected to materially
impair the continued use of a Company Owned Real Property or a
Company Leased Real Property as currently operated (each of the
foregoing, a “Company Permitted Lien”) (and
conditions, covenants, encroachments, easements, restrictions
and other encumbrances that do not materially adversely affect
the use of the Company Owned Real Property by the Company for
residential home building), (ii) there are no reversion
rights, outstanding options or rights of first refusal in favor
of any other party to purchase, lease, occupy or otherwise
utilize such Company Owned Real Property or any portion thereof
or interest therein that would reasonably be expected to
materially adversely affect the use by the Company for
residential home building of the Company Owned Real Property
affected thereby and (iii) neither the Company nor its
Subsidiaries have collaterally assigned or granted a security
interest in the Company Owned Real Property except for Company
Permitted Liens. Neither the Company nor any of its Subsidiaries
has received notice of any pending, and to the knowledge of the
Company there is no pending or threatened condemnation or
eminent domain proceeding with respect to any Company Owned Real
Property, except proceedings which are not having or would not
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(b) Except as is not having or would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect, (i) each material lease, sublease,
license, easement and other agreement
A-13
under which the Company or any of its Subsidiaries uses or
occupies or has the right to use or occupy any material real
property at which the material operations of the Company and its
Subsidiaries are conducted (the “Company Leased Real
Property”), is valid, binding and in full force and
effect and (ii) no uncured default of a material nature on
the part of the Company or, if applicable, its Subsidiary or, to
the knowledge of the Company, the landlord or other parties to
such lease or other agreement thereunder exists with respect to
any Company Leased Real Property. Except as is not having or
would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, the Company and
each of its Subsidiaries has a good and valid leasehold
interest, subject to the terms of any lease, sublease or other
agreement applicable thereto, in each parcel of Company Leased
Real Property, free and clear of all Liens, except for Company
Permitted Liens (and conditions, covenants, encroachments,
easements, restrictions and other encumbrances that do not
adversely affect the use of the Company Leased Real Property by
the Company for residential home building). Except as is not
having or would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect, neither
the Company nor any of its Subsidiaries has (x) received
notice of any pending, and, to the knowledge of the Company,
there is no threatened, condemnation proceeding with respect to
any Company Leased Real Property, (y) collaterally assigned
or granted a security interest in the Company Leased Real
Property except for Company Permitted Liens, or
(z) received any written notice of any default under lease
or other agreement for a Company Leased Real Property and, to
the knowledge of Company, no event has occurred and no condition
exists that, with notice or lapse of time, or both, would
constitute a default by Company or any of its Subsidiaries, as
applicable, under any such leases and agreements.
(c) Except as is not having or would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect, no judgment, injunction, order, decree,
statute, ordinance, rule, regulation, moratorium, or other
action by or before a Governmental Entity exists or is pending
or threatened that restricts the development or sale of Company
Owned Real Property currently under development or all or a
portion of which is being held for sale by the Company or any of
its Subsidiaries.
(d) No developer-related charges or assessments imposed by
any Governmental Entity (or any other person) for public
improvements (or otherwise) against any Company Owned Real
Property held for development, are unpaid (other than those
reflected on the most recent financial statements of the
Company, and those incurred since the date of such financial
statements of the Company to the extent in the ordinary course
of the Company’s business and consistent with past
practices), except for such charges and assessments as, in the
aggregate, are not having or would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect.
Section 3.17 Required
Vote of the Company Stockholders. Subject to
the accuracy of the representations and warranties of Parent and
Merger Sub in Section 4.21, the affirmative vote of a
majority of the outstanding Company Common Stock entitled to
vote on this Agreement and the Merger is the only vote of
holders of securities of the Company which is required to
approve this Agreement and the Merger (the “Company
Stockholder Approval”).
Section 3.18 Opinion
of Financial Advisors.The Company Board has
received the opinion of Goldman, Sachs & Co. dated the
date of this Agreement, substantially to the effect that, as of
such date, the Exchange Ratio is fair to the holders of Company
Common Stock from a financial point of view.
(a) Section 3.19(a) of the Company Disclosure Schedule
contains a complete list as of the date hereof of the following
types of Contracts, whether written or oral, that are intended
by the Company or any of its Subsidiaries, as applicable, to be
legally binding, and to which the Company or any of its
Subsidiaries is a party (such Contracts, being the
“Company Material Contracts”):
(i) each “material contract” (as such term is
defined in Item 610(b)(10) of
Regulation S-K
of the SEC) with respect to the Company and its Subsidiaries
(other than compensatory contracts with, or which include as
participants, any current or former director or officer of the
Company or any of its Subsidiaries);
A-14
(ii) all contracts and agreements evidencing indebtedness
for borrowed money in excess of $50 million in principal
amount; and
(iii) all non-competition agreements or any other
agreements or arrangements (A) that materially limit or
otherwise materially restrict the Company and its Subsidiaries
from conducting a material portion of the business of the
Company and its Subsidiaries, taken as a whole, or (B) that
would, after the Effective Time, materially limit or materially
restrict Parent or any of its Subsidiaries (other than the
Surviving Corporation and its Subsidiaries) from engaging or
competing in any material line of business or in any material
geographic area, or that would materially limit or materially
restrict a material portion of the business of Parent and its
Subsidiaries, taken as a whole (including for purposes of such
determination, the Surviving Corporation and its Subsidiaries),
after giving effect to the Merger.
(b) Neither the Company nor any Subsidiary of the Company
is in breach of or default under the terms of any Company
Material Contract where such breach or default is having or
would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. To the knowledge
of the Company, no other party to any Company Material Contract
is in breach of or default under the terms of any Company
Material Contract where such breach or default is having or
would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Except as is not
having or would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect, each
Company Material Contract is a legal, valid and binding
obligation of the Company or the Subsidiary of the Company which
is party thereto and, to the knowledge of the Company, of each
other party thereto, and is in full force and effect, except
that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar Laws, now or hereafter in effect, relating to
creditors’ rights generally and (ii) equitable
remedies of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor
may be brought.
(c) The Company has made available to Parent correct and
complete copies in all material respects of all Company Material
Contracts, including any material amendments or material waivers
thereto.
Section 3.20 Finders
or Brokers. Except for Goldman,
Sachs & Co., neither the Company nor any of its
Subsidiaries has employed any investment banker, broker or
finder in connection with the transactions contemplated by this
Agreement who might be entitled to any fee or any commission in
connection with or upon consummation of the Merger. The Company
has made available to Parent for informational purposes only a
true and complete copy of all agreements between the Company and
Goldman, Sachs & Co. pursuant to which such firm would
be entitled to any payment relating to the Merger.
Section 3.21 Insurance. Section 3.21
of the Company Disclosure Schedule sets forth (i) a true
and complete list of the material insurance policies covering
the Company and its Subsidiaries as of the date hereof and
(ii) the last annual premium paid by the Company for the
Company’s directors’ and officers’ insurance
policy. Except as is not having or would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect, (a) each insurance policy under
which the Company or any of its Subsidiaries is an insured or
otherwise the principal beneficiary of coverage (collectively,
the “Company Insurance Policies”) is in full
force and effect, all premiums due thereon have been paid in
full and the Company and its Subsidiaries are in compliance with
the terms and conditions of such Company Insurance Policy,
(b) neither the Company nor any of its Subsidiaries is in
breach or default under any Company Insurance Policy and
(c) no event has occurred which, with notice or lapse of
time, would constitute such breach or default, or permit
termination or modification, under the policy.
Section 3.22 Tax
Treatment. Neither the Company nor any of its
Subsidiaries has taken or agreed to take any action or knows of
any fact that would prevent or impede, or would be reasonably
likely to prevent or impede, the Merger from qualifying as a
“reorganization” within the meaning of
Section 368(a) of the Code.
Investor Services LLC, as Rights Agent, inapplicable to the
Merger, this Agreement, the Voting Agreements executed by
stockholders of the Company and the transactions contemplated
hereby or thereby, including the Merger, (b) to ensure that
(i) neither Parent, Merger Sub nor any of their Affiliates
will become an “Acquiring Person” (as such term is
defined in the CompanyRights Agreement) by reason of the
approval, execution, announcement or consummation of this
Agreement or the Voting Agreements executed by stockholders of
the Company or the transactions contemplated hereby or thereby,
including the Merger, and (ii) neither a
“Shares Acquisition Date” nor a
“Distribution Date” (each as defined in the CompanyRights Agreement) shall occur, in each case, by reason of the
approval, execution, announcement or consummation of this
Agreement or the Voting Agreements executed by stockholders of
the Company or the transactions contemplated hereby or thereby,
including the Merger, and (c) to cause the Company Rights
Agreement to terminate at the Effective Time.
Section 3.24 Anti-Takeover
Laws. Assuming the accuracy of Parent’s
representations and warranties in Section 4.21, the Company
Board has taken all action necessary to render the provisions of
Sections 78.411 to 78.444, inclusive, of the NRS
inapplicable to this Agreement and the transactions contemplated
hereby. No other “moratorium,”“control
share,”“fair price,”“business
combination,”“supermajority,”“affiliate
transactions” or other anti-takeover Laws or any similar
provisions under the Company Organizational Documents are
applicable to this Agreement or the transactions contemplated
hereby.
Section 3.25 No
Additional Representations.The Company
acknowledges that neither Parent nor Merger Sub makes any
representation or warranty as to any matter whatsoever except as
expressly set forth in this Agreement or in any certificate
delivered by Parent or Merger Sub to the Company in accordance
with the terms hereof, and specifically (but without limiting
the generality of the foregoing) that neither Parent nor Merger
Sub makes any representation or warranty with respect to
(a) any projections, estimates or budgets delivered or made
available to the Company (or any of their respective affiliates
or Representatives) of future revenues, results of operations
(or any component thereof), cash flows or financial condition
(or any component thereof) of Parent and its Subsidiaries or
(b) the future business and operations of Parent and its
Subsidiaries.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in the Parent SEC Documents filed or
furnished with the SEC since January 1, 2007 but prior to
the date hereof (but excluding any risk factor disclosures
contained under the heading “Risk Factors,” any
disclosure of risks included in any “forward-looking
statements” disclaimer or any other statements that are
similarly predictive or forward-looking in nature, other than,
in the case of any such disclosures or other statements, any
factual or historical information contained therein) or in the
disclosure schedule delivered by Parent to the Company
immediately prior to the execution of this Agreement (the
“Parent Disclosure Schedule”), Parent and
Merger Sub represent and warrant to the Company as follows:
Section 4.1 Qualification;
Organization, Subsidiaries, etc.
(a) Each of Parent and Merger Sub is a legal entity duly
organized, validly existing and in good standing under the Laws
of its respective jurisdiction of organization and has all
requisite corporate or similar power and authority to own, lease
and operate its properties and assets and to carry on its
business as presently conducted and is qualified to do business
and is in good standing as a foreign legal entity in each
jurisdiction where the ownership, leasing or operation of its
assets or properties or conduct of its business requires such
qualification, except where the failure to be so organized,
validly existing, qualified or in good standing, or to have such
power or authority, is not having or would not reasonably be
expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. As used in this Agreement, a
“Parent Material Adverse Effect” means an
event, change, effect, development, state of facts, condition,
circumstance or occurrence that is materially adverse to the
business, financial condition or continuing results of
operations of Parent and its Subsidiaries, taken as a whole, but
shall not be deemed to include any event, change, effect,
development, state of facts, condition, circumstance or
occurrence: (i) in or affecting economic conditions
generally
A-16
(including changes in interest rates) or the financial, mortgage
or securities markets in the United States or elsewhere in the
world, (ii) in or affecting the industries in which Parent
or its Subsidiaries operate generally or in any specific
jurisdiction or geographical area or (iii) resulting from
or arising out of (A) the announcement or the existence of,
or compliance with, or taking any action required or permitted
by this Agreement or the transactions contemplated hereby,
(B) any taking of any action at the written request of the
Company, (C) any litigation arising from allegations of a
breach of fiduciary duty or other violation of applicable Law
relating to this Agreement or the transactions contemplated
hereby, (D) any adoption, implementation, promulgation,
repeal, modification, reinterpretation or proposal of any rule,
regulation, ordinance, order, protocol or any other Law of or by
any national, regional, state or local Governmental Entity,
(E) any changes in GAAP or accounting standards or
interpretations thereof, (F) any weather-related or other
force majeure event or outbreak or escalation of hostilities or
acts of war or terrorism, except to the extent that Parent and
its Subsidiaries are adversely affected in a disproportionate
manner relative to other participants in the industries in which
Parent and its Subsidiaries operate or (G) any changes in
the share price or trading volume of the Parent Common Stock, in
Parent’s credit rating or in any analyst’s
recommendations, or the failure of Parent to meet projections or
forecasts (including any analyst’s projections) (provided
that the event, change, effect, development, condition or
occurrence underlying such change shall not be excluded to the
extent such event, change, effect, development, condition or
occurrence would otherwise constitute a Parent Material Adverse
Effect).
(b) Parent has made available to the Company prior to the
date of this Agreement a true and complete copy of the articles
of incorporation and by-laws of Parent and Merger Sub, each as
amended through the date hereof (collectively, the
“Parent Organizational Documents”).
Section 4.2 Capital
Stock.
(a) The authorized capital stock of Parent consists of
400,000,000 shares of Parent Common Stock and
25,000,000 shares of preferred stock par value $0.01 per
share (“Parent Preferred Stock”). As of the
close of business on April 3, 2009 (the “Parent
Capitalization Date”), (i) 258,563,448 shares
of Parent Common Stock were issued and outstanding (including
3,819,346 restricted share units (“Parent
RSUs”)), (ii) no shares of Parent Common Stock
were held in treasury, (iii) 19,890,366 shares of
Parent Common Stock were reserved for issuance in respect of
outstanding Parent Stock Options, (iv) no shares of Parent
Preferred Stock were issued or outstanding and
(v) 400,000 shares of Parent Preferred Stock were
reserved and available for issuance pursuant to the Parent
Rights Agreement. All outstanding shares of Parent Common Stock
are, and all shares of Parent Common Stock reserved for issuance
as noted in clause (iii), when issued in accordance with the
respective terms thereof, will be duly authorized, validly
issued, fully paid and nonassessable and free of pre-emptive
rights.
(b) From the close of business on the Parent Capitalization
Date through the date of this Agreement, there have been no
issuances of shares of the capital stock or equity securities of
Parent or any other securities of Parent other than issuances of
shares of Parent Common Stock pursuant to the exercise of Parent
Stock Options under the employee and director stock plans of
Parent. Except as set forth in Section 4.2(a), as of the
date hereof, there are no outstanding subscriptions, options,
warrants, calls, convertible securities or other similar rights,
agreements or commitments relating to the issuance of capital
stock to which Parent or any of its Subsidiaries is a party
obligating Parent or any of its Subsidiaries to (i) issue,
transfer or sell any shares of capital stock or other equity
interests of Parent or any Subsidiary of Parent or securities
convertible into or exchangeable or exercisable for such shares
or equity interests, (ii) grant, extend or enter into any
such subscription, option, warrant, call, convertible securities
or other similar right, agreement or commitment,
(iii) redeem or otherwise acquire any such shares of
capital stock or other equity interests or (iv) provide a
material amount of funds to, or make any material investment (in
the form of a loan, capital contribution or otherwise) in, any
Subsidiary.
(c) Except for awards to acquire shares of Parent Common
Stock under the employee and director stock plans of Parent,
neither Parent nor any of its Subsidiaries has outstanding
bonds, debentures, notes or other obligations, the holders of
which have the right to vote (or which are convertible or
exchangeable into or exercisable for securities having the right
to vote) with the stockholders of Parent on any matter.
A-17
(d) There are no outstanding obligations of Parent or any
of its Subsidiaries restricting the transfer of, containing any
right of first refusal or granting any antidilution rights with
respect to, any shares of capital stock or other ownership
interests of Parent or any of its Subsidiaries. There are no
voting trusts or other agreements or understandings to which
Parent or any of its Subsidiaries is a party with respect to the
voting of the capital stock or other equity interest of Parent
or any of its Subsidiaries.
(e) As of the date of this Agreement, the authorized
capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $0.01 per share, all of which are
validly issued and outstanding. All of the issued and
outstanding capital stock of Merger Sub is, and at the Effective
Time all of the issued and outstanding capital stock of the
Surviving Corporation will be, owned by Parent or a direct or
indirect wholly owned Subsidiary of Parent. Merger Sub has
outstanding no option, warrant, right or any other agreement
pursuant to which any person other than Parent may acquire any
equity security of Merger Sub. Merger Sub has not conducted any
business prior to the date hereof and has, and prior to the
Effective Time will have, no assets, liabilities or obligations
of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other
transactions contemplated by this Agreement.
Section 4.3 Corporate
Authority Relative to This Agreement; No
Violation.
(a) Each of Parent and Merger Sub has the requisite
corporate power and authority to enter into this Agreement and,
subject to receipt of the Parent Stockholder Approvals, to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by the Boards of Directors of Parent and Merger Sub
and by Parent, as the sole stockholder of Merger Sub, and,
except for the Parent Stockholder Approvals, no other corporate
proceedings on the part of Parent or Merger Sub are necessary to
authorize the consummation of the transactions contemplated
hereby. As of the date hereof, the Parent Board has resolved to
recommend that Parent’s stockholders (A) approve an
amendment to Parent’s Articles of Incorporation to increase
the total number of shares of authorized Parent Common Stock as
set forth on Section 4.3(a) of the Parent Disclosure
Schedule (the “Charter Amendment”) and
(B) approve the issuance of shares of Parent Common Stock
in connection with the Merger (the “Stock
Issuance”) (collectively, the “Parent
Recommendation”), and has directed that the Charter
Amendment and Stock Issuance be submitted to the holders of
Parent Common Stock for approval. This Agreement has been duly
and validly executed and delivered by Parent and Merger Sub,
and, assuming this Agreement constitutes the legal, valid and
binding agreement of the Company, this Agreement constitutes the
legal, valid and binding agreement of each of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance
with its terms.
(b) Other than in connection with or in compliance with
(i) the NRS, (ii) the Exchange Act, (iii) the
Securities Act, (iv) the rules and regulations of the NYSE
and (v) the HSR Act, no authorization, consent or approval
of, or filing with, any Governmental Entity is necessary, under
applicable Law, for the consummation by Parent or Merger Sub of
the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals or filings that, if not
obtained or made, would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect.
(c) The execution and delivery by Parent and Merger Sub of
this Agreement do not, and, except as described in
Section 4.3(b), the consummation of the transactions
contemplated hereby and compliance with the provisions hereof
will not (i) result in any violation of, or result in a
default (with or without notice or lapse of time, or both)
under, or require any consent or approval under, or give rise to
a right of termination, cancellation, acceleration or amendment
of any material obligation under, or give rise to (except with
respect to any Parent Benefit Plans or other compensatory
programs or arrangements) any vesting, guaranteed payment or
loss of a material benefit under, any Contract binding upon or
inuring to the benefit of Parent or any of its Subsidiaries or
result in the creation of any Lien, other than any such Lien
(A) for Taxes or governmental assessments, charges or
claims of payment not yet due, being contested in good faith or
for which adequate accruals or reserves have been established,
(B) which is a carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s or other
similar lien arising in the ordinary course of business or
(C) which would not reasonably be expected to materially
impair the continued use of a Parent Owned Real Property or a
Parent Leased Real Property as currently operated, upon any of
the properties or assets of Parent or any of its
A-18
Subsidiaries, (ii) conflict with or result in any violation
of any provision of the articles of incorporation or by-laws or
other equivalent organizational document, in each case as
amended, of Parent or any of its Subsidiaries or
(iii) conflict with or violate any applicable Laws, other
than, in the case of clauses (i) and (iii), any such
consent, approval, violation, conflict, default, termination,
cancellation, acceleration, amendment, right, loss or Lien that
would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
Section 4.4 Reports
and Financial Statements.
(a) From December 31, 2007 through the date of this
Agreement, Parent has filed or furnished all forms, documents
and reports required to be filed or furnished by it with the SEC
(the “Parent SEC Documents”). None of
Parent’s Subsidiaries is required to make any filings with
the SEC. As of their respective dates, or, if amended prior to
the date hereof, as of the date of the last such amendment, the
Parent SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as the
case may be, and the applicable rules and regulations
promulgated thereunder, and none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including all
related notes and schedules) of Parent included in the Parent
SEC Documents (i) have been prepared from, and are based
upon the books and records of Parent and its consolidated
subsidiaries and (ii) fairly present in all material
respects the consolidated financial position of Parent and its
consolidated subsidiaries, as at the respective dates thereof,
and the consolidated results of their operations and their
consolidated cash flows for the respective periods then ended
(subject, in the case of the unaudited statements, to normal
year-end audit adjustments and to any other adjustments
described therein, including the notes thereto) in conformity
with GAAP (except, in the case of the unaudited statements, as
permitted by the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the
notes thereto).
(c) To the knowledge of Parent, as of the date of this
Agreement, there are no SEC inquiries or investigations, other
governmental inquiries or investigations or internal
investigations pending or threatened, in each case regarding any
accounting practices of Parent.
Section 4.5 Internal
Controls and Procedures. 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, of
Rule 13a-15
under the Exchange Act) as required by
Rule 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. Parent’s management has completed
an assessment of the effectiveness of Parent’s disclosure
controls and procedures in accordance with
Rule 13a-15
and, to the extent required by applicable Law, presented in any
applicable Parent SEC Document that is a report on
Form 10-K
or
Form 10-Q
its conclusions about the effectiveness of the disclosure
controls and procedures as of the end of the period covered by
such report based on such evaluation. Based on Parent’s
management’s most recently completed evaluation of
Parent’s internal control over financial reporting prior to
the date of this Agreement, (i) to the knowledge of Parent,
Parent had no significant deficiencies or material weaknesses in
the design or operation of its internal control over financial
reporting that would reasonably be expected to adversely affect
Parent’s ability to record, process, summarize and report
financial information and (ii) Parent does not have
knowledge of any fraud, whether or not material, that involves
management or other employees who have a significant role in
Parent’s internal control over financial reporting.
Section 4.6 No
Undisclosed Liabilities. Except (a) as
reflected or reserved against in Parent’s consolidated
balance sheets (or the notes thereto) included in the Parent SEC
Documents filed with the SEC prior to the date hereof,
(b) as permitted or contemplated by this Agreement,
(c) for liabilities and obligations
A-19
incurred in the ordinary course of business since
December 31, 2008 and (d) for liabilities or
obligations which have been discharged or paid in full in the
ordinary course of business, as of the date hereof, neither
Parent nor any Subsidiary of Parent has any liabilities or
obligations of any nature, whether or not accrued, contingent or
otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of Parent and its consolidated
Subsidiaries (or in the notes thereto), other than those which
are not having or would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect.
Section 4.7 Compliance
with Law; Permits.
(a) Parent and each of its Subsidiaries are in compliance
with and are not in default under or in violation of any
applicable Law, except where such non-compliance, default or
violation is not having or would not reasonably be expected to
have, individually or in the aggregate, a Parent Material
Adverse Effect.
(b) Parent and its Subsidiaries are in possession of all
franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for
Parent and its Subsidiaries to own, lease and operate their
properties and assets or to carry on their businesses as they
are now being conducted (the “Parent Permits”),
except for any of the foregoing franchises, grants,
authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders related
to the residential construction activities of Parent and its
Subsidiaries that Parent or such Subsidiaries have applied for
or are endeavoring to obtain in the ordinary course of business
and except where the failure to have any of the Parent Permits
is not having or would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect. All Parent Permits are in full force and effect, except
where the failure to be in full force and effect is not having
or would not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect.
(c) Notwithstanding anything contained in this
Section 4.7, no representation or warranty shall be deemed
to be made in this Section 4.7 in respect of the matters
referenced in Section 4.4 or 4.5, or in respect of
environmental, Tax, employee benefits or labor Law matters.
Section 4.8 Environmental
Laws and Regulations. Except as is not having
or would not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect: (a) since
January 1, 2006, no notice, notification, demand, request
for information, citation, summons, complaint or order has been
received, no penalty has been assessed, no action, claim, suit
or proceeding is pending, and, to the knowledge of Parent, no
action, claim, suit or proceeding is threatened nor is any
investigation or review pending or threatened, in each case, by
any Governmental Entity or other person relating to Parent or
any of its Subsidiaries and relating to or arising out of any
Environmental Law; (b) Parent and its Subsidiaries are in
compliance with all Environmental Laws with respect to their
properties and operations, and are in compliance with all
Environmental Permits; (c) neither Parent nor any of its
Subsidiaries is obligated to conduct or pay for, and is not
conducting or paying for, any response or corrective action
under any Environmental Law at any location; and
(d) neither Parent nor any of its Subsidiaries is party to
any order, judgment or decree that imposes any obligations under
any Environmental Law.
Section 4.9 Employee
Benefit Plans.
(a) Section 4.9(a) of the Parent Disclosure Schedule
lists all material Parent Benefit Plans. For purposes of this
Agreement, “Parent Benefit Plans” means all
compensation or employee benefit plans, programs, policies,
agreements or other arrangements, whether or not “employee
benefit plans” (within the meaning of Section 3(3) of
ERISA, whether or not subject to ERISA), providing cash- or
equity-based incentives, including bonus, profit-sharing,
deferred compensation, incentive compensation, stock ownership,
stock purchase, stock options, phantom stock, restricted stock,
restricted stock units, performance stock, performance stock
units, stock appreciation rights, health, medical, dental,
vision, disability, accident or life insurance benefits or
vacation, sick leave, holiday pay, fringe benefit, severance,
retirement, pension or savings benefits, that are sponsored,
maintained or contributed to by Parent or any of its
Subsidiaries for the benefit of current or former employees or
directors of Parent or its Subsidiaries and all employee
agreements providing compensation, vacation, holiday pay,
severance or other benefits to any current or former officer or
employee of Parent or its Subsidiaries.
A-20
(b) Each Parent Benefit Plan has been maintained and
administered in compliance with its terms and with applicable
Law, including ERISA and the Code to the extent applicable
thereto, except for such non-compliance which is not having or
would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. Any Parent Benefit
Plan intended to be qualified under Section 401(a) or
401(k) of the Code has received a determination letter from the
IRS and, to the knowledge of Parent, after consultation with
employees of Parent who are responsible for the
day-to-day
administration of such Parent Benefit Plans, (i) there are
no circumstances likely to result in the revocation of any such
favorable determination letter and (ii) there are no
circumstances indicating that any such plan is not so qualified
in operation. To the knowledge of Parent, no prohibited
transaction described in Section 406 of ERISA or
Section 4975 of the Code has occurred, except as is not
having or would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect. Neither
Parent nor any of its Subsidiaries maintains or contributes to
any plan or arrangement which provides retiree medical or
welfare benefits nor has any liability or obligation to provide
such benefits, except as required by applicable Law. There is no
pending, or to the knowledge of Parent, threatened litigation or
claims (other than routine claims for benefits) relating to the
Parent Benefit Plans which are having or would reasonably be
expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(c) None of Parent, any of its Subsidiaries or any of its
ERISA Affiliates contributes to or maintains an ERISA Plan
subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code or have contributed to or
maintained any such plan at any time during the past six years
and no liability has been or is expected to be incurred by
Parent or any of its Subsidiaries with respect to any such plan.
None of Parent, any of its Subsidiaries or any ERISA Affiliate
of Parent or its Subsidiaries has contributed, or been obligated
to contribute, to any “multiemployer plan” (within the
meaning of Section 3(37) of ERISA) at any time during the
past six years and no liability has been or is expected to be
incurred by Parent or any Subsidiary with respect to any such
plan.
(d) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee,
consultant or officer of Parent or any of its Subsidiaries to
severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement or as required by
applicable Law or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such
employee, consultant or officer, except as expressly provided in
this Agreement.
Section 4.10 Absence
of Certain Changes or Events.
(a) From December 31, 2008 through the date of this
Agreement, (i) the businesses of Parent and its
Subsidiaries have been conducted, in all material respects, in
the ordinary course of business, and (ii) there has not
been any event, change, effect, development, state of facts,
condition, circumstance or occurrence that has had, individually
or in the aggregate, a Parent Material Adverse Effect.
(b) Since the date of this Agreement, there has not been
any event, change, effect, development, state of facts,
condition, circumstance or occurrence that is having or would
reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
Section 4.11 Investigations;
Litigation. (a) There is no
investigation or review pending (or, to the knowledge of Parent,
threatened) by any Governmental Entity with respect to Parent or
any of its Subsidiaries, and (b) there are no actions,
suits, inquiries, investigations or proceedings pending (or, to
the knowledge of Parent, threatened) against or affecting Parent
or any of its Subsidiaries, or any of their respective
properties at law or in equity before, and there are no orders,
judgments or decrees of, or before, any Governmental Entity,
which in the case of clause (a) or (b), are having or would
reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
Section 4.12 Information
Supplied. None of the information provided by
Parent for inclusion or incorporation by reference in
(a) the
Form S-4
will, at the time the
Form S-4
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 to make the
statements therein not misleading or (b) the Joint Proxy
Statement
A-21
will, at the date it is first mailed to Parent’s
stockholders and the Company’s stockholders or at the time
of the Parent Stockholders’ Meeting or the Company
Stockholder’s 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 light of the circumstances under which they were
made, not misleading. The Joint Proxy Statement (other than the
portion thereof relating solely to the Company
Stockholders’ Meeting) and the
Form S-4
will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act.
Notwithstanding the foregoing provisions of this
Section 4.12, no representation or warranty is made by
Parent with respect to information or statements made or
incorporated by reference in the
Form S-4
or the Joint Proxy Statement which were not supplied by or on
behalf of Parent.
Section 4.13 Tax
Matters. Except as would not reasonably be
expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, (a) other than with respect to
matters contested in good faith or for which adequate reserves
have been established in accordance with GAAP (i) Parent
and each of its Subsidiaries have prepared and timely filed
(taking into account any extension of time within which to file)
all Tax Returns required to be filed by any of them and all such
filed Tax Returns are complete and accurate, and
(ii) Parent and each of its Subsidiaries have paid all
Taxes that are required to be paid by any of them, (b) all
deficiencies asserted or assessed by a taxing authority against
Parent or any of its Subsidiaries have been paid in full or are
adequately reserved, in accordance with GAAP, (c) as of the
date of this Agreement, there are not pending or, to the
knowledge of Parent, threatened in writing, any audits,
examinations, investigations or other proceedings in respect of
income or franchise Taxes and there are no currently effective
waivers (or requests for waivers) of the time to assess any
Taxes, (d) there are no Liens for income or franchise Taxes
on any of the assets of Parent or any of its Subsidiaries other
than Parent Permitted Liens, (e) Parent has not been a
“controlled corporation” or a “distributing
corporation” in any distribution occurring during the
three-year period ending on the date hereof (or otherwise as
part of a “plan (or series of related transactions)”
within the meaning of Section 355(e) of the Code of which
the Merger is also a part) that was purported or intended to be
governed by Section 355 of the Code, (f) neither
Parent nor any of its Subsidiaries (I) is a party to or is
bound by any Tax sharing, allocation or indemnification
agreement with persons other than wholly owned Subsidiaries of
Parent or (II) has any liability for Taxes of any other
person (other than Parent and its Subsidiaries) pursuant to
Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law), as a
transferee or successor, by contract or otherwise, (g) as
of the date hereof, neither Parent nor any of its Subsidiaries
is required to include in income any adjustment pursuant to
Section 481(a) of the Code, no such adjustment has been
proposed by the IRS and no pending request for permission to
change any accounting method has been submitted by Parent or any
of its Subsidiaries, (h) neither Parent nor any of its
Subsidiaries has participated in any “listed
transaction” within the meaning of Treasury Regulation
Section 1.6011-4(b)(2)
and (i) to the knowledge of Parent, as of the date hereof
and without regard to this Agreement, Parent has not undergone
an “ownership change” within the meaning of
Section 382 of the Code.
Section 4.14 Employment
and Labor Matters. Except for such matters
which are not having or would not reasonably be expected to
have, individually or in the aggregate, a Parent Material
Adverse Effect, (a) (i) there are no strikes or lockouts
with respect to any employees of Parent or any of its
Subsidiaries (“Parent Employees”),
(ii) Parent and its Subsidiaries are not parties to any
collective bargaining agreement and, to the knowledge of Parent,
there is no union organizing effort pending or threatened
against Parent or any of its Subsidiaries, (iii) there is
no labor dispute (other than routine individual grievances) or
labor arbitration proceeding pending or, to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries,
(iv) there is no slowdown or work stoppage in effect or, to
the knowledge of Parent, threatened with respect to Parent
Employees, and (v) to the knowledge of Parent, there is no
charge, complaint, or investigation pending or threatened by any
Governmental Entity against Parent or any of its Subsidiaries
concerning any alleged violation of any applicable Law
respecting employment or employment practices, workplace health
and safety, terms and conditions of employment, wages and hours,
or unfair labor practices, and (b) Parent and its
Subsidiaries are in compliance with all applicable Laws
respecting (i) employment and employment practices,
(ii) workplace health and safety, (iii) terms and
conditions of employment and wages and hours, and
(iv) unfair labor practices. Neither Parent nor any of its
Subsidiaries has any liabilities or is in breach of any
obligations under the WARN Act or any similar state or local Law
as a result of any action taken by Parent that would reasonably
be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. It is agreed
A-22
and understood that no representation or warranty is made by
Parent or Merger Sub in respect of labor matters in any section
of this Agreement other than this Section 4.14.
Section 4.15 Intellectual
Property. Except as is not having or would
not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, either Parent or a
Subsidiary of Parent owns, or is licensed or otherwise possesses
legally enforceable rights to use, all material Intellectual
Property. Except as is not having or would not reasonably be
expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, (a) there are no pending or, to
the knowledge of Parent, threatened claims by any person
alleging infringement by Parent or any of its Subsidiaries for
their use of the Intellectual Property of Parent or any of its
Subsidiaries, (b) to the knowledge of Parent, the conduct
of the business of Parent and its Subsidiaries does not infringe
any intellectual property rights of any person, (c) neither
Parent nor any of its Subsidiaries has any claim pending of a
violation or infringement by others of its rights to or in
connection with the Intellectual Property of Parent or any of
its Subsidiaries and (d) to the knowledge of Parent, no
person is infringing any Intellectual Property of Parent or any
of its Subsidiaries.
Section 4.16 Real
Property.
(a) With respect to the real property owned by Parent or
any Subsidiary (such property collectively, the “Parent
Owned Real Property”), except as is not having or would
not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, (i) either
Parent or a Subsidiary of Parent has good and valid title to
such Parent Owned Real Property, free and clear of all Liens
other than any such Lien (A) for Taxes or governmental
assessments, charges or claims of payment not yet due, being
contested in good faith or for which adequate accruals or
reserves have been established, (B) which is a
carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s, or other similar lien
arising in the ordinary course of business, (C) which is
disclosed on the most recent consolidated balance sheet of
Parent or notes thereto included in the Parent SEC Documents
filed prior to the date hereof or securing liabilities reflected
on such balance sheet, (D) which was incurred in the
ordinary course of business since the date of such recent
consolidated balance sheet of Parent or (E) which would not
reasonably be expected to materially impair the continued use of
a Parent Owned Real Property or a Parent Leased Real Property as
currently operated (each of the foregoing, a “Parent
Permitted Lien”) (and conditions, covenants,
encroachments, easements, restrictions and other encumbrances
that do not materially adversely affect the use of the Parent
Owned Real Property by Parent for residential home building),
(ii) there are no reversion rights, outstanding options or
rights of first refusal in favor of any other party to purchase,
lease, occupy or otherwise utilize such Parent Owned Real
Property or any portion thereof or interest therein that would
reasonably be expected to materially adversely affect the use by
Parent for residential home building of the Parent Owned Real
Property affected thereby and (iii) neither Parent nor its
Subsidiaries have collaterally assigned or granted a security
interest in the Parent Owned Real Property except for Parent
Permitted Liens. Neither Parent nor any of its Subsidiaries has
received notice of any pending, and to the knowledge of Parent
there is no pending or threatened condemnation or eminent domain
proceeding with respect to any Parent Owned Real Property,
except proceedings which are not having or would not reasonably
be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(b) Except as is not having or would not reasonably be
expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, (i) each material lease, sublease,
license, easement and other agreement under which Parent or any
of its Subsidiaries uses or occupies or has the right to use or
occupy any material real property at which the material
operations of Parent and its Subsidiaries are conducted (the
“Parent Leased Real Property”), is valid,
binding and in full force and effect and (ii) no uncured
default of a material nature on the part of Parent or, if
applicable, its Subsidiary or, to the knowledge of Parent, the
landlord or other parties to such lease or other agreement
thereunder exists with respect to any Parent Leased Real
Property. Except as is not having or would not reasonably be
expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, Parent and each of its Subsidiaries 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 Real Property, free and clear of all
Liens, except for Parent Permitted Liens (and conditions,
covenants, encroachments, easements, restrictions and other
encumbrances that do not adversely affect the use of the Parent
Leased Real Property by Parent for residential home building).
Except as is not having or would not
A-23
reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, neither Parent nor
any of its Subsidiaries has (x) received notice of any
pending, and, to the knowledge of Parent, there is no
threatened, condemnation proceeding with respect to any Parent
Leased Real Property, (y) collaterally assigned or granted
a security interest in the Parent Leased Real Property except
for Parent Permitted Liens, or (z) received any written
notice of any default under lease or other agreement for a
Parent Leased Real Property and, to the knowledge of Parent, no
event has occurred and no condition exists that, with notice or
lapse of time, or both, would constitute a default by Parent or
any of its Subsidiaries, as applicable, under any such leases
and agreements.
(c) Except as is not having or would not reasonably be
expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, no judgment, injunction, order, decree,
statute, ordinance, rule, regulation, moratorium, or other
action by or before a Governmental Entity exists or is pending
or threatened that restricts the development or sale of Parent
Owned Real Property currently under development or all or a
portion of which is being held for sale by Parent or any of its
Subsidiaries.
(d) No developer-related charges or assessments imposed by
any Governmental Entity (or any other person) for public
improvements (or otherwise) against any Parent Owned Real
Property held for development, are unpaid (other than those
reflected on the most recent financial statements of Parent, and
those incurred since the date of such financial statements of
Parent to the extent in the ordinary course of Parent’s
business and consistent with past practices), except for such
charges and assessments as, in the aggregate, are not having or
would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
Section 4.17 Required
Vote of Parent Stockholders; Merger Sub
Approval.
(a) The affirmative vote of (i) holders of a majority
of the outstanding shares of Parent Common Stock entitled to
vote at the Parent Stockholders’ Meeting is the only vote
of the holders of any class or series of Parent capital stock
necessary to approve the Charter Amendment, (ii) holders of
a majority of the Parent Common Stock present or represented and
entitled to vote on the Stock Issuance at the Parent
Stockholders’ Meeting is the only vote of the holders of
any class or series of Parent capital stock necessary to approve
the Stock Issuance (collectively, the “Parent
Stockholder Approvals”) and (iii) Parent, as the
sole stockholder of Merger Sub, is the only vote of the holders
of any class or series of Merger Sub’s capital stock
necessary to approve the Merger, and no other vote of the
holders of any class or series of Parent or Merger Sub capital
stock is necessary to approve the Charter Amendment or the Stock
Issuance or to approve this Agreement or the transactions
contemplated hereby, including the Merger.
(b) The Board of Directors of Merger Sub, by written
consent duly adopted prior to the date hereof,
(i) determined that this Agreement and the Merger are
advisable and in the best interests of Merger Sub and its
stockholder, (ii) duly approved this Agreement, the Merger
and the other transactions contemplated hereby, which approval
has not been rescinded or modified and (iii) submitted this
Agreement for approval by Parent, as the sole stockholder of
Merger Sub and recommended Parent approve the same. Parent, as
the sole stockholder of Merger Sub, has duly approved this
Agreement and the Merger.
Section 4.18 Opinion
of Financial Advisor. The Parent Board has
received the opinion of Citigroup Global Markets Inc. dated the
date of this Agreement, substantially to the effect that, as of
such date, the Exchange Ratio is fair to Parent from a financial
point of view.
(a) Section 4.19(a) of the Parent Disclosure Schedule
contains a complete list as of the date hereof of the following
types of Contracts, whether written or oral, that are intended
by Parent or any of its Subsidiaries, as applicable, to be
legally binding, and to which Parent or any of its Subsidiaries
is a party (such Contracts, being the “Parent Material
Contracts”):
(i) each “material contract” (as such term is
defined in Item 610(b)(10) of
Regulation S-K
of the SEC) with respect to Parent and its Subsidiaries (other
than compensatory contracts with, or which include as
participants, any current or former director or officer of
Parent or any of its Subsidiaries);
A-24
(ii) all contracts and agreements evidencing indebtedness
for borrowed money in excess of $50 million in principal
amount; and
(iii) all non-competition agreements or any other
agreements or arrangements that materially limit or otherwise
materially restrict Parent and its Subsidiaries from conducting
a material portion of the business of Parent and its
Subsidiaries, taken as a whole.
(b) Neither Parent nor any Subsidiary of Parent is in
breach of or default under the terms of any Parent Material
Contract where such breach or default is having or would
reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. To the knowledge of
Parent, no other party to any Parent Material Contract is in
breach of or default under the terms of any Parent Material
Contract where such breach or default is having or would
reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. Except as is not
having or would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect, each
Parent Material Contract is a legal, valid and binding
obligation of Parent or the Subsidiary of Parent which is party
thereto and, to the knowledge of Parent, of each other party
thereto, and is in full force and effect, except that
(i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar Laws, now or hereafter in effect, relating to
creditors’ rights generally and (ii) equitable
remedies of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor
may be brought.
(c) Parent has made available to the Company correct and
complete copies in all material respects of all Parent Material
Contracts, including any material amendments or material waivers
thereto.
Section 4.20 Finders
or Brokers. Except for Citigroup Global
Markets Inc., Banc of America Securities LLC and
J.P. Morgan Securities Inc. neither Parent nor any of its
Subsidiaries has employed any investment banker, broker or
finder in connection with the transactions contemplated by this
Agreement who might be entitled to any fee or any commission in
connection with or upon consummation of the Merger.
Section 4.21 Lack
of Ownership of Company Common Stock. Neither
Parent nor any of its Subsidiaries beneficially owns directly or
indirectly, 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
Subsidiary of the Company, and neither Parent nor any of its
Subsidiaries has any rights to acquire any Shares except
pursuant to this Agreement. There are no voting trusts or other
agreements or understandings to which Parent or any of its
Subsidiaries is a party with respect to the voting of the
capital stock or other equity interest of the Company or any of
its Subsidiaries.
Section 4.22 Insurance. Section 4.22
of the Parent Disclosure Schedule sets forth a true and complete
list of the material insurance policies covering Parent and its
Subsidiaries as of the date hereof. Except as is not having or
would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, (a) each
insurance policy under which Parent or any of its Subsidiaries
is an insured or otherwise the principal beneficiary of coverage
(collectively, the “Parent Insurance Policies”)
is in full force and effect, all premiums due thereon have been
paid in full and Parent and its Subsidiaries are in compliance
with the terms and conditions of such Parent Insurance Policy,
(b) neither Parent nor any of its Subsidiaries is in breach
or default under any Parent Insurance Policy and (c) no
event has occurred which, with notice or lapse of time, would
constitute such breach or default, or permit termination or
modification, under the policy.
Section 4.23 Tax
Treatment. Neither Parent nor any of its
Subsidiaries has taken or agreed to take any action or knows of
any fact that would prevent or impede, or would be reasonably
likely to prevent or impede, the Merger from qualifying as a
“reorganization” within the meaning of
Section 368(a) of the Code.
Section 4.24 Rights
Plan. Parent has taken all action necessary
(a) to render the Section 382 Rights Agreement, dated
March 5, 2009 (“Parent Rights Agreement”),
between Parent and Computershare Trust Company, N.A., as
Rights Agent, inapplicable to the Merger, this Agreement, the
Voting Agreements executed by stockholders of Parent and the
transactions contemplated hereby or thereby, including the
Merger, and (b) to ensure that (i) neither the Company
nor any Company stockholder will become an “Acquiring
Person” (as such term is defined in the Parent Rights
Agreement) by reason of the approval, execution, announcement or
A-25
consummation of this Agreement or the Voting Agreements executed
by stockholders of Parent or the transactions contemplated
hereby or thereby, including the Merger, and (ii) neither a
“Share Acquisition Date” nor a “Distribution
Date” (each as defined in the Parent Rights Agreement)
shall occur, in each case, by reason of the approval, execution,
announcement or consummation of this Agreement or the Voting
Agreements executed by stockholders of Parent or the
transactions contemplated hereby or thereby, including the
Merger.
Section 4.25 No
Additional Representations. Parent and Merger
Sub acknowledge that the Company makes no representations or
warranties as to any matter whatsoever except as expressly set
forth in this Agreement or in any certificate delivered by the
Company to Parent or Merger Sub in accordance with the terms
hereof, and specifically (but without limiting the generality of
the foregoing) that the Company makes no representations or
warranties with respect to (a) any projections, estimates
or budgets delivered or made available to Parent or Merger Sub
(or any of their respective affiliates or Representatives) of
future revenues, results of operations (or any component
thereof), cash flows or financial condition (or any component
thereof) of the Company and its Subsidiaries or (b) the
future business and operations of the Company and its
Subsidiaries.
(a) From and after the date hereof and prior to the
Effective Time or the date, if any, on which this Agreement is
earlier terminated pursuant to Section 7.1 (the
“Termination Date”), and except (i) as may
be required by applicable Law, (ii) as may be consented to
in writing by Parent (which consent shall not be unreasonably
withheld, delayed or conditioned), (iii) as may be
contemplated or required by this Agreement or (iv) as set
forth in Section 5.1 of the Company Disclosure Schedule,
the Company covenants and agrees with Parent that the business
of the Company and its Subsidiaries shall be conducted in, and
such entities shall not take any action except in, the ordinary
course of business, and the Company and its Subsidiaries shall
use their reasonable best efforts to (A) keep available the
services of current officers, key employees and consultants of
the Company and each of its Subsidiaries, (B) preserve the
Company’s business organization intact and maintain its
existing relations and goodwill with customers, suppliers,
distributors, creditors and lessors, (C) maintain insurance
policies or replacement or revised policies in such amounts and
against such risks and losses of the Company and its
Subsidiaries as are currently in effect and (D) comply in
all material respects with all applicable Laws; provided,
however, that no action by the Company or its
Subsidiaries with respect to matters specifically addressed by
any provision of Section 5.1(b) shall be deemed a breach of
this sentence unless such action would constitute a breach of
such other provision.
(b) The Company agrees with Parent, on behalf of itself and
its Subsidiaries, that between the date hereof and prior to the
earlier of the Effective Time and the Termination Date, without
the prior written consent of Parent (which consent shall not be
unreasonably withheld, delayed or conditioned), the Company:
(i) shall not, and shall not permit any of its Subsidiaries
that is not directly or indirectly wholly owned by the Company
to, authorize or pay any dividends on or make any distribution
with respect to its outstanding shares of capital stock (whether
in cash, assets, stock or other securities of the Company or its
Subsidiaries), except dividends and distributions paid or made
on a pro rata basis by Subsidiaries;
(ii) except for transactions between the Company and its
wholly owned Subsidiaries or among the Company’s wholly
owned Subsidiaries, the Company shall not, and shall not permit
any of its Subsidiaries, to redeem, repurchase, defease or
otherwise cancel any indebtedness for borrowed money of the
Company or any Subsidiary, other than (x) at stated
maturity, (y) any required amortization payments and
mandatory prepayments (including mandatory prepayments arising
from any change of control put rights to which holders of such
indebtedness for borrowed money may be entitled), and
(z) indebtedness for borrowed money either (A) not in
excess of $1 million or (B) arising under the
agreements disclosed
A-26
in Section 5.1(b)(ii) of the Company Disclosure Schedule,
in each case in accordance with the terms of the instrument
governing such indebtedness as in effect on the date hereof;
(iii) shall not, and shall not permit any of its
Subsidiaries to, make any acquisition of any other person or
business or make any capital expenditures, loans, advances or
capital contributions to, or investments in, any other person
with a value in excess of $15 million in the aggregate,
except (A) in the ordinary course of business, including
entering into option contracts to acquire (and purchasing
pursuant to the terms of such contracts) (1) finished lots
in an amount not to exceed $8 million individually or
$150 million in the aggregate or (2) raw land in an
amount not to exceed $20 million in the aggregate,
(B) as required by or pursuant to existing contracts,
including existing contracts for the acquisition of finished
lots or realty, or (C) as made in connection with any
transaction solely between the Company and a wholly owned
Subsidiary of the Company or between wholly owned Subsidiaries
of the Company;
(iv) shall not, and shall not permit any of its
Subsidiaries to, (A) split, combine, reclassify, subdivide
or amend the terms of any of its capital stock or issue or
authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock, except for any such transaction by
a wholly owned Subsidiary of the Company which remains a wholly
owned Subsidiary after consummation of such transaction or
(B) enter into any agreement with respect to voting of any
of its capital stock or any securities convertible or
exchangeable for such shares;
(v) except as required by existing written agreements or
Company Benefit Plans, as otherwise required by applicable Law,
or as permitted under Section 5.6(b)(v) and
Section 5.6(b)(vi), shall not, and shall not permit any of
its Subsidiaries to, (A) increase the compensation or other
benefits payable or provided to the Company’s directors,
executive officers or other employees, (B) enter into any
employment, change of control, severance or retention agreement
with any employee of the Company (except (1) for agreements
entered into with any newly-hired employees or replacements or
as a result of promotions, (2) for employment agreements
terminable on less than thirty days’ notice without
penalty, and (3) for severance agreements entered into with
employees who are not executive officers, in the ordinary course
of business in connection with terminations of employment) or
(C) establish, adopt, enter into or amend any plan, policy,
program or arrangement for the benefit of any current or former
directors, officers or employees or any of their beneficiaries,
except (x) as permitted pursuant to clause (B) above,
or (y) for entering into or amending collective bargaining
agreements in the ordinary course of business;
(vi) shall not, and shall not permit any of its
Subsidiaries to, materially change financial accounting policies
or procedures or any of its methods of reporting income,
deductions or other material items for financial accounting
purposes, except as required by GAAP, SEC rule or policy or
applicable Law;
(vii) except as required by a change in Law, make, change
or revoke any material Tax election, file any material amended
Tax Return, or settle or compromise any material Tax liability
or refund, in each case, if such action could have an adverse
effect that, individually or in the aggregate, is material to
the Company and its Subsidiaries;
(viii) shall not, and shall not permit any of its
Subsidiaries to, adopt or propose to adopt any material
amendments to its articles of incorporation or by-laws or
similar applicable charter documents;
(ix) except for transactions among the Company and its
wholly owned Subsidiaries or among the Company’s wholly
owned Subsidiaries, shall not, and shall not permit any of its
Subsidiaries to, issue, sell, pledge, dispose of, grant,
transfer or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer or encumbrance of, any shares of
its capital stock or other ownership interest in the Company or
any Subsidiaries or any securities convertible into or
exchangeable for any such shares or ownership interest, or any
rights, warrants or options to acquire or with respect to any
such shares of capital stock, ownership interest or convertible
or exchangeable securities or take any action to cause to be
exercisable any otherwise unexercisable option under any
existing stock option plan (except as otherwise provided by the
terms of this Agreement or the terms of any unexercisable or
unexercised options or warrants outstanding on the date hereof),
other than (A) issuances of shares of Company Common Stock
in respect of any exercise of Company Stock Options or the
vesting or settlement of
A-27
Restricted Stock Units outstanding on the date hereof or as may
be granted after the date hereof as permitted under this
Section 5.1(b), (B) the sale of shares of Company
Common Stock pursuant to the exercise of options to purchase
Company Common Stock if necessary to effectuate an optionee
direction upon exercise or for withholding of Taxes and
(C) the grant of equity compensation awards in the ordinary
course of business in accordance with the Company’s
customary long-term compensation award practices in accordance
with Section 5.6(b)(vi);
(x) except for transactions among the Company and its
wholly owned Subsidiaries or among the Company’s wholly
owned Subsidiaries, shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, purchase, redeem or
otherwise acquire any shares of the capital stock of any of
them, or any securities convertible into or exchangeable for any
such shares or ownership interest, or any rights, warrants or
options to acquire or with respect to any such shares, ownership
interest or convertible or exchangeable securities;
(xi) shall not, and shall not permit any of its
Subsidiaries to, incur, assume, guarantee, prepay or otherwise
become liable for any indebtedness for borrowed money (directly,
contingently or otherwise), except for (A) any indebtedness
for borrowed money among the Company and its wholly owned
Subsidiaries or among the Company’s wholly owned
Subsidiaries, (B) indebtedness for borrowed money incurred
to replace, renew, extend, refinance or refund any existing
indebtedness for borrowed money, (C) guarantees by the
Company of indebtedness for borrowed money of Subsidiaries of
the Company or guarantees by the Company’s Subsidiaries of
indebtedness for borrowed money of the Company or any Subsidiary
of the Company, which indebtedness is incurred in compliance
with this Section 5.1(b) and (D) indebtedness incurred
in the ordinary course of business pursuant to funding
facilities for the Company’s financial services
Subsidiaries, provided that nothing contained herein
shall prohibit the Company and its Subsidiaries from making
guarantees or obtaining letters of credit or surety bonds for
the benefit of commercial counterparties in the ordinary course
of business;
(xii) shall not, and shall not permit any of its
Subsidiaries to, sell, pledge, lease, license, transfer,
guarantee, exchange or swap, mortgage (including
securitizations), or otherwise dispose of any material portion
of its material properties or material assets, including the
capital stock of Subsidiaries (it being understood that the
foregoing shall not prohibit the sales of land or homes in the
ordinary course of business), except (A) for transactions
among the Company and its wholly owned Subsidiaries or among the
Company’s wholly owned Subsidiaries, (B) pursuant to
existing agreements in effect prior to the execution of this
Agreement and that are set forth in Section 5.1(b)(xii) of
the Company Disclosure Schedule or (C) as may be required
by applicable Law or any Governmental Entity in order to permit
or facilitate the consummation of the transactions contemplated
hereby;
(xiii) shall not, and shall not permit any of its
Subsidiaries to, (A) adopt a plan of complete or partial
liquidation or resolutions providing for a complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any
of its Subsidiaries (other than the Merger and consolidations,
mergers or reorganizations among the Company and its wholly
owned Subsidiaries or among the Company’s wholly owned
Subsidiaries that would not result in material adverse tax
consequences or material loss of tax benefits or loss of any
material asset (including Intellectual Property)) or
(B) vote in support of, consent to or approve a plan of
complete or partial liquidation or resolutions providing for a
complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization of any joint venture or similar entity to which
the Company or any of its Subsidiaries is a party that is not a
Subsidiary of the Company (other than consolidations, mergers or
reorganizations that would not result in material adverse tax
consequences or material loss of tax benefits or loss of any
material asset (including Intellectual Property));
(xiv) shall not, and shall not permit any of its
Subsidiaries to, enter into any Contract that would materially
restrict, after the Effective Time, Parent and its Subsidiaries
(including the Surviving Corporation and its Subsidiaries) with
respect to engaging or competing in any line of business or in
any geographic area;
A-28
(xv) shall not, and shall not permit any of its
Subsidiaries to, settle or compromise any litigation, or
release, dismiss or otherwise dispose of any claim, liability,
obligation or arbitration, other than settlements or compromises
of litigation or releases, dismissals or dispositions of claims,
liabilities, obligations or arbitration that involve the payment
of monetary damages not in excess of $15 million
individually or $75 million in the aggregate (but excluding
from such aggregate total any individual claim involving the
payment by the Company of an amount less than $1 million)
by the Company and do not involve any material injunctive or
other non-monetary relief or impose material restrictions on the
business or operations of the Company;
(xvi) shall not, and shall not permit any of its
Subsidiaries to, enter into interest rate swaps and other
similar hedging arrangements other than for purposes of
offsetting a bona fide exposure (including counterparty risk);
(xvii) shall not, and shall not permit any of its
Subsidiaries to, issue or forgive any loans to directors,
officers, employees, contractors or any of their respective
affiliates, except for any such issuances that would not violate
the Sarbanes-Oxley Act; and
(xviii) shall not, and shall not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
Section 5.2 Conduct
of Business by Parent.
(a) From and after the date hereof and prior to the earlier
of the Effective Time and the Termination Date, and except
(i) as may be required by applicable Law, (ii) as may
be consented to in writing by the Company (which consent shall
not be unreasonably withheld, delayed or conditioned),
(iii) as may be contemplated or required by this Agreement
or (iv) as set forth in Section 5.2 of the Parent
Disclosure Schedule, Parent covenants and agrees with the
Company that the business of Parent and its Subsidiaries shall
be conducted in, and such entities shall not take any action
except in, the ordinary course of business, and Parent and its
Subsidiaries shall use their reasonable best efforts to
(A) keep available the services of current officers, key
employees and consultants of Parent and each of its
Subsidiaries, (B) preserve Parent’s business
organization intact and maintain its existing relations and
goodwill with customers, suppliers, distributors, creditors and
lessors, (C) maintain insurance policies or replacement or
revised policies in such amounts and against such risks and
losses of Parent and its Subsidiaries as are currently in effect
and (D) comply in all material respects with all applicable
Laws; provided, however, that no action by Parent
or its Subsidiaries with respect to matters specifically
addressed by any provision of Section 5.2(b) shall be
deemed a breach of this sentence unless such action would
constitute a breach of such other provision.
(b) Parent agrees with the Company, on behalf of itself and
its Subsidiaries, that between the date hereof and prior to the
earlier of the Effective Time and the Termination Date, without
the prior written consent of the Company (which consent shall
not be unreasonably withheld, delayed or conditioned), Parent:
(i) except in the ordinary course of business, shall not,
and shall not permit any of its Subsidiaries that is not
directly or indirectly wholly owned by Parent to, authorize or
pay any dividends on or make any distribution with respect to
its outstanding shares of capital stock (whether in cash,
assets, stock or other securities of Parent or its
Subsidiaries), except dividends and distributions paid or made
on a pro rata basis by Subsidiaries;
(ii) shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merger or
consolidation, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership,
association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets, other than
acquisitions that could not reasonably be expected to make it
materially more difficult to obtain any authorization, consent
or approval required in connection with the Merger and that
could not reasonably be expected to prevent or materially delay
or impede the consummation of the transactions contemplated by
this Agreement, including the Merger;
A-29
(iii) shall not, and shall not permit any of its
Subsidiaries to, (A) split, combine, reclassify, subdivide
or amend the terms of any of its capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock, except for any such transaction by a wholly owned
Subsidiary of Parent which remains a wholly owned Subsidiary
after consummation of such transaction or (B) enter into
any agreement with respect to voting of any of its capital stock
or any securities convertible or exchangeable for such shares;
(iv) except for (A) the adoption of an amendment to
Parent’s Articles of Incorporation as contemplated in
Parent’s proxy statement for its 2009 Annual Meeting of
Shareholders and (B) an amendment to Parent’s
certificate of designations of Parent’s Series A
Junior Participating Preferred Shares to increase the number of
shares, shall not, and shall not permit any of its Subsidiaries
to, adopt or propose to adopt any material amendments to its
articles of incorporation or by-laws or similar applicable
charter documents;
(v) except for transactions among Parent and its wholly
owned Subsidiaries or among Parent’s wholly owned
Subsidiaries, shall not, and shall not permit any of its
Subsidiaries to, issue, sell, pledge, dispose of, grant,
transfer or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer or encumbrance of, any shares of
its capital stock or other ownership interest in Parent or any
Subsidiaries or any securities convertible into or exchangeable
for any such shares or ownership interest, or any rights,
warrants or options to acquire or with respect to any such
shares of capital stock, ownership interest or convertible or
exchangeable securities or take any action to cause to be
exercisable any otherwise unexercisable option under any
existing stock option plan (except as otherwise provided by the
terms of this Agreement or the terms of any unexercisable or
unexercised options or warrants outstanding on the date hereof),
other than (A) issuances of shares of Parent Common Stock
in respect of any exercise of Parent Stock Options or the
vesting or settlement of Parent RSUs outstanding on the date
hereof or as may be granted after the date hereof as permitted
under this Section 5.2(b), (B) the sale of shares of
Parent Common Stock pursuant to the exercise of options to
purchase Parent Common Stock if necessary to effectuate an
optionee direction upon exercise or for withholding of Taxes and
(C) the grant of equity compensation awards in the ordinary
course of business in accordance with Parent’s customary
schedule;
(vi) shall not, and shall not permit any of its
Subsidiaries to, (A) adopt a plan of complete or partial
liquidation or resolutions providing for a complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of Parent or any of its
Subsidiaries (other than the Merger and consolidations, mergers
or reorganizations among Parent and its wholly owned
Subsidiaries or among Parent’s wholly owned Subsidiaries
that would not result in material adverse tax consequences or
material loss of tax benefits or loss of any material asset
(including Intellectual Property)) or (B) vote in support
of, consent to or approve a plan of complete or partial
liquidation or resolutions providing for a complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of any joint venture or
similar entity to which Parent or any of its Subsidiaries is a
party that is not a Subsidiary of Parent (other than
consolidations, mergers or reorganizations that would not result
in material adverse tax consequences or material loss of tax
benefits or loss of any material asset (including Intellectual
Property)); and
(vii) shall not, and shall not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
Section 5.3 Investigation.
(a) Each of the Company and Parent shall afford the other
party and to the officers, employees, accountants, consultants,
legal counsel, financial advisors and agents and other
representatives (collectively,
“Representatives”) of such other party
reasonable access during normal business hours, throughout the
period prior to the earlier of the Effective Time and the
Termination Date, to its and its Subsidiaries’ personnel,
properties, contracts, commitments, books and records and any
report, schedule or other document filed or received by it
pursuant to the requirements of applicable Laws for purposes of
integration planning. Notwithstanding the foregoing, neither the
Company nor Parent shall be required to afford such access if it
would (i) unreasonably disrupt the operations of such party
or any of its Subsidiaries, (ii) cause a violation of
A-30
any agreement to which such party or any of its Subsidiaries is
a party (provided that Parent or the Company, as the case may
be, shall use reasonable best efforts to implement procedures to
provide the access or information contemplated by this
Section 5.3 without violating such agreement), or
(iii) cause a risk of a loss of privilege to such party or
any of its Subsidiaries or would constitute a violation of any
applicable Law.
(b) The parties hereby agree that all information provided
to them or their respective Representatives in connection with
this Agreement and the consummation of the transactions
contemplated hereby shall be deemed to be Evaluation Material,
as such term is used in, and shall be treated in accordance
with, the Confidentiality Agreement, dated as of
February 17, 2009, between the Company and Parent (the
“Confidentiality Agreement”).
Section 5.4 Non-Solicitation.
(a) Subject to
Sections 5.4(b)-(k),
the Company agrees that neither it nor any of its Subsidiaries
shall, and that it shall direct its and their respective
Representatives not to, and shall not publicly announce any
intention to, directly or indirectly, (i) solicit, initiate
or knowingly encourage any inquiries with respect to, or the
making or submission of, any Alternative Proposal,
(ii) participate in any negotiations regarding an
Alternative Proposal with, or furnish any nonpublic information
regarding an Alternative Proposal to any person that has made
or, to the Company’s knowledge, is considering making an
Alternative Proposal, (iii) engage in discussions regarding
an Alternative Proposal with any person, except to notify such
person as to the existence of the provisions of this
Section 5.4, (iv) submit to a vote of its
stockholders, approve, endorse or recommend any Alternative
Proposal or (v) enter into any letter of intent or
agreement in principle or any agreement providing for any
Alternative Proposal (except for confidentiality agreements
permitted under Section 5.4(c)).
(b) The Company promptly (and in any event within
24 hours) shall advise Parent orally and in writing of
(i) receipt of any Alternative Proposal or indication or
inquiry with respect to or that would reasonably be expected to
lead to any Alternative Proposal and (ii) any request for
non-public information relating to the Company or its
Subsidiaries, other than requests for information not reasonably
expected to be related to an Alternative Proposal, including in
each case the identity of the person making any such Alternative
Proposal or indication or inquiry and the material terms of any
such Alternative Proposal or indication or inquiry (including
copies of any document or correspondence evidencing such
Alternative Proposal or inquiry). The Company shall keep Parent
reasonably informed on a reasonably current basis of any
material change to the financial or other material terms of any
such Alternative Proposal or indication or inquiry.
(c) Notwithstanding the limitations set forth in
Section 5.4(a), if, after the date hereof and prior to the
receipt of the Company Stockholder Approval, the Company
receives an unsolicited, written Alternative Proposal that the
Company Board determines in good faith either constitutes a
Superior Proposal or could reasonably be expected to lead to a
Superior Proposal, then the Company may, subject to compliance
with this Section 5.4 and if, and only if, prior to taking
any such actions the Company receives from the third party
making such Alternative Proposal an executed confidentiality
agreement on terms with respect to confidentiality no less
favorable to the Company than the Confidentiality Agreement:
(i) furnish nonpublic information to the third party making
such Alternative Proposal and (ii) engage in discussions or
negotiations with such third party. The Company agrees that it
and its Subsidiaries shall not enter into any confidentiality
agreement with any person subsequent to the date hereof that
prohibits the Company from providing information to Parent that
is required to be provided under this Section 5.4.
(d) Except as otherwise provided in Section 5.4(e) or
Section 5.4(g), the Company Board may not withdraw or, in a
manner adverse to Parent or Merger Sub, modify or qualify the
Company Recommendation (any such actions being a
“Company Change of Recommendation”).
(e) Notwithstanding anything to the contrary in this
Agreement, prior to the receipt of the Company Stockholder
Approval, in response to the receipt of a Superior Proposal that
has not been withdrawn and provided the Company and its
Subsidiaries have complied in all material respects with this
Section 5.4, the Company Board may make a Company Change of
Recommendation; provided, that the Company has complied
in all material respects with the following sentence of this
Section 5.4(e) and, after so complying,
A-31
such proposal continues to constitute a Superior Proposal and
the Company Board determines in good faith, after consultation
with the Company’s outside legal and financial advisors,
that the failure to make a Company Change of Recommendation
would be inconsistent with the directors’ fiduciary
obligations to the Company’s stockholders under applicable
Law. The Company Board shall not make a Company Change of
Recommendation unless the Company has, three business days in
advance (the “Notice Period”), provided a
written notice to Parent (a “Notice of Superior
Proposal”) advising Parent that the Company Board has
received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal, identifying the person
making such Superior Proposal and providing copies of any
agreements intended to effect such Superior Proposal;
provided, however, that if during the Notice
Period any revisions are made to the Superior Proposal and such
revisions are material (it being understood and agreed that any
change to consideration with respect to such proposal is
material), the Company shall provide written notice of such
revisions to Parent and the Notice Period shall be extended by
one business day.
(f) Nothing contained in this Agreement shall prohibit the
Company or the Company Board from (i) taking and disclosing
to its stockholders a position contemplated by
Rules 14d-9
and 14e-2(a)
promulgated under the Exchange Act or (ii) making any
legally required disclosure to the Company’s stockholders
or taking any position with respect to the Merger if, in the
good faith judgment of the Company Board, after consultation
with the Company’s outside legal advisors, failure to so
take and/or
disclose would be inconsistent with the directors’
fiduciary obligations to the Company’s stockholders under
applicable Law or obligations under the rules and regulations of
the NYSE; provided, however, that any action that
would constitute a Company Change of Recommendation may only be
made in compliance with either Section 5.4(e) or
Section 5.4(g).
(g) Nothing contained in this Agreement shall prohibit the
Company or the Company Board from, at any time prior to the
receipt of the Company Stockholder Approval, making a Company
Change of Recommendation if the Company Board is required to do
so under applicable Law; provided, that the Company Board
shall not make a Company Change of Recommendation pursuant to
this Section 5.4(g) unless the Company has three business
days in advance provided a written notice to Parent advising
Parent of its intent to make a Company Change of Recommendation
as required under applicable Law.
(h) As used in this Agreement, “Alternative
Proposal” shall mean any bona fide inquiry, proposal or
offer made by any person or group of persons prior to the
receipt of the Company Stockholder Approval (other than a
proposal or offer by Parent or any of its Subsidiaries) for
(i) a merger, reorganization, share exchange,
consolidation, business combination, recapitalization,
dissolution, liquidation or similar transaction involving the
Company, (ii) a tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 20%
or more of the outstanding shares of Company Common Stock,
(iii) the acquisition by any person or group of persons of
20% or more of the assets of the Company and its Subsidiaries,
taken as a whole or (iv) the direct or indirect acquisition
by any person or group of persons of 20% or more of the
outstanding shares of Company Common Stock.
(i) As used in this Agreement, “Superior
Proposal” shall mean an Alternative Proposal
(substituting 50% for the 20% threshold set forth in the
definition of “Alternative Proposal”) made by any
person or group of persons on terms that the Company Board
determines in good faith, after consultation with the
Company’s financial and legal advisors, is more favorable
to the stockholders of the Company than the transactions
contemplated by this Agreement (taking into account such factors
as the Company Board in good faith deems relevant).
(j) The Company agrees that, as of the date hereof, it and
its Subsidiaries shall, and the Company shall direct its and its
Subsidiaries’ respective Representatives to, immediately
cease and cause to be terminated any activities, discussions or
negotiations with any persons with respect to any Alternative
Proposal which shall have occurred prior to the date hereof. The
Company also agrees that it will promptly request each person
that has heretofore executed a confidentiality agreement in
connection with any Alternative Proposal to return or destroy
all confidential information heretofore furnished to such person
by or on behalf of it or any of its Subsidiaries.
A-32
(k) During the period from the date of this Agreement
through the Effective Time, the Company (i) shall not
terminate, amend, modify or waive any standstill provision of
any confidentiality, standstill or similar agreement between the
Company and any other person which relates to any transaction
that could constitute an Alternative Proposal and
(ii) agrees to use its reasonable best efforts to enforce
the provisions of any such agreements, including using its
reasonable best efforts to obtain injunctions to prevent any
threatened or actual breach of such agreements and to enforce
specifically the terms and provisions thereof in any court of
the United States or any state thereof having jurisdiction;
provided, that the Company shall not be required to take,
or be prohibited from taking, any action otherwise prohibited or
required by this Section 5.4(k), if the Company Board
determines in good faith, after consultation with the
Company’s outside legal advisors, such action or inaction
would be inconsistent with the directors’ fiduciary
obligations to the Company’s stockholders under applicable
Law or if such action or failure to act would otherwise be
permitted by this Section 5.4.
Section 5.5 Filings;
Other Actions.
(a) As promptly as practicable following the date of this
Agreement, the Company shall prepare and file with the SEC the
Joint Proxy Statement, and Parent shall prepare and file with
the SEC the
Form S-4
in which the Joint Proxy Statement will be included as a
prospectus. The Company and Parent shall provide the other with
the opportunity to review and comment on such documents prior to
their filing with the SEC. Each of Parent and the Company shall
use reasonable best efforts to have the
Form S-4
declared effective under the Securities Act as promptly as
reasonably practicable after such filing and to keep the
Form S-4
effective as long as necessary to consummate the Merger. Parent
will cause the Joint Proxy Statement to be mailed to
Parent’s stockholders, and the Company will cause the Joint
Proxy Statement to be mailed to the Company’s stockholders,
in each case as promptly as reasonably practicable after the
Form S-4
is declared effective under the Securities Act. Parent shall
also take any action required to be taken under any applicable
state securities laws in connection with the issuance and
reservation of shares of Parent Common Stock in the Merger and
the conversion of Company Stock Options into options to acquire
Parent Common Stock, the conversion of the Restricted Shares
into the right to receive Parent Common Stock as set forth in
Section 5.6(a)(ii) and the conversion of the Restricted
Stock Units into shares of Parent Common Stock as set forth in
Section 5.6(a)(ii), and the Company shall furnish all
information concerning the Company and the holders of Company
Common Stock as may be reasonably requested in connection with
any such action. No filing of, or amendment or supplement to,
the
Form S-4
or the Joint Proxy Statement will be made by Parent or the
Company, as applicable, without the other’s prior consent
(which shall not be unreasonably withheld, delayed or
conditioned) and without providing the other the opportunity to
review and comment thereon. Parent or the Company, as
applicable, will advise the other promptly after it receives
oral or written notice of the time when the
Form S-4
has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the
qualification of the Parent Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or any
oral or written request by the SEC for amendment of the Joint
Proxy Statement or the
Form S-4
or comments thereon and responses thereto or requests by the SEC
for additional information, and will promptly provide the other
with copies of any written communication from the SEC or any
state securities commission. If at any time prior to the
Effective Time any information relating to Parent or the
Company, or any of their respective affiliates, officers or
directors, is discovered by Parent or the Company which should
be set forth in an amendment or supplement to any of the
Form S-4
or the Joint Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information
shall promptly notify the other party and an appropriate
amendment or supplement describing such information shall be
promptly filed with the SEC, after the other party has had a
reasonable opportunity to review and comment thereon, and, to
the extent required by applicable Law, disseminated to the
respective stockholders of Parent and the Company.
(b) Each of the Company and Parent shall, as promptly as
practicable after the
Form S-4
is declared effective under the Securities Act, take all action
necessary in accordance with applicable Laws and the Company
Organizational Documents, in the case of the Company, and the
Parent Organizational Documents, in the case of Parent, to duly
give notice of, convene and hold a meeting of its stockholders,
respectively, to be held as promptly as practicable to consider,
in the case of Parent, the Charter Amendment and the Stock
A-33
Issuance (the “Parent Stockholders’
Meeting”) and, in the case of the Company, the approval
of this Agreement and the approval of the transactions
contemplated hereby, including the Merger (the “Company
Stockholders’ Meeting”). The Company will, except
to the extent the Company has made a Company Change of
Recommendation in compliance with Section 5.4(e) or
Section 5.4(g), through the Company Board, recommend that
its stockholders approve this Agreement and will use reasonable
best efforts to solicit from its stockholders, proxies in favor
of the approval of this Agreement and to take all other action
necessary or advisable to secure the vote or consent of its
stockholders required by the rules of the NYSE or applicable
Laws to obtain such approvals. Parent will, through the Parent
Board, recommend that its stockholders approve the Charter
Amendment and the Stock Issuance, and will use reasonable best
efforts to solicit from its stockholders proxies in favor of the
Charter Amendment and the Stock Issuance and to take all other
action necessary or advisable to secure the vote or consent of
its stockholders required by the rules of the NYSE or applicable
Laws to obtain such approval.
(c) The Parent Board may not withdraw or, in a manner
adverse to the Company, modify or qualify the Parent
Recommendation (any such actions being a “Parent Change
of Recommendation”), except to the extent that the
Parent Board is required to do so under applicable Law;
provided, that the Parent Board shall not make a Parent
Change of Recommendation pursuant to this Section 5.5(c)
unless Parent has three business days in advance provided a
written notice to the Company advising the Company of its intent
to make a Company Change of Recommendation as required under
applicable Law.
(d) Each of the Company and Parent will use reasonable best
efforts to hold the Company Stockholders’ Meeting and the
Parent Stockholders’ Meeting, respectively, on the same
date as the other party and as soon as reasonably practicable
after the date of this Agreement.
Section 5.6 Stock
Options and Other Stock-Based Awards; Employee
Matters.
(a) Stock Options and Other Stock-Based
Awards.
(i) Each option to purchase shares of Company Common Stock
(each, a “Company Stock Option”) granted under
the employee and director stock plans of the Company (the
“Company Stock Plans”), whether vested or
unvested, that is outstanding immediately prior to the Effective
Time shall, as of the Effective Time, automatically and without
any action on the part of the holders thereof, be converted into
a vested option to purchase shares of Parent Common Stock (a
“Parent Stock Option”), on the same terms and
conditions (except as provided in this Section 5.6(a)(i))
as were applicable under such Company Stock Option immediately
prior to the Effective Time, to purchase that number of shares
of Parent Common Stock equal to the product of (A) the
total number of shares of Company Common Stock subject to such
Company Stock Option and (B) the Exchange Ratio, rounded
down to the nearest whole number of shares of Parent Common
Stock. The per-share exercise price for the shares of Parent
Common Stock issuable upon exercise of such Parent Stock Options
will be equal to the quotient determined by dividing
(x) the exercise price per share of Company Common Stock at
which the Company Stock Options were exercisable immediately
prior to the Effective Time by (y) the Exchange Ratio, and
rounding the resulting per-share exercise price up to the
nearest whole cent. Solely with respect to a Company Stock
Option granted with an exercise price of less than $40.00 per
share of Company Common Stock (which shall have been converted
into a Parent Stock Option pursuant to the terms of this
Section 5.6(a)(i)), the terms of such Parent Stock Option
(as so converted) shall provide that if the employment of the
applicable option holder is terminated under circumstances that
would entitle such option holder to severance benefits under a
severance plan, program or agreement in which such option holder
participates (or to which such option holder is a party) as of
immediately following the Effective Time (a “Severance
Event”) during the period beginning at the Effective
Time and ending on the second anniversary thereof, such Parent
Stock Option shall remain exercisable until the earlier of
(1) the later of (x) the third anniversary of the date
of such termination of employment and (y) the date on which
the Company Stock Option (which shall have been converted into a
Parent Stock Option pursuant to the terms hereof) would cease to
be exercisable in accordance with its terms and (2) the
expiration of the scheduled term of the Company Stock Option
(which shall have been converted into a Parent Stock Option
pursuant to the terms hereof). No later than the Effective Time,
the Company shall pass such resolutions as are necessary to
approve the terms of this Section 5.6(a)(i).
A-34
(ii) At the Effective Time, each award of restricted
Company Common Stock granted under a Company Stock Plan that is
outstanding immediately prior to the Effective Time (the
“Restricted Shares”) and each restricted or
deferred stock unit based on shares of Company Common Stock
granted under a Company Stock Plan that is outstanding
immediately prior to the Effective Time (the “Restricted
Stock Units”) shall, automatically and without any
action on the part of the holders thereof, vest and be
converted, on the same terms and conditions (except as provided
in this Section 5.6(a)(ii)) as were applicable under such
Restricted Shares and Restricted Stock Units, as applicable,
immediately prior to the Effective Time, into a number of shares
of Parent Common Stock or units with respect to Parent Common
Stock equal to the product of (A) the total number of
shares of Company Common Stock subject to such grant of
Restricted Shares or Restricted Stock Units, as applicable, and
(B) the Exchange Ratio.
(iii) Immediately prior to the Effective Time, each award
of performance units with respect to shares of Company Common
Stock under a Company Stock Plan that is outstanding immediately
prior to the Effective Time (collectively, the “Company
Performance Units”) shall, automatically and without
any action on the part of the holders thereof, vest and be
converted, into the right to receive, immediately prior to the
Effective Time, an amount in cash equal to the product of
(i) the total number of shares of Company Common Stock
subject to such Company Performance Unit, assuming the
achievement of all performance goals applicable to such Company
Performance Unit at target levels and (ii) the Fair Market
Value (as defined in the Amended and Restated Centex Corporation
2003 Equity Incentive Plan) of Company Common Stock on the day
immediately prior to the Effective Time.
(iv) At the Effective Time, Parent shall assume all the
obligations of the Company under the Company Stock Plans, each
outstanding Company Stock Option and the agreements evidencing
the grants thereof. As soon as practicable after the Effective
Time, Parent shall deliver to the holders of Company Stock
Options appropriate notices setting forth such holders’
rights pursuant to the respective Company Stock Plans, and the
agreements evidencing the grants of such Company Stock Options
shall continue in effect on the same terms and conditions
(subject to the adjustments required by this
Section 5.6(a)).
(v) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Parent Stock
Options resulting from the conversion of Company Stock Options
assumed by Parent in accordance with this Section 5.6(a).
At or prior to the Effective Time, Parent shall file a
registration statement on
Form S-8
(or any successor or other appropriate form) with respect to the
shares of Parent Common Stock subject to such Parent Stock
Options resulting from the conversion of Company Stock Options
and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Parent Stock
Options remain outstanding.
(b) Employee Matters.
(i) From and after the Effective Time, Parent shall honor
all Company Benefit Plans in accordance with their terms as in
effect immediately before the Effective Time. During the period
beginning at the Effective Time and ending on December 31,2009, Parent shall provide, or shall cause to be provided, to
each current and former Company Employee, other than such
employees covered by collective bargaining agreements,
compensation and benefits that are no less favorable, in the
aggregate, than the compensation and benefits provided to
Company Employees immediately before the Effective Time (except
that the Company’s Salary Continuation Plan shall be
disregarded for purposes of this sentence). Thereafter, it is
the intention of Parent that over the long term Company
Employees and similarly situated employees of Parent, taking
into account the job responsibilities, scope of duties,
performance and geographic location of such employees, will be
treated alike in terms of compensation and benefits. Without
limiting the generality of the foregoing, during the period
beginning on January 1, 2010 and ending on
December 31, 2010, any change made in the salary or annual
incentive bonus of any Company Employee, other than any such
employee covered by collective bargaining agreements, shall not
affect such Company Employee in a manner which is
disproportionate, taking into account the market pay, job
responsibilities, scope of duties, performance and geographic
location of such employees, to any change in the salary or
annual incentive bonus of any similarly situated employee of
Parent. From and after December 31, 2009, Parent shall
provide, or shall cause to be provided, to each current and
A-35
former Company Employee, other than such employees covered by
collective bargaining agreements, pension and welfare benefits
including medical, dental, pharmaceutical and vision benefits
that are no less favorable, in the aggregate, than the pension
and welfare benefits provided to similarly situated employees of
Parent.
(ii) For all purposes (including purposes of vesting,
eligibility to participate, accrual of benefits and level of
benefits) under the “employee benefit plans” (as such
term is defined in section 3(3) of ERISA, but without
regard to whether the applicable plan is subject to ERISA) and
programs of Parent and its Subsidiaries providing benefits to
any Company Employees after the Effective Time (the “New
Plans”), each Company Employee shall be credited for
his or her years of service with the Company and its
Subsidiaries and their respective predecessors before the
Effective Time, to the same extent as such Company Employee was
entitled, before the Effective Time, to credit for such service
under any similar Company employee benefit plan or program in
which such Company Employee participated or was eligible to
participate immediately prior to the Effective Time,
provided, however, that the foregoing shall not
apply with respect to benefit accrual under any defined benefit
pension plan or to the extent that its application would result
in a duplication of benefits and, provided,
further, that Company Employees’ years of service
with the Company and its Subsidiaries and their respective
predecessors before the Effective Time shall not be included for
purposes of determining whether a Company Employee satisfies the
requirements of the “Seventy Year Rule” (within the
meaning of Parent’s equity incentive plans and option award
agreements thereunder), unless the Company Employee terminates
employment after December 31, 2011. In addition, and
without limiting the generality of the foregoing, (A) each
Company Employee shall be immediately eligible to participate,
without any waiting time, in any and all New Plans to the extent
coverage under such New Plan is comparable to a Company Benefit
Plan in which such Company Employee participated immediately
before the Effective Time (such plans, collectively, the
“Old Plans”) and (B) for purposes of each
New Plan providing medical, dental, pharmaceutical
and/or
vision benefits to any Company Employee, Parent shall cause all
pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such employee and
his or her covered dependents, unless such conditions would not
have been waived under the comparable plans of the Company or
its Subsidiaries in which such employee participated immediately
prior to the Effective Time, and Parent shall cause any eligible
expenses incurred by such employee and his or her covered
dependents during the portion of the plan year of the Old Plan
ending on the date such employee’s participation in the
corresponding New Plan begins to be taken into account under
such New Plan for purposes of satisfying all deductible,
coinsurance and maximum
out-of-pocket
requirements applicable to such employee and his or her covered
dependents for the applicable plan year as if such amounts had
been paid in accordance with such New Plan.
(iii) Parent hereby acknowledges that a “change of
control” (or similar phrase) within the meaning of the
Company Stock Plans and the Company Benefit Plans, as
applicable, will occur at or prior to the Effective Time, as
applicable.
(iv) Notwithstanding anything in this Agreement to the
contrary, during the period beginning at the Effective Time and
ending on December 31, 2010, Parent shall provide
(A) severance benefits on an
individual-by-individual
basis that are no less favorable to the applicable Company
Employee than the severance benefits provided to such Company
Employee under the Company’s severance plans, programs and
agreements as of immediately prior to the Effective Time (except
that the Company’s Salary Continuation Plan shall be
disregarded for purposes of this Section 5.6(b)(iv)(A)) and
(B) paid time-off benefits on an
individual-by-individual
basis that are no less favorable to the applicable Company
Employee than the paid time-off programs provided to such
Company Employee under the Company’s paid time-off programs
as of immediately prior to the Effective Time.
(v) Notwithstanding anything in this Agreement to the
contrary, the Company may establish a short-term incentive
compensation program (the “New Bonus Plan”) for
the Company’s fiscal year which commenced April 1,2009 and may establish with respect to each individual who
participates in a short-term incentive plan in the ordinary
course of business consistent with past practice (a
“Bonus Plan Participant”) short-term incentive
compensation target payout levels (i.e., target, maximum,
threshold), provided that the target payout level with respect
to each such Bonus Plan Participant shall be no greater than
100% of such Bonus Plan Participant’s target payout
opportunity under the short-term incentive compensation program
in which such Bonus Plan Participant participated during the
Company’s fiscal year ended March 31, 2009 (or in the
case of
A-36
a newly-hired or promoted employee, the opportunity provided to
similarly situated Company Employees) (the “Full
Bonus”); provided that, if the Effective Time
occurs, (A) Parent shall pay, or cause to be paid, to each
Bonus Plan Participant employed by the Company or any of its
Subsidiaries or Affiliates on December 31, 2009, as soon as
practicable following such date, but in no event later than
March 15, 2010, an amount equal to the product of
(1) the applicable Bonus Plan Participant’s target
bonus under the New Bonus Plan and (2) 75% (the
“Unprorated Bonus”) and (B) Parent shall
pay to each Bonus Plan Participant who experiences a Severance
Event prior to December 31, 2009, as soon as practicable,
but in no event more than 30 days, following the applicable
Severance Event, an amount equal to the product of (1) the
Unprorated Bonus and (2) a fraction, the numerator of which
is the number of days between (and including) April 1, 2009
and the applicable Severance Event and the denominator of which
is 275. Notwithstanding the foregoing, with respect to each of
the five Bonus Plan Participants identified in
Section 5.6(b)(v) of the Company Disclosure Schedule, any
payment made pursuant to the New Bonus Plan to such a Bonus Plan
Participant shall be made at the Effective Time in an amount
equal to such Bonus Plan Participant’s Full Bonus and shall
(in the event of a termination prior to March 31, 2010 of
such Bonus Plan Participant’s employment entitling such
Bonus Plan Participant to severance under the Company’s
Plan Regarding Severance After a Change in Control (the
“Change in Control Plan”)) reduce the payment
to such Bonus Plan Participant under the Change in Control Plan
in accordance with the terms of such plan as of the date hereof.
For the avoidance of doubt, the amount of any severance pay
payable to a Bonus Plan Participant identified in
Section 5.6(b)(v) of the Company Disclosure Schedule under
the Change in Control Plan shall be reduced in such
circumstances pursuant to the terms of the Change in Control
Plan by an amount equal to the product of (A) the Full
Bonus paid to such Bonus Plan Participant and (B) a
fraction, the numerator of which equals the number of days
between the date on which the applicable Severance Event occurs
and March 31, 2010 and the denominator of which equals 365.
The New Bonus Plan shall be the sole short-term incentive
compensation plan in effect for the Company’s fiscal year
which commenced April 1, 2009 (other than any commission or
similar sales incentive plans or the retention program
established in accordance with this Agreement). The Company
shall take, or cause to be taken, any and all actions,
including, but not limited to, (x) amending the terms of
any short-term incentive compensation, severance or other plans,
programs or agreements in which any Bonus Plan Participant
participates (or to which any Bonus Plan Participant is a party)
and (y) obtaining any consents from any Bonus Plan
Participants, in each case as are necessary, to ensure that,
effective immediately prior to the Effective Time, the terms of
any such plans, programs or agreements in which any Bonus Plan
Participant participates (or to which any Bonus Plan Participant
is a party) comply with, and are not otherwise inconsistent
with, the terms of the New Bonus Plan as set forth in this
Section 5.6(b)(v). Parent shall provide, or cause to be
provided to, each Company Employee a bonus opportunity for
calendar year 2010 consistent with the principles articulated in
Section 5.6(b)(i).
(vi) Notwithstanding anything in this Agreement to the
contrary, the Company may establish a long-term incentive
compensation program (the “New LTIP”) for the
Company’s fiscal year which commenced April 1, 2009
and may grant each individual who participates in a long-term
incentive plan in the ordinary course of business consistent
with past practice (an “LTIP Participant”) a
long-term incentive award under an equity incentive plan of the
Company which shall consist of a number of Restricted Shares
having a fair market value on the date of grant (the
“Grant Date”) no greater than 100% of the total
value on the date of grant of the aggregate long term incentive
awards granted to such LTIP Participant with respect to the
Company’s fiscal year ended March 31, 2009 (or in the
case of a newly-hired or promoted employee, the awards granted
to similarly situated Company Employees). Each award granted
under the New LTIP shall provide that no Restricted Shares
subject to the award shall vest immediately upon the Effective
Time and such Restricted Shares shall vest (1) on
March 31, 2010, with respect to 1/3 of the number of
Restricted Shares subject to the award on the Grant Date,
(2) on March 31, 2011, with respect to an additional
1/3 of the number of Restricted Shares subject to the award on
the Grant Date and (3) on March 31, 2012, with respect
to the remaining 1/3 of the number of Restricted Shares subject
to the award on the Grant Date. Each award granted under the New
LTIP also shall provide that (A) at the Effective Time, 25%
of the number of Restricted Shares subject to the award on the
Grant Date shall be forfeited by the LTIP Participant to the
Company, (B) after the Effective Time, notwithstanding the
vesting schedule in effect immediately prior to the Effective
Time, the Restricted Shares shall vest (x) on
March 31, 2010, with respect to 25% of the number of
Restricted Shares subject to
A-37
the award on the Grant Date, (y) on March 31, 2011,
with respect to an additional 25% of the number of Restricted
Shares subject to the award on the Grant Date and (z) on
March 31, 2012, with respect to the remaining 25% of the
number of Restricted Shares subject to the award on the Grant
Date and (C) if, after the Effective Time, an LTIP
Participant experiences a Severance Event (x) prior to the
first anniversary of the Grant Date, the award shall immediately
vest with respect to 25% of the number of Restricted Shares
subject to the award on the Grant Date, (y) after the first
anniversary of the Grant Date, but prior to the second
anniversary of the Grant Date, the award shall immediately vest
with respect to an additional 25% of the number of Restricted
Shares subject to the award on the Grant Date and (z) after
the second anniversary of the Grant Date, but prior to the third
anniversary of the Grant Date, the award shall immediately vest
in full. Without limiting the generality of
Section 5.6(b)(i), Parent shall provide, or cause to be
provided to, each Company Employee long term incentive awards
for calendar year 2010 no less favorable than the long-term
incentive awards provided to similarly situated employees of
Parent, taking into account the job responsibilities, scope of
duties, performance and geographic location of the employees.
Section 5.7 Reasonable
Best Efforts.
(a) Subject to the terms and conditions set forth in this
Agreement, each of the parties shall use its reasonable best
efforts (subject to, and in accordance with, applicable Law),
including with respect to the matters set forth in
Section 5.7 of the Parent Disclosure Schedule, to take
promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable
under applicable Laws to consummate and make effective the
Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from
third parties, (iii) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the
transactions contemplated by this Agreement and (iv) the
execution and delivery of any additional instruments necessary
to consummate the transactions contemplated by this Agreement;
provided, however, that in no event shall Parent,
Merger Sub or the Company or any of their respective
Subsidiaries be required to pay, prior to the Effective Time,
any fee, penalty or other consideration to any third party for
any consent or approval required for the consummation of the
transactions contemplated by this Agreement under any contract
or agreement.
(b) Subject to the terms and conditions herein provided and
without limiting the foregoing, the Company and Parent shall
(i) to the extent required, promptly, but in no event later
than fifteen days after the date hereof, make their respective
filings and thereafter make any other required submissions under
the HSR Act, (ii) use reasonable best efforts to cooperate
with each other in (A) determining whether any filings are
required to be made with, or consents, permits, authorizations,
waivers or approvals are required to be obtained from, any third
parties or other Governmental Entities in connection with the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and (B) timely making
all such filings and timely seeking all such consents, permits,
authorizations or approvals and (iii) use reasonable best
efforts to take, or cause to be taken, all other actions and do,
or cause to be done, all other things necessary, proper or
advisable to consummate and make effective the transactions
contemplated hereby, including taking all such further action as
may be necessary to resolve such objections, if any, as the
United States Federal Trade Commission, the Antitrust Division
of the United States Department of Justice, state antitrust
enforcement authorities or competition authorities of any other
nation or other jurisdiction or any other Governmental Entity
may assert under Regulatory Law with respect to the transactions
contemplated hereby. In furtherance of the foregoing, the
parties shall take all actions necessary to avoid or eliminate
each and every impediment under any Law that may be asserted by
any Governmental Entity with respect to the Merger so as to
enable the Closing to occur as soon as reasonably possible (and
in any event no later than the End Date), including
(A) proposing, negotiating, committing to and effecting, by
consent decree, hold separate order or otherwise, the sale,
divestiture or disposition of such assets or businesses of
Parent or its Subsidiaries or affiliates or of the Company or
its Subsidiaries and (B) otherwise taking or committing to
take actions that after the Closing Date would limit
Parent’s or its Subsidiaries’ (including the Surviving
Corporation’s) or its
A-38
affiliates’ freedom of action with respect to, or its or
their ability to retain, one or more of its or its
Subsidiaries’ (including the Surviving Corporation’s)
businesses, product lines or assets, in each case as may be
required in order to avoid the entry of, or to effect the
dissolution of, any injunction, temporary restraining order or
other order in any suit or proceeding which would otherwise have
the effect of preventing or materially delaying the Closing,
provided that any such agreement or action by the Company
shall be conditioned on the consummation of the Merger.
Notwithstanding anything to the contrary in this Agreement,
Parent shall not be obligated to take any action, propose or
make any divestiture or other undertaking, or propose or enter
into a consent decree, in each case that would have either a
Parent Material Adverse Effect or a Company Material Adverse
Effect. Subject to applicable legal limitations and the
instructions of any Governmental Entity, the Company and Parent
shall keep each other apprised of the status of matters relating
to the completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices
or other communications received by the Company or Parent, as
the case may be, or any of their respective Subsidiaries, from
any third party
and/or any
Governmental Entity with respect to such transactions. The
Company and Parent shall permit counsel for the other party
reasonable opportunity to review in advance, and consider in
good faith the views of the other party in connection with, any
proposed written communication to any Governmental Entity. Each
of the Company and Parent agrees not to participate in any
meeting or discussion (other than relating to the scheduling of
any meetings or of any discussions), either in person or by
telephone, with any Governmental Entity in connection with the
proposed transactions unless it consults with the other party in
advance and, to the extent not prohibited by such Governmental
Entity, gives the other party the opportunity to attend and
participate. The Company and Parent shall furnish the other with
such necessary information and reasonable assistance as the
other may reasonably request in connection with its preparation
of necessary filings or submissions of information to any
Governmental Entity. Either Parent or the Company may designate
any competitively sensitive information provided to the other
under this Agreement as “outside counsel only”. Such
materials and the information contained therein shall be given
only to outside legal counsel of the other and will not be
disclosed by such outside counsel to employees, officers or
directors of their client unless express written permission is
obtained in advance from the disclosing party or its legal
counsel.
(c) In furtherance and not in limitation of the covenants
of the parties contained in this Section 5.7, if any
administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to
be instituted) challenging any transaction contemplated by this
Agreement as violative of any Regulatory Law, each of the
Company and Parent shall cooperate in all respects with each
other and shall use their respective reasonable best efforts to
contest and resist any such action or proceeding and to have
vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this
Agreement. Notwithstanding the foregoing or any other provision
of this Agreement, nothing in this Section 5.7 shall limit
a party’s right to terminate this Agreement pursuant to
Section 7.1(b) or 7.1(c) so long as such party has, prior
to such termination, complied with its obligations under this
Agreement, including this Section 5.7.
(d) For purposes of this Agreement, “Regulatory
Law” means the Sherman Act of 1890, the Clayton
Antitrust Act of 1914, the HSR Act and all other federal, state
or foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other Laws, including
any antitrust, competition or trade regulation Laws, that
are designed or intended to (i) prohibit, restrict or
regulate actions having the purpose or effect of monopolization
or restraint of trade or lessening competition through merger or
acquisition or (ii) protect the national security or the
national economy of any nation.
Section 5.8 Takeover
Statute. If any “fair price,”“moratorium,”“control share acquisition” or
other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, each of the
Company and Parent, to the extent permissible under applicable
Law, shall grant such approvals and take such actions, in
accordance with the terms of this Agreement, as are reasonably
necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable, and in any event prior
to the End Date, on the terms contemplated hereby and otherwise,
to the extent permissible under applicable
A-39
Law, act to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby.
Section 5.9 Public
Announcements. Except with respect to any
Company Change of Recommendation, Parent Change of
Recommendation or any action taken by the Company or the Company
Board pursuant to, and in accordance with, Section 5.4, so
long as this Agreement is in effect, the parties shall use
reasonable efforts to consult with each other before issuing any
press release or making any public announcement primarily
relating to this Agreement or the transactions contemplated
hereby and, except for any press release or public announcement
as may be required by applicable Law, court process or any
listing agreement with any national securities exchange, shall
use reasonable efforts not to issue any such press release or
make any such public announcement without consulting the other
parties. Parent and the Company agree to issue a mutually
acceptable joint press release announcing this Agreement.
Section 5.10 Indemnification
and Insurance.
(a) Parent and Merger Sub agree that all rights to
exculpation, indemnification and advancement of expenses now
existing in favor of the current or former directors, officers
or employees, as the case may be, of the Company or its
Subsidiaries as provided in their respective articles of
incorporation or by-laws or other organization documents or in
any agreement to which the Company or any of its Subsidiaries is
a party shall survive the Merger and shall continue in full
force and effect. For a period of six years from the Effective
Time, Parent and the Surviving Corporation shall maintain in
effect the exculpation, indemnification and advancement of
expenses provisions of the Company’s and any Company
Subsidiary’s articles of incorporation and by-laws or
similar organization documents in effect immediately prior to
the Effective Time or in any indemnification agreements of the
Company or its Subsidiaries with any of their respective
directors, officers or employees in effect immediately prior to
the Effective Time, and shall not amend, repeal or otherwise
modify any such provisions or the exculpation, indemnification
or advancement of expenses provisions of the Surviving
Corporation’s articles of incorporation and by-laws set
forth in Exhibit A and Exhibit B in any manner that
would adversely affect the rights thereunder of any individuals
who immediately before the Effective Time were current or former
directors, officers or employees of the Company or any of its
Subsidiaries; provided, however, that all rights
to indemnification in respect of any Action pending or asserted
or any claim made within such period shall continue until the
disposition of such Action or resolution of such claim. From and
after the Effective Time, Parent shall assume, be jointly and
severally liable for, and honor, guaranty and stand surety for,
and shall cause the Surviving Corporation and its Subsidiaries
to honor, in accordance with their respective terms, each of the
covenants contained in this Section 5.10 without limit as
to time.
(b) At and after the Effective Time, each of Parent and the
Surviving Corporation shall, to the fullest extent permitted
under applicable Law, indemnify and hold harmless each current
and former director, officer or employee of the Company or any
of its Subsidiaries and each person who served as a director,
officer, member, trustee or fiduciary of another corporation,
partnership, joint venture, trust, pension or other employee
benefit plan or enterprise if such service was at the request or
for the benefit of the Company or any of its Subsidiaries (each,
together with such person’s heirs, executors or
administrators, an “Indemnified Party”) against
any costs or expenses (including advancing attorneys’ fees
and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to
the fullest extent permitted by law), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in
connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal,
administrative or investigative (an “Action”),
arising out of, relating to or in connection with any action or
omission occurring or alleged to have occurred whether before or
after the Effective Time (including acts or omissions in
connection with such persons serving as an officer, director or
other fiduciary in any entity if such service was at the request
or for the benefit of the Company). In the event of any such
Action, Parent and the Surviving Corporation shall cooperate
with the Indemnified Party in the defense of any such Action.
(c) For a period of six years from the Effective Time,
Parent shall cause to be maintained in effect (i) the
coverage provided by the policies of directors’ and
officers’ liability insurance and fiduciary liability
insurance
A-40
in effect as of immediately prior to the Effective Time
maintained by the Company and its Subsidiaries with respect to
matters arising on or before the Effective Time or (ii) a
“tail” policy (which the Company may purchase at its
option prior to the Effective Time, and, in such case, Parent
shall cause such policy to be in full force and effect, and
shall cause all obligations thereunder to be honored by the
Surviving Corporation) under the Company’s existing
directors’ and officers’ insurance policy that covers
those persons who are currently covered by the Company’s
directors’ and officers’ insurance policy in effect as
of the date hereof for actions and omissions occurring on or
prior to the Effective Time, is from a carrier with comparable
credit ratings to Company’s existing directors’ and
officers’ insurance policy carrier and contains terms and
conditions that are no less favorable to the insured than those
of the Company’s directors’ and officers’
insurance policy in effect as of the date hereof;
provided, however, that, after the Effective Time,
Parent shall not be required to pay annual premiums in excess of
300% of the last annual premium paid by the Company prior to the
date hereof in respect of the coverages required to be obtained
pursuant hereto, but in such case shall purchase as much
coverage as reasonably practicable for such amount.
(d) Parent shall pay all reasonable expenses, including
reasonable attorneys’ fees, that may be incurred by any
Indemnified Party in enforcing the indemnity and other
obligations provided in this Section 5.10.
(e) The rights of each Indemnified Party hereunder shall be
in addition to, and not in limitation of, any other rights such
Indemnified Party may have under the articles of incorporation
or by-laws or other organization documents of the Company or any
of its Subsidiaries or the Surviving Corporation, any other
indemnification arrangement, the NRS (or any other applicable
Law) or otherwise. The provisions of this Section 5.10
shall survive the consummation of the Merger and expressly are
intended to benefit, and are enforceable by, each of the
Indemnified Parties.
Section 5.11 Control
of Operations. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right
to control or direct the Company’s operations prior to the
Effective Time. Prior to the Effective Time, the Company shall
exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its operations.
Section 5.12 Certain
Transfer Taxes.The Company and Parent shall
cooperate in the preparation, execution and filing of all
returns, questionnaires, applications or other documents
regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any
transfer, recording, registration and other fees and any similar
Taxes which are payable under applicable Law in connection with
the transactions contemplated by this Agreement. Any liability
arising out of any real estate transfer Tax with respect to
interests in real property owned directly or indirectly by the
Company or any of its Subsidiaries immediately prior to the
Merger, if applicable and due with respect to the Merger, shall
be borne by the Surviving Corporation and expressly shall not be
a liability of stockholders of the Company.
Section 5.13 Section 16
Matters. Prior to the Effective Time, Parent
and the Company shall take all such steps as may be required to
cause any dispositions of Company Common Stock (including
derivative securities with respect to Company Common Stock) or
acquisitions of Parent Common Stock (including derivative
securities with respect to Parent Common Stock) resulting from
the transactions contemplated by this Agreement by each
individual who is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to the
Company or will become subject to such reporting requirements
with respect to Parent, to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
Section 5.14 Tax
Matters. Neither Parent nor the Company shall
take any action or knowingly fail to take any action, which
action or failure to act would prevent or impede, or would be
reasonably likely to prevent or impede, the Merger from
qualifying as a “reorganization” within the meaning of
Section 368(a) of the Code.
Section 5.15 Listing
of Shares of Parent Common Stock. Parent
shall cause the shares of Parent Common Stock to be issued in
the Merger to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
Section 5.16 Board
of Directors of Parent. Parent shall take all
actions as may be necessary to cause, as of the Effective Time,
the Parent Board to be comprised of (a) eight current
directors of the Parent Board
A-41
and (b) four current directors of the Company Board
designated by the Company (each a “Company
Designee”). At the first annual meeting of Parent
following the Closing, Parent shall nominate each of the Company
Designees, and use reasonable best efforts to cause each Company
Designee, to be reelected to the Parent Board as follows: one
Company Designee to be reelected to a term expiring at the
second annual meeting following the Closing Date, one director
to be reelected to a term expiring at the third annual meeting
following the Closing Date and two directors to be reelected to
terms expiring at the fourth annual meeting following the
Closing Date. If, prior the expiration of the term to which the
relevant Company Designee is or was reelected pursuant to the
immediately preceding sentence, any Company Designee dies,
resigns or is removed from the Company Board, then a successor
to such Company Designee shall be chosen by a majority of the
other Company Designees (or their successors chosen pursuant to
this sentence) then serving on the Parent Board. Subject to
compliance with the applicable qualification and independence
standards promulgated by the SEC and NYSE, as applicable, at
least one Company Designee shall be appointed to each committee
of the Parent Board.
Section 5.17 Dallas
Business Presence. Parent will maintain an
office in Dallas, Texas as a home office extension of the
Detroit headquarters and will conduct certain support functions
of the combined company out of such office.
Section 5.18 Officers
of Parent. The Chief Executive Officer of
Parent shall continue to be the Chief Executive Officer of
Parent following the Effective Time. Additional members of the
senior management of Parent shall be designated prior to the
Effective Time by the majority vote of a selection committee
comprised of (a) the Chief Executive Officer of the Company
or his designee, (b) the Chief Executive Officer of Parent
or his designee and (c) one additional representative
designated by Parent.
Section 5.19 Rights
Agreements.
(a) Without the prior written consent of Parent (which
consent shall not be unreasonably withheld, delayed or
conditioned), the Company shall not redeem the rights issued
under the CompanyRights Agreement or amend or terminate the
Company Rights Agreement prior to the Effective Time other than
(i) to render the CompanyRights Agreement inapplicable to
the Merger, this Agreement, the Voting Agreements executed by
stockholders of the Company and the transactions contemplated
hereby and thereby, (ii) as required to do so by a court of
competent jurisdiction (in which case, to the extent permitted
by such court of competent jurisdiction, the Company shall
provide Parent with written notice at least three business days
prior to taking any such action), (iii) to preserve the net
operating losses of Parent following the Closing or (iv) to
effectuate the Merger and the transactions contemplated hereby.
(b) Without the prior written consent of the Company (which
consent shall not be unreasonably withheld, delayed or
conditioned), Parent shall not redeem the rights issued under
the Parent Rights Agreement or amend or terminate the Parent
Rights Agreement prior to the Effective Time other than
(i) to render the Parent Rights Agreement inapplicable to
the Merger, this Agreement, the Voting Agreements executed by
stockholders of Parent and the transactions contemplated hereby
and thereby, (ii) as required to do so by a court of
competent jurisdiction (in which case, to the extent permitted
by such court of competent jurisdiction, the Company shall
provide the Company with written notice at least three business
days prior to taking any such action), (iii) to preserve
the net operating losses of Parent following the Closing or
(iv) to effectuate the Merger and the transactions
contemplated hereby.
(c) Parent shall take all such actions necessary to render
each of (i) Article IX of Parent’s by-laws
adopted by the Parent Board on the date hereof and
(ii) Article XII of Parent’s Articles of
Incorporation (assuming such Article is approved by
Parent’s stockholders at Parent’s 2009 annual meeting)
inapplicable to the Merger, this Agreement and the transactions
contemplated hereby (including the receipt of the Merger
Consideration by each holder of Shares pursuant to
Article II hereof).
A-42
ARTICLE VI
CONDITIONS
TO THE MERGER
Section 6.1 Conditions
to Each Party’s Obligation to Effect the
Merger. The respective obligations of each
party to effect the Merger shall be subject to the fulfillment
(or, to the extent permitted by Law, waiver by all parties) at
or prior to the Effective Time of the following conditions:
(a) Each of the Company Stockholder Approval and Parent
Stockholder Approvals shall have been obtained.
(b) No temporary restraining order or preliminary or
permanent injunction issued by any court of competent
jurisdiction shall be in effect that prohibits or prevents the
consummation of the Merger (provided, that prior to
asserting this condition, the party asserting this condition
shall have used its reasonable best efforts to prevent the entry
of any such order or injunction and to appeal as promptly as
practicable any order or injunction that may be entered).
(c) Any applicable waiting period under the HSR Act shall
have expired or been earlier terminated.
(d) The shares of Parent Common Stock to be issued in the
Merger and such other shares of Parent Common Stock to be
reserved for issuance in connection with the Merger shall have
been approved for listing on the NYSE, subject to official
notice of issuance.
(e) The
Form S-4
shall have been declared effective by the SEC under the
Securities Act and no stop order suspending the effectiveness of
the
Form S-4
shall have been issued by the SEC and no proceedings for that
purpose shall have been initiated by the SEC.
Section 6.2 Conditions
to Obligation of the Company to Effect the
Merger. The obligation of the Company to
effect the Merger is further subject to the fulfillment of the
following conditions:
(a) The representations and warranties of Parent and Merger
Sub set forth in (i) this Agreement (other than
Sections 4.2(a), 4.10(a)(ii) and 4.10(b)) that are
qualified by Parent Material Adverse Effect shall be true and
correct at and as of the date of this Agreement and at and as of
the Closing Date as though made at and as of the Closing Date,
(ii) this Agreement (other than Sections 4.2(a),
4.10(a)(ii) and 4.10(b) and those representations and warranties
qualified by Parent Material Adverse Effect) shall be true and
correct at and as of the date of this Agreement and at and as of
the Closing Date as though made at and as of the Closing Date,
except for such failures to be true and correct as are not
having or would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect,
(iii) Section 4.2(a) shall be true and correct at and
as of the date of this Agreement and at and as of the Closing
Date as though made at and as of the Closing Date, except for
de minimis inaccuracies,
(iv) Section 4.10(a)(ii) shall be true and correct at
and as of the date of this Agreement and
(v) Section 4.10(b) shall be true and correct at and
as of the Closing Date as though made at and as of the Closing
Date; provided, however, that representations and
warranties that are made as of a particular date or period shall
be true and correct (in the manner set forth in clauses (i),
(ii) and (iii), as applicable) only as of such date or
period.
(b) Parent shall have in all material respects performed
all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it prior to the
Effective Time.
(c) Parent shall have delivered to the Company a
certificate, dated the Effective Time and signed by its Chief
Executive Officer or another senior officer, certifying to the
effect that the conditions set forth in Sections 6.2(a) and
6.2(b) have been satisfied.
(d) The Company shall have received an opinion from
Wachtell, Lipton, Rosen & Katz, on the basis of
representations and warranties set forth or referred to in such
opinion, dated as of the Closing Date, to the effect that the
Merger will be treated as a “reorganization” within
the meaning of Section 368(a) of the Code. In rendering
such opinion, such counsel shall be entitled to receive and rely
upon representations, warranties and covenants of officers of
Parent, Merger Sub, the Company or others reasonably requested
by such counsel.
A-43
The foregoing conditions are for the sole benefit of the Company
and may, subject to the terms of this Agreement, be waived by
the Company, in whole or in part at any time and from time to
time, in the sole discretion of the Company. The failure by the
Company at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at
any time and from time to time prior to the Effective Time.
Section 6.3 Conditions
to Obligation of Parent to Effect the
Merger. The obligation of Parent to effect
the Merger is further subject to the fulfillment of the
following conditions:
(a) The representations and warranties of the Company set
forth in (i) this Agreement (other than
Sections 3.2(a), 3.10(a)(ii) and 3.10(b)) that are
qualified by Company Material Adverse Effect shall be true and
correct at and as of the date of this Agreement and at and as of
the Closing Date as though made at and as of the Closing Date,
(ii) this Agreement (other than Sections 3.2(a),
3.10(a)(ii) and 3.10(b) and those representations and warranties
qualified by Company Material Adverse Effect) shall be true and
correct at and as of the date of this Agreement and at and as of
the Closing Date as though made at and as of the Closing Date,
except for such failures to be true and correct as are not
having or would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect,
(iii) Section 3.2(a) shall be true and correct at and
as of the date of this Agreement and at and as of the Closing
Date as though made at and as of the Closing Date, except for
de minimis inaccuracies,
(iv) Section 3.10(a)(ii) shall be true and correct at
and as of the date of this Agreement and
(v) Section 3.10(b) shall be true and correct at and
as of the Closing Date as though made at and as of the Closing
Date; provided, however, that representations and
warranties that are made as of a particular date or period shall
be true and correct (in the manner set forth in clauses (i),
(ii) or (iii), as applicable) only as of such date or
period.
(b) The Company shall have in all material respects
performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by
it prior to the Effective Time.
(c) The Company shall have delivered to Parent a
certificate, dated the Effective Time and signed by its Chief
Executive Officer or another senior officer, certifying to the
effect that the conditions set forth in Sections 6.3(a) and
6.3(b) have been satisfied.
(d) Parent shall have received an opinion from Honigman
Miller Schwartz and Cohn LLP or Sidley Austin LLP, on the basis
of representations and warranties set forth or referred to in
such opinion, dated as of the Closing Date, to the effect that
the Merger will be treated as a “reorganization”
within the meaning of Section 368(a) of the Code. In
rendering such opinion, such counsel shall be entitled to
receive and rely upon representations, warranties and covenants
of officers of Parent, Merger Sub, the Company or others
reasonably requested by such counsel.
The foregoing conditions are for the sole benefit of Parent and
may, subject to the terms of this Agreement, be waived by
Parent, in whole or in part at any time and from time to time,
in the sole discretion of Parent. The failure by Parent at any
time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right and each such right shall be deemed
an ongoing right which may be asserted at any time and from time
to time prior to the Effective Time.
ARTICLE VII
TERMINATION
Section 7.1 Termination
or Abandonment. Notwithstanding anything in
this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Effective Time, whether
before or after any approval of the matters presented in
connection with the Merger by the stockholders of the Company or
Parent:
(a) by the mutual written consent of the Company and Parent;
A-44
(b) by either the Company or Parent if the Effective Time
shall not have occurred on or before November 7, 2009 (the
“End Date”), provided that the right to
terminate this Agreement pursuant to this Section 7.1(b)
shall not be available to a party that fails to perform or
comply in all material respects with the covenants and
agreements of such party set forth in this Agreement;
(c) by either the Company or Parent if a Governmental
Entity of competent jurisdiction shall have issued an order,
judgment, decree or ruling permanently enjoining or otherwise
prohibiting the consummation of the Merger and such order,
judgment, decree or ruling shall have become final and
non-appealable, provided that the party seeking to
terminate this Agreement pursuant to this Section 7.1(c)
shall have used its reasonable best efforts to remove or prevent
entry of such order, judgment, decree or ruling;
(d) by either the Company or Parent if the Company
Stockholders’ Meeting (including any adjournments or
postponements thereof) shall have concluded and the Company
Stockholder Approval contemplated by this Agreement shall not
have been obtained; provided, however, that the
right to terminate this Agreement under this Section 7.1(d)
shall not be available to the Company where the failure to
obtain the Company Stockholder Approval shall have been caused
by the action or failure to act of the Company and such action
or failure to act constitutes a material breach by the Company
of this Agreement;
(e) by either the Company or Parent if the Parent
Stockholders’ Meeting (including any adjournments or
postponements thereof) shall have concluded and the Parent
Stockholder Approvals contemplated by this Agreement shall not
have been obtained; provided, however, that the
right to terminate this Agreement under this Section 7.1(e)
shall not be available to Parent where the failure to obtain the
Parent Stockholder Approvals shall have been caused by the
action or failure to act of Parent and such action or failure to
act constitutes a material breach by Parent of this Agreement;
(f) by the Company, if Parent shall have breached or failed
to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (i) would
result in a failure of a condition set forth in Section 6.1
or 6.2 and (ii) cannot be cured by the End Date,
provided that the Company shall have given Parent written
notice, delivered at least thirty days prior to such
termination, stating the Company’s intention to terminate
this Agreement pursuant to this Section 7.1(f) and the
basis for such termination;
(g) by Parent, if the Company shall have breached or failed
to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (i) would
result in a failure of a condition set forth in Section 6.1
or 6.3 and (ii) cannot be cured by the End Date,
provided that Parent shall have given the Company written
notice, delivered at least thirty days prior to such
termination, stating Parent’s intention to terminate this
Agreement pursuant to this Section 7.1(g) and the basis for
such termination;
(h) by the Company, at any time prior to obtaining the
Company Stockholder Approval, in light of a Superior Proposal;
provided, however, that the Company may not
terminate this Agreement pursuant to this Section 7.1(h) if
the Company is in material breach of Section 5.4 or unless
the Company has first provided a Notice of Superior Proposal to
Parent and is in compliance in all material respects with
Section 5.4(e) and, at the end of the Notice Period (as it
may be extended if so required pursuant to the terms of
Section 5.4(e)), such proposal continues to constitute a
Superior Proposal and the Company Board determines in good
faith, after consultation with the Company’s outside legal
and financial advisors, that making the Company Recommendation
or failing to effect a Company Change of Recommendation in a
manner adverse to Parent would be inconsistent with the
directors’ fiduciary obligations to the Company’s
stockholders under applicable Law;
(i) by the Company, if the Parent Board shall have effected
a Parent Change of Recommendation; and
(j) by Parent, if the Company Board shall have
(i) effected a Company Change of Recommendation or
(ii) recommended the approval or adoption of any
Alternative Proposal to the Company’s stockholders.
A-45
If this Agreement is terminated pursuant to this
Section 7.1, then this Agreement shall terminate (except
for the provisions of Sections 7.2 and Article VIII),
and there shall be no other liability on the part of the Company
or Parent to the other except liability arising out of an
intentional breach of this Agreement, for fraud or as provided
for in the Confidentiality Agreement, in which case the
aggrieved party shall be entitled to all rights and remedies
available at law or in equity.
Section 7.2 Termination
Fees.
(a) If this Agreement is terminated by the Company pursuant
to Section 7.1(h), then the Company shall pay to Parent
$48 million concurrently with any such termination.
(b) If this Agreement is terminated by Parent pursuant to
Section 7.1(j), then the Company shall pay to Parent
$48 million as promptly as possible (but in any event
within three business days) thereafter.
(c) If this Agreement is terminated by Parent or the
Company pursuant to Section 7.1(d), then the Company shall
pay to Parent $24 million (unless prior to such termination
the Company Board shall have effected a Company Change of
Recommendation, in which event the Company shall pay to Parent
$48 million), in the case of a termination by the Company,
concurrently with any such termination, and in the case of a
termination by Parent, as promptly as possible (but in any event
within three business days) thereafter.
(d) If (i) prior to the termination of this Agreement,
any Alternative Proposal (substituting 50% for the 20% threshold
set forth in the definition of “Alternative Proposal”)
(a “Qualifying Transaction”) is publicly
proposed or publicly disclosed prior to, and not withdrawn at
the time of, the Company Stockholders’ Meeting,
(ii) this Agreement is terminated by Parent or the Company
pursuant to Section 7.1(d) and (iii) concurrently with
or within twelve months after such termination the Company
enters into a definitive agreement with respect to, or otherwise
consummates, any Qualifying Transaction, then the Company shall
pay to Parent $48 million (less any amounts paid by the
Company to Parent pursuant to Section 7.2(c)) as promptly
as possible (but in any event within three business days)
thereafter.
(e) If (i) prior to the termination of this Agreement,
any Qualifying Transaction shall have been publicly proposed or
publicly disclosed with respect to the Company, (ii) this
Agreement is terminated by Parent or the Company pursuant to
Section 7.1(b) or terminated by Parent pursuant to
Section 7.1(g) (by reason of an intentional breach or
intentional failure to perform in any material respect any
covenants or other agreements contained in this Agreement) and
(iii) concurrently with or within twelve months after such
termination the Company enters into a definitive agreement with
respect to, or otherwise consummates, any Qualifying
Transaction, then the Company shall pay to Parent
$48 million as promptly as possible (but in any event
within three business days) thereafter.
(f) If this Agreement is terminated by Parent or the
Company pursuant to Section 7.1(e), then Parent shall pay
to the Company $51 million (unless prior to such
termination the Parent Board shall have effected a Parent Change
of Recommendation, in which event Parent shall pay to the
Company $102 million), in the case of a termination by
Parent, concurrently with any such termination, and in the case
of a termination by the Company, as promptly as possible (but in
any event within three business days) thereafter.
(g) If this Agreement is terminated by the Company pursuant
to Section 7.1(i), then Parent shall pay to the Company
$102 million as promptly as possible (but in any event
within three business days) thereafter.
(h) Any amounts payable by a party pursuant
Section 7.2(a), 7.2(b), 7.2(c), 7.2(d), 7.2(e), 7.2(f) or
7.2(g) (each a “Termination Fee” and,
collectively, the “Termination Fees”) or
pursuant to Section 7.2(i) shall be paid by wire transfer
of immediately available funds to an account designated in
writing by the other party to which such Termination Fee is to
be paid. Upon payment of a Termination Fee by a party, such
party shall have no further liability to the other party or its
stockholders with respect to this Agreement or the transactions
contemplated hereby (other than the obligation to pay any
amounts payable pursuant to Section 7.2(i) and, in the case
of the Company, the obligation to pay the Termination Fee set
forth in Section 7.2(d) if the circumstances provided for
in such Section shall apply); provided that nothing
herein shall release any party from liability for intentional
breach, for fraud or as provided for in the Confidentiality
Agreement. The parties acknowledge and agree that in no event
shall the Company or Parent, as applicable, be required to pay
more
A-46
than one Termination Fee (other than, in the case of the
Company, the obligation to pay the Termination Fee set forth in
Section 7.2(d) if the circumstances provided for in such
Section shall apply).
(i) In the event that either party shall fail to pay when
due any Termination Fee required to be paid by it pursuant to
this Section 7.2, such Termination Fee shall accrue
interest for the period commencing on the date such Termination
Fee became past due, at a rate equal to the sum of (x) the
prime lending rate prevailing during such period as published in
The Wall Street Journal plus (y) 5%, calculated on a
daily basis until the date of actual payment. In addition, if
either party shall fail to pay such Termination Fee when due,
such owing party shall also pay to the owed party all of the
owed party’s costs and expenses (including reasonable
attorneys’ fees), as applicable, in connection with efforts
to collect such amounts.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No
Survival 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 Merger or the
termination of this Agreement.
Section 8.2 Expenses. Whether
or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger, this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring or required to incur such expenses, except
(i) all fees paid in respect of any HSR filing shall be
borne by Parent and (ii) all costs and expenses incurred in
connection with the printing, filing and mailing of the Joint
Proxy Statement (including applicable SEC filing fees) shall be
borne 50% by Parent and 50% by the Company.
Section 8.3 Counterparts;
Effectiveness. This Agreement may be executed
in two or more counterparts (including by facsimile), each of
which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument, and
shall become effective when one or more counterparts have been
signed by each of the parties and delivered (by telecopy,
e-mail or
otherwise) to the other parties.
Section 8.4 Governing
Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
without giving effect to any choice or conflict of law provision
or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Delaware;
provided, however, that issues involving the
consummation and effects of the Merger will be governed by the
laws of the State of Nevada to the extent the application of
Nevada law is mandatory.
Section 8.5 Jurisdiction;
Enforcement. The parties agree that
irreparable damage would occur if any of the provisions of this
Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that
each of the parties shall be entitled (in addition to any other
remedy that may be available to it, including monetary damages)
to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
of this Agreement exclusively in the Delaware Court of Chancery
and any state appellate court therefrom within the State of
Delaware (or, if the Delaware Court of Chancery declines to
accept jurisdiction over a particular matter, any state or
federal court within the State of Delaware). In addition, each
of the parties irrevocably agrees that any legal action or
proceeding with respect to this Agreement and the rights and
obligations arising hereunder, or for recognition and
enforcement of any judgment in respect of this Agreement and the
rights and obligations arising hereunder brought by the other
party hereto or its successors or assigns, shall be brought and
determined exclusively in the Delaware Court of Chancery and any
state appellate court therefrom within the State of Delaware
(or, if the Delaware Court of Chancery declines to accept
jurisdiction over a particular matter, any state or federal
court within the State of Delaware). The parties further agree
that no party to this Agreement shall be required to obtain,
furnish or post any bond or similar instrument in connection
with or as a condition to obtaining any remedy referred to in
this Section 8.5 and each party waives any objection to the
imposition of such relief or any right it may have to require
the obtaining, furnishing or posting of any such bond or similar
instrument. Each of the parties hereby irrevocably submits with
regard to any such action or proceeding for itself and in
A-47
respect of its property, generally and unconditionally, to the
personal jurisdiction of the aforesaid courts and agrees that it
will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court
other than the aforesaid courts. Each of the parties hereby
irrevocably waives, and agrees not to assert, by way of motion,
as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim
that it is not personally subject to the jurisdiction of the
above named courts for any reason other than the failure to
serve in accordance with this Section 8.5, (b) any
claim that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise) and (c) to
the fullest extent permitted by the applicable Law, any claim
that (i) the suit, action or proceeding in such court is
brought in an inconvenient forum, (ii) the venue of such
suit, action or proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in
or by such courts. Each of the Company, Parent and Merger Sub
hereby consents to service being made through the notice
procedures set forth in Section 8.7 and agrees that service
of any process, summons, notice or document by registered mail
(return receipt requested and first-class postage prepaid) to
the respective addresses set forth in Section 8.7 shall be
effective service of process for any suit or proceeding in
connection with this Agreement or the transactions contemplated
by this Agreement.
Section 8.6 WAIVER
OF JURY TRIAL. EACH OF THE PARTIES HERETO
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WITH AND UPON THE
ADVICE OF COMPETENT COUNSEL IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 8.7 Notices. Any
notice required to be given hereunder shall be sufficient if in
writing, and sent by facsimile transmission (provided that any
notice received by facsimile transmission or otherwise at the
addressee’s location on any non-business day or any
business day after 5:00 p.m. (addressee’s local time)
shall be deemed to have been received at 9:00 a.m.
(addressee’s local time) on the next business day), by
reliable overnight delivery service (with proof of service) or
hand delivery, addressed as follows:
Any party to this Agreement may modify the notification details
specified in this paragraph by delivering written notice of such
modifications to each of the other parties as provided in this
Section 8.7; provided, however, that any such
modification shall only be effective on the date specified in
such notice or five business days after the notice is given,
whichever is later.
Section 8.8 Assignment;
Binding Effect. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be
assigned by any of the parties (whether by operation of law or
otherwise) without the prior written consent of the other
parties, and any attempted assignment of this Agreement or any
of such rights, interests or obligations without such consent
shall be void and of no effect. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors
and assigns.
Section 8.9 Severability. Any
term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, such provision shall be interpreted to be
only so broad as is enforceable.
Section 8.10 Entire
Agreement. This Agreement (including the
exhibits and schedules hereto), the Voting Agreements and the
Confidentiality Agreement constitute the entire agreement, and
supersede all other prior agreements and understandings, both
written and oral, between the parties, or any of them, with
respect to the subject matter hereof and thereof, and this
Agreement is not intended to grant standing to any person other
than the parties except, following the Effective Time, for the
provisions of Sections 2.1, 5.6(a) and 5.10.
Section 8.11 Amendments;
Waivers. At any time prior to the Effective
Time, any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Parent and
Merger Sub or, in the case of a waiver, by the party against
whom the waiver is to be effective; provided,
however, that after receipt of Company Stockholder
Approval, if any such amendment or waiver shall by applicable
Law or in accordance with the rules and regulations of the NYSE
require further approval of the stockholders of the Company, the
effectiveness of such amendment or waiver shall be subject to
the approval of the stockholders of the Company. Notwithstanding
the foregoing, no failure or delay by the Company or Parent 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 of any other right hereunder.
Section 8.12 Headings. Headings
of the Articles and Sections of this Agreement are for
convenience of the parties only and shall be given no
substantive or interpretive effect whatsoever. The table of
contents to this Agreement is for reference purposes only and
shall not affect in any way the meaning or interpretation of
this Agreement.
Section 8.13 Interpretation. When
a reference is made in this Agreement to an Article or Section,
such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. Whenever the words
“include,”“includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.” The words “hereof,”“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. All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document
made or delivered pursuant thereto unless otherwise defined
therein. The
A-49
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. 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. Each of the parties has
participated in the drafting and negotiation of this Agreement.
If an ambiguity or question of intent or interpretation arises,
this Agreement must be construed as if it is drafted by all the
parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of authorship of any
of the provisions of this Agreement.
Section 8.14 Definitions.
(a) References in this Agreement to
“Subsidiaries” of any party shall mean any
corporation, partnership, association, trust or other form of
legal entity of which more than 50% of the voting power of the
outstanding voting securities are on the date hereof directly or
indirectly owned by such party. References in this Agreement
(except as specifically otherwise defined) to
“affiliates” shall mean, as to any person, any
other person which, directly or indirectly, controls, or is
controlled by, or is under common control with, such person. As
used in this definition, “control” (including,
with its correlative meanings, “controlled by” and
“under common control with”) shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person,
whether through the ownership of securities or partnership or
other ownership interests, by contract or otherwise. References
in this Agreement (except as specifically otherwise defined) to
“person” shall mean an individual, a
corporation, a partnership, a limited liability company, an
association, a trust or any other entity, group (as such term is
used in Section 13 of the Exchange Act) or organization,
including a Governmental Entity, and any permitted successors
and assigns of such person. As used in this Agreement,
“knowledge” means (i) with respect to
Parent, the actual knowledge of the executive officers of Parent
or the persons listed in Section 8.14(a) of the Parent
Disclosure Schedule and (ii) with respect to the Company,
the actual knowledge of the individuals listed on
Section 8.14(a) of the Company Disclosure Schedule. As used
in this Agreement, “business day” shall mean
any day other than a Saturday, Sunday or a day on which the
banks in New York are authorized by law or executive order to be
closed. References in this Agreement to specific laws or to
specific provisions of laws shall include all rules and
regulations promulgated thereunder. Any statute defined or
referred to herein or in any agreement or instrument referred to
herein shall mean such statute as from time to time amended,
modified or supplemented, including by succession of comparable
successor statutes.
(b) Each of the following terms is defined on the pages set
forth opposite such term:
The following is a list of the disclosure schedules to the
Agreement and Plan of Merger among Pulte, Pi Nevada Building
Company and Centex that have been omitted pursuant to
Item 601(b)(2) of
Regulation S-K.
Pulte and Centex undertake to furnish supplementally to the SEC,
upon request, a copy of any omitted schedule.
You have requested our opinion as to the fairness, from a
financial point of view, to Pulte Homes, Inc.
(“Pulte”) of the Exchange Ratio (defined below) set
forth in the Agreement and Plan of Merger, dated as of
April 7, 2009 (the “Merger Agreement”), among
Pulte, Pi Nevada Building Company, a wholly owned subsidiary of
Pulte (“Merger Sub”), and Centex Corporation
(“Centex”). As more fully described in the Merger
Agreement, Merger Sub will be merged with and into Centex (the
“Merger”) and each outstanding share of the common
stock, par value $0.25 per share, of Centex (“Centex Common
Stock”) will be converted into the right to receive 0.975
(the “Exchange Ratio”) of a share of the common stock,
par value $0.01 per share, of Pulte (“Pulte Common
Stock”).
In arriving at our opinion, we reviewed the Merger Agreement and
held discussions with certain senior officers, directors and
other representatives and advisors of Pulte and certain senior
officers and other representatives and advisors of Centex
concerning the businesses, operations and prospects of Pulte and
Centex. We reviewed certain publicly available business and
financial information relating to Pulte and Centex as well as
certain financial forecasts and other information and data
relating to Pulte and Centex which were provided to or discussed
with us by the management of Pulte, including information
relating to potential strategic implications and operational
benefits (including the amount, timing and achievability
thereof) anticipated by the management of Pulte to result from
the Merger. We reviewed the financial terms of the Merger as set
forth in the Merger Agreement in relation to, among other
things: current and historical market prices and trading volumes
of Pulte Common Stock and Centex Common Stock; the historical
and projected earnings and other operating data of Pulte and
Centex; and the capitalization and financial condition of Pulte
and Centex. 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 Pulte and Centex and 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 Pulte utilizing, among other things,
the financial forecasts and estimates relating to Pulte and
Centex referred to above after giving effect to the potential
strategic implications and operational benefits anticipated by
the management of Pulte to result from the Merger. 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. 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 reviewed by or discussed with us and
upon the assurances of the managements of Pulte and Centex that
they are not aware of any relevant information that has been
omitted or that remains undisclosed to us. With respect to
financial forecasts and other information and data provided to
or otherwise reviewed by or discussed with us relating to Pulte
and Centex and potential pro forma financial effects of, and
strategic implications and operational benefits resulting from,
the Merger, we have been advised by the management of Pulte, 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 Pulte as to the future financial
performance of Pulte and Centex, such strategic implications and
operational benefits and the other matters covered thereby. We
also have assumed, with your consent, that the financial results
(including
the potential strategic implications and operational benefits
anticipated to result from the Merger) reflected in such
financial forecasts and other information and data will be
realized in the amounts and at the times projected.
We have assumed, with your consent, that the Merger will be
consummated in accordance with its terms without waiver,
modification or amendment of any material term, condition or
agreement and that, in the course of obtaining the necessary
regulatory or third party approvals, consents, releases and
waivers for the Merger, no delay, limitation, restriction or
condition will be imposed that would have an adverse effect on
Pulte, Centex or the contemplated benefits of the Merger. We
also have assumed, with your consent, that the Merger will
qualify for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended. Our opinion, as set forth
herein, relates to the relative values of Pulte and Centex. We
are not expressing any opinion as to what the value of Pulte
Common Stock actually will be when issued pursuant to the Merger
or the prices at which Pulte Common Stock or Centex Common Stock
will trade at any time. We have not made or been provided with
an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Pulte or Centex nor
have we made any physical inspection of the properties or assets
of Pulte or Centex. We express no view as to, and our opinion
does not address, the underlying business decision of Pulte to
effect the Merger, the relative merits of the Merger as compared
to any alternative business strategies that might exist for
Pulte or the effect of any other transaction in which Pulte
might engage. Our opinion does not address any terms (other than
the Exchange Ratio to the extent expressly specified herein) or
other aspects or implications of the Merger, including, without
limitation, the form or structure of the Merger 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
fairness (financial or otherwise) of the amount or nature or any
other aspect of any compensation to any officers, directors or
employees of any parties to the Merger, or any class of such
persons, relative to the Exchange Ratio. Our opinion is
necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances
existing and disclosed to us, as of the date hereof. As you are
aware, the credit, financial and stock markets are experiencing
unusual volatility and we express no opinion or view as to any
potential effects of such volatility on Pulte, Centex or the
contemplated benefits of the Merger.
Citigroup Global Markets Inc. has acted as financial advisor to
Pulte in connection with the proposed Merger and will receive a
fee for such services, a significant portion of which is
contingent upon the consummation of the Merger. We also will
receive a fee in connection with the delivery of this opinion.
We and our affiliates in the past have provided, currently are
providing and in the future may provide services to Pulte and
Centex unrelated to the proposed Merger, for which services we
and such affiliates have received and expect to receive
compensation, including, without limitation, (i) acting as
joint arranger
and/or agent
for, and as a lender under, a $1.6 billion and
$1.86 billion revolving credit facility of Pulte and
(ii) acting as agent for, and as a lender under, a
$2.085 billion revolving credit facility of Centex. In the
ordinary course of our business, we and our affiliates may
actively trade or hold the securities of Pulte and Centex 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 Pulte, Centex and their respective affiliates.
Our advisory services and the opinion expressed herein are
provided for the information of the Board of Directors of Pulte
in its evaluation of the proposed Merger, and our opinion is not
intended to be and does not constitute a recommendation to any
securityholder as to how such securityholder should vote or act
on any matters relating to the proposed Merger.
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 Exchange Ratio is fair, from a financial
point of view, to Pulte.
You have requested our opinion as to the fairness from a
financial point of view to the holders of the outstanding shares
of common stock, par value $0.25 per share (the
“Shares”), of Centex Corporation (the
“Company”) of the exchange ratio of 0.975 shares
of common stock, par value $0.01 per share (the “Pulte
Common Stock”), of Pulte Homes, Inc. (“Pulte”) to
be paid for each Share (the “Exchange Ratio”) pursuant
to the Agreement and Plan of Merger, dated as of April 7,2009 (the “Agreement”), by and among Pulte,
Pi Nevada Building Company, a wholly owned subsidiary of
Pulte, and the Company.
Goldman, Sachs & Co. and its affiliates are engaged in
investment banking and financial advisory services, securities
trading, investment management, principal investment, financial
planning, benefits counseling, risk management, hedging,
financing, brokerage activities and other financial and
non-financial activities and services for various persons and
entities. In the ordinary course of these activities and
services, Goldman, Sachs & Co. and its affiliates may
at any time make or hold long or short positions and
investments, as well as actively trade or effect transactions,
in the equity, debt and other securities (or related derivative
securities) and financial instruments (including bank loans and
other obligations) of the Company, Pulte and any of their
respective affiliates or any currency or commodity that may be
involved in the transaction contemplated by the Agreement (the
“Transaction”) for their own account and for the
accounts of their customers. We have acted as financial advisor
to the Company in connection with, and have participated in
certain of the negotiations leading to, the Transaction. We
expect to receive fees for our services in connection with the
Transaction, the principal portion of which is contingent upon
consummation of the Transaction, and the Company has agreed to
reimburse our expenses and indemnify us against certain
liabilities that may arise out of our engagement. In addition,
we have provided certain investment banking and other financial
services to the Company and its affiliates from time to time,
including having acted as financial advisor to the Company in
connection with the sale of certain of its land assets in March
2008. We also have provided certain investment banking and other
financial services to Pulte and its affiliates from time to
time. We also may provide investment banking and other financial
services to the Company, Pulte and their respective affiliates
in the future. In connection with the above-described services
we have received, and may receive, compensation.
In connection with this opinion, we have reviewed, among other
things, the Agreement; annual reports to stockholders and Annual
Reports on
Form 10-K
of the Company and Pulte for the five fiscal years ended
March 31, 2008 and December 31, 2008, respectively;
certain interim reports to stockholders and Quarterly Reports on
Form 10-Q
of the Company and Pulte; certain other communications from the
Company and Pulte to their respective stockholders; certain
publicly available research analyst reports for the Company and
Pulte; certain internal financial analyses and forecasts for the
Company prepared by its management and certain internal
financial analyses and forecasts for Pulte prepared by its
management, as adjusted by the management of the Company, in
each case, as approved for our use by the Company (the
“Forecasts”); certain cost savings
C-1
and operating synergies projected by the management of Pulte to
result from the Transaction; and certain cost savings and
operating synergies projected by the management of the Company
to result from the Transaction, as approved for our use by the
Company (the “Synergies”). We also have held
discussions with members of the senior managements of the
Company and Pulte regarding their assessment of the strategic
rationale for, and the potential benefits of, the Transaction
and the past and current business operations, financial
condition and future prospects of Pulte, and with members of the
senior management of the Company regarding their assessment of
the past and current business operations, financial condition
and future prospects of the Company. In addition, we have
reviewed the reported price and trading activity for the Shares
and shares of Pulte Common Stock, compared certain financial and
stock market information for the Company and Pulte with similar
information for certain other companies the securities of which
are publicly traded, reviewed the financial terms of certain
recent business combinations in the construction services
industry specifically and in other industries generally and
performed such other studies and analyses, and considered such
other factors, as we considered appropriate.
For purposes of rendering this opinion, we have relied upon and
assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
financial, legal, regulatory, tax, accounting and other
information provided to, discussed with or reviewed by us. In
that regard, we have assumed that the Forecasts and the
Synergies have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the
management of the Company, and that the Synergies will be
realized in all respects meaningful to our analysis. In
addition, we have not made an independent evaluation or
appraisal of the assets and liabilities (including any
contingent, derivative or off-balance-sheet assets and
liabilities) of the Company or Pulte or any of their respective
subsidiaries and we have not been furnished with any such
evaluation or appraisal. We also have assumed that all
governmental, regulatory or other consents and approvals
necessary for the consummation of the Transaction will be
obtained without any adverse effect on the Company or Pulte or
on the expected benefits of the Transaction in any way
meaningful to our analysis. Our opinion does not address any
legal, regulatory, tax or accounting matters.
Our opinion does not address the underlying business decision of
the Company to engage in the Transaction, or the relative merits
of the Transaction as compared to any strategic alternatives
that may be available to the Company. This opinion addresses
only the fairness from a financial point of view, as of the date
hereof, of the Exchange Ratio pursuant to the Agreement. We do
not express any view on, and our opinion does not address, any
other term or aspect of the Agreement or Transaction, including,
without limitation, the fairness of the Transaction to, or any
consideration received in connection therewith by, the holders
of any other class of securities, creditors, or other
constituencies of the Company or Pulte; nor as to the fairness
of the amount or nature of any compensation to be paid or
payable to any of the officers, directors or employees of the
Company or Pulte, or class of such persons in connection with
the Transaction, whether relative to the Exchange Ratio pursuant
to the Agreement or otherwise. We are not expressing any opinion
as to the prices at which shares of Pulte Common Stock will
trade at any time. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof and we
assume no responsibility for updating, revising or reaffirming
this opinion based on circumstances, developments or events
occurring after the date hereof. Our advisory services and the
opinion expressed herein are provided for the information and
assistance of the Board of Directors of the Company in
connection with its consideration of the Transaction and such
opinion does not constitute a recommendation as to how any
holder of Shares should vote with respect to such Transaction or
any other matter. This opinion has been approved by a fairness
committee of Goldman, Sachs & Co.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Exchange Ratio pursuant to the
Agreement is fair from a financial point of view to the holders
of Shares.
RESTATED
ARTICLES OF
INCORPORATION OF PULTE HOMES, INC.
ARTICLE I
The name of the corporation is: Pulte Homes, Inc.
ARTICLE II
The purpose or purposes for which the corporation is formed are:
The purpose or purposes for which the Corporation is organized
is to engage in any activity within the purposes for which
Corporations may be organized under the Michigan Business
Corporation Act.
ARTICLE III
The total authorized shares:
1.
Common Shares
400,000,000
Par Value Per Share
$
0.01
Preferred Shares
25,000,000
Par Value Per Share
$
0.01
2. A statement of all or any of the relative
rights, preferences and limitations of the shares of each class
is as follows:
Provisions
Relating to Preferred Stock
The Board of Directors may cause the Corporation to issue
Preferred Stock in one or more series, each series to bear a
distinctive designation and to have such relative rights and
preferences as shall be prescribed by resolution of the Board;
such resolutions, when filed, shall constitute amendments to
these Articles of Incorporation. Without limiting the generality
of the grant of authority contained in the preceding sentence,
the Board of Directors is authorized to determine any or all of
the following, and the shares of each series may vary from the
shares of any other series in any or all of the following
respects:
a. The number of shares of such series (which may
subsequently be increased, except as otherwise provided by the
resolutions of the Board of Directors providing for the issue of
such series, or decreased to a number not less than the number
of shares then outstanding) and the distinctive designation
thereof;
b. The dividend rights, if any, of such series; the
dividend preferences, if any, as between such series and any
other class or series of stock; whether and the extent to which
shares of such series shall be entitled to participate in
dividends with shares of any other series or class of stock;
whether and the extent to which dividends on such series shall
be cumulative; and any limitations, restrictions or conditions
on the payment of such dividends;
c. The time or times during which, the price or prices at
which, and any other terms or conditions on which the shares of
such series may be redeemed, if redeemable;
d. The rights of such series, and the preferences, if any,
as between such series and any other class or series of stock,
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and whether and the
extent to which shares of any such series shall be entitled to
participate in such event with any other class or series of
stock;
e. The voting powers, if any, in addition to the voting
powers prescribed by law, of shares of such series, and the
terms of exercise of such voting powers;
f. Whether shares of such series shall be convertible into
or exchangeable for shares of other series or class of stock, or
of any series of the same class, or any other securities, and
the terms and conditions, if any, applicable to such right;
D-1
g. The terms and conditions, if any, of any purchase,
retirement or sinking fund which may be provided for the shares
of such series; and
h. Any other preferences and relative, participating,
optional or other special rights, and qualifications,
limitations or restrictions thereof, in relation to stock of any
other class or series thereof or of any other series of the same
class, as shall not be inconsistent with law or the provisions
of this Article III.
Any action required or permitted by the Act to be taken at an
annual or special meeting of shareholders may be taken without a
meeting, without prior notice, and without a vote, if a consent
in writing, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take the
action at a meeting at which all shares entitled to vote thereof
were present and voted.
Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to
the shareholders who have not consented in writing.
ARTICLE VII
Pursuant to Section 784(1)(b) of the Michigan Business
Corporation Act, the Corporation expressly elects not be
governed by Chapter 7A of the Michigan Business Corporation
Act, being Sections 775 through 784 of the Michigan
Business Corporation Act; provided that the Corporation’s
Board of Directors may terminate this election in whole or in
part by action of the majority of directors then in office.
ARTICLE VIII
A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for
breach of the director’s fiduciary duty. However, this
Article VIII shall not eliminate or limit the liability of
a director for any of the following:
1. A breach of the director’s duty of loyalty to the
Corporation or its shareholders.
2. Acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law.
3. A violation of Section 551(1) of the Michigan
Business Corporation Act.
4. A transaction from which the director derived an
improper personal benefit.
5. An act or omission occurring before the effective date
of this Article.
D-2
Any repeal or modification of this Article by the shareholders
of the Corporation shall not adversely affect any right or
protection of any director of the Corporation existing at the
time of, or for or with respect to, any acts or omissions
occurring before such repeal or modification.
ARTICLE IX
The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors consisting of not
less than three (3), or more than fifteen (15) directors,
the exact number of directors to be determined from time to time
solely by a resolution adopted by an affirmative vote of a
majority of the entire Board of Directors. The directors shall
be divided into three (3) classes, designated Class I,
Class II and Class III. Each class shall consist, as
nearly as may be possible, of one-third (1/3) of the total
number of directors constituting the entire Board of Directors.
At the 1988 Annual Meeting of Shareholders, Class I
directors shall be elected for a one-year term. Class II
directors for a two-year term and Class III directors for a
three-year term. At each succeeding annual meeting of
shareholders, commencing in 1989, successors to the class of
directors whose term expires at that annual meeting shall be
elected for a three-year term.
If the number of directors is changed, any increase or decrease
shall be apportioned among the classes of directors so as to
maintain the number of directors in each class as nearly equal
as possible, but in no case shall a decrease in the number of
directors shorten the term of any incumbent director. When the
number of directors is increased by the Board of Directors and
any newly created directorships are filled by the Board, there
shall be no classification of the additional directors until the
next annual meeting of shareholders.
A director shall hold office until the meeting for the year in
which his or her term expires and until his or her successor
shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from
office. Newly created directorships resulting from an increase
in the number of directors and any vacancy on the Board of
Directors for any reason whatsoever shall be filled only by an
affirmative vote of a majority of the Board of Directors then in
office. If the number of directors then in office is less than a
quorum, such newly created directorships and vacancies shall be
filled by a majority of the directors then in office, although
less than a quorum, or by the sole remaining director. A
director elected by the Board of Directors to fill a vacancy
shall hold office until the next meeting of shareholders called
for the election of directors and until his or her successor
shall be elected and shall qualify.
Nominations for the election of directors shall be made as set
forth in the Bylaws of the Corporation.
Notwithstanding the foregoing, whenever the holders of any one
or more classes of preferred stock or series thereof issued by
the Corporation shall have the right, voting separately by class
or series, to elect directors at an annual or special meeting of
shareholders, the election, term of office, filling of vacancies
and other features of such directorship shall be governed by the
terms of these Articles of Incorporation applicable thereto, and
such directors so elected shall not be divided into classes
pursuant to this Article IX.
ARTICLE X
A. In addition to any affirmative vote required by law or
these Articles of Incorporation, and except as provided in
Section B of this Article X:
1. Any merger or consolidation of the Corporation or any
subsidiary with either;
(i) Any Interested Shareholder;
(ii) Any other corporation, whether or not itself an
Interested Shareholder, which is, or after the merger or
consolidation would be, an Affiliate of an Interested
Shareholder that was an Interested Shareholder prior to the
transaction;
2. Any sale, lease, transfer, or other disposition, except
in the usual and regular course of business, in one transaction
or a series of transactions in any twelve-month period, to any
Interested Shareholder or any Affiliate of any Interested
Shareholder, other than the Corporation or any of its
subsidiaries, of any
D-3
assets of the Corporation or any subsidiary having, measured at
the time the transaction or transactions are approved by the
Board of Directors of the Corporation, an aggregate book value
at the end of the Corporation’s most recently ended fiscal
quarter of ten percent (10%) or more of its consolidated net
worth;
3. The issuance or transfer by the Corporation, or any
subsidiary, in one transaction or a series of transactions in
any twelve-month period, of any Equity Securities of the
Corporation or any subsidiary which have an aggregate market
value of five percent (5%) or more of the total market value of
the outstanding shares of the Corporation to any Interested
Shareholder or any Affiliate of any Interested Shareholder,
other than the Corporation or any of its subsidiaries, except
pursuant to the exercise of warrants or rights to purchase
securities offered pro rata to all holders of the
Corporation’s voting shares or any other method affording
substantially proportionate treatment to the holders of voting
shares;
4. The adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder or any Affiliate of any Interested
Shareholder;
5. Any reclassification of securities, including any
reverse stock split, or recapitalization of the Corporation, or
any merger, consolidation, or share exchange of the Corporation
with any of its subsidiaries which has the effect, directly or
indirectly, in one transaction or a series of transactions in
any twelve-month period, of increasing the proportionate amount
of the outstanding shares of any class of Equity Securities of
the Corporation or any subsidiary which is directly or
indirectly owned by any Interested Shareholder or any Affiliate
of any Interested Shareholder; and
6. Any agreement, contract or other arrangement providing
for one or more of the foregoing.
shall require the affirmative vote of the holders of at least
sixty-nine and three tenths percent (69.3%) of the shares voting
on the proposed Business Combination (as defined below) at the
meeting of shareholders. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or in any agreement
with any national securities exchange or otherwise.
B. The provisions of Section A of this Article X
shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such
affirmative vote as is required by law and any other provisions
of these Articles of Incorporation if:
1. The Board of Directors of the Corporation shall have
approved such Business Combination and either (i) the
Interested Shareholder has been an Interested Shareholder
continuously for period of at least two (2) years prior to
the date on which the Board approved such Business Combination,
or (ii) such proposed transaction was approved by the Board
prior to the time the Interested Shareholder became an
Interested Shareholder; or
2. A majority of the outstanding shares of stock of such
other corporation is owned of record or beneficially, directly
or indirectly, by the Corporation or its subsidiaries.
C. For the purpose of this Article X:
1. “Business Combination” shall mean any
transaction referred to in any one or more of clauses A.1
through A.5 above.
2. A “person” shall mean any individual or
firm, corporation, partnership, limited partnership, joint
venture, trust, unincorporated association or other entity.
3. “Interested Shareholder” means any
person other than the Corporation or any subsidiary of the
Corporation who is either:
a. The Beneficial Owner, directly or indirectly, of ten
percent (10%) or more of the voting power of the outstanding
voting stock of the Corporation.
b. An Affiliate of the Corporation that at any time within
the two-year period immediately prior to the date in question
was the Beneficial Owner, directly or indirectly, of ten percent
(10%) or more of the voting power of the then outstanding voting
stock of the Corporation.
D-4
c. For the purpose of determining whether a person is an
Interested Shareholder pursuant to subdivision C.3.a or C.3.b,
the number of shares of voting stock considered to be
outstanding shall include all voting stock owned by the person
except for those shares which may be issuable pursuant to any
agreement, arrangement, or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
4. Beneficial Owner”, when used with respect to any
voting stock, means a person who:
a. Individually or with any of its Affiliates or
Associates, beneficially owns voting stock, directly or
indirectly.
b. Individually or with any of its Affiliates or Associates
has:
(1) The right to acquire shares, whether the right is
exercisable immediately or only after the passage of time,
pursuant to any agreement, arrangement, or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise.
(2) The right to vote voting shares pursuant to any
agreement, arrangement, or understanding.
(3) Any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting or disposing of voting
shares with any other person who beneficially owns, or whose
Affiliates or Associates beneficially own, directly or
indirectly, the voting shares.
5. “Affiliate” or “Affiliated
Person” means a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by,
or is under common control with, a specified person.
6. “Associate” when used to indicate a
relationship with any person, means any one of the following:
a. Any corporation or organization, other than the
Corporation or a subsidiary of the Corporation, in which the
person is an officer, director, or partner, or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of
any class of Equity Securities.
b. Any trust or other estate in which the person has a
beneficial interest of ten percent (10%) or more or as to which
the person serves as trustee or in a similar fiduciary capacity
in connection with the trust or estate.
c. Any relative or spouse of the person, or any relative of
the spouse, who has the same home as the person or who is a
director or officer of the Corporation or any of its Affiliates.
7. “Control”, “controlling”,
“controlled by”, or “under common control
with” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. The beneficial ownership
of ten percent (10%) or more of the voting shares of a
corporation shall create a presumption of control.
8. “Equity Security” means any one of the
following:
a. Any stock or similar security, certificate of interest,
or participation in any profit sharing agreement, voting trust
certificate, or voting share.
b. Any security convertible, with or without consideration,
into an Equity Security, or any warrant or other security
carrying any right to subscribe to or purchase an Equity
Security.
c. Any put, call, straddle, or other option or privilege of
buying an Equity Security from or selling an Equity Security to
another without being bound to do so.
The Board of Directors of the Corporation shall have the power
and duty to determine for the purposes of this Article X,
on the basis of the information known to them after reasonable
inquiry, (A) whether a person is
D-5
an Interested Shareholder, (B) the number of shares of
voting stock beneficially owned by any persons, and
(C) whether a person is an Affiliate or an Associate of
another.
Nothing contained in this Article X shall be construed to
relieve any Interested Shareholder from any fiduciary obligation
imposed by law.
In accordance with the provisions of Article XI of these
Articles of Incorporation, this Article X may only be
amended by the affirmative vote of sixty-nine and three tenths
percent (69.3%) of the shares voting on the proposed amendment
at a meeting of shareholders, in addition to the vote otherwise
required by the Michigan Business Corporation Act.
ARTICLE XI
Anything contained in these Articles of Incorporation to the
contrary Article X and this Article XI of these
Articles of Incorporation shall not be altered, amended, changed
or repealed and no provision inconsistent with the intent or
purpose of such provisions shall be adopted without the
affirmative vote of sixty-nine and three tenths percent (69.3%)
of the shares voting at a meeting of shareholders, in addition
to the vote otherwise required by the Michigan Business
Corporation Act.
MICHIGAN
DEPARTMENT OF ENERGY, LABOR & ECONOMIC GROWTH
BUREAU OF
COMMERCIAL SERVICES
Date Received
(FOR BUREAU USE ONLY)
This document is effective on the date filed, unless a
subsequent effective date within 90 days after received
date is stated in the document
Name
Address
City
State
ZIP Code
ñ
Document will be returned to the name and address you enter
above.
ñ If left blank document will be mailed to the registered
office.
EFFECTIVE DATE:
CERTIFICATE OF
AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Profit and
Nonprofit Corporations (Please
read information and instructions on the last page)
Pursuant to the
provisions of Act 284, Public Acts of 1972, (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit
corporations), the undersigned corporation executes the
following Certificate:
1.
The present name of the corporation is:
Pulte Homes, Inc.
2.
The identification number assigned by the Bureau is:
4. Profit or
Nonprofit Corporation: For amendments adopted by unanimous
consent of incorporators before the first meeting of the board
of directors or trustees.
,
,
in accordance with the provisions of the Act by the unanimous
consent of the incorporator(s) before the first meeting of the
Board of Directors or Trustees.
Signed this
day of
,
(Signature)
(Signature)
(Type or Print Name)
(Type or Print Name)
(Signature)
(Signature)
(Type or Print Name)
(Type or Print Name)
5. Profit
Corporation Only: Shareholder or Board Approval
The foregoing
amendment to the Articles of Incorporation proposed by the board
was duly adopted on the
day of
,
2009 , by the:
(check one of the following)
þ
shareholders at a
meeting in accordance with Section 611(3) of the Act.
o
written consent of
the shareholders having not less than the minimum number of
votes required by statute in accordance with Section 407(1)
of the Act. Written notice to shareholders who have not
consented in writing has been given. (Note: Written consent by
less than all of the shareholders is permitted only if such
provision appears in the Articles of Incorporation.)
o
written consent of
all the shareholders entitled to vote in accordance with
Section 407(2) of the Act.
o
board of a profit
corporation pursuant to section 611(2) of the Act.
Profit Corporations
and Professional Service Corporations
Signed this
day of
,
By
(Signature
of an authorized officer or agent)
(Type
or Print Name)
E-2
6.
Nonprofit
corporation only: Member, shareholder, or board
approval
The foregoing
amendment to the Articles of Incorporation was duly adopted on
the
day of
,
by
the (check one of the following)
Member or
shareholder approval for nonprofit corporations organized on a
membership or share basis
o
members or shareholders at a meeting in accordance with Section
611(2) of the Act.
o
written consent of the members or shareholders having not less
than the minimum number of votes required by statute in
accordance with Section 407(1) and (2) of the Act.
Written notice to members or shareholders who have not consented
in writing has been given. (Note: Written consent by less than
all of the members or shareholders is permitted only if such
provision appears in the Articles of Incorporation.)
o
written consent of all the members or shareholders entitled to
vote in accordance with section 407(3) of the Act.
Directors (Only
if the Articles state that the corporation is organized on a
directorship basis)
o
directors at a meeting in accordance with Section 611(2) of
the Act.
o
written consent of all directors pursuant to Section 525 of
the Act.
Nonprofit
Corporations
Signed
this
day of
,
By
(Signature of President, Vice-President, Chairperson or Vice-Chairperson)
MICHIGAN
DEPARTMENT OF ENERGY, LABOR & ECONOMIC GROWTH
BUREAU OF
COMMERCIAL SERVICES
Date Received
(FOR BUREAU USE ONLY)
This document is effective on the date filed, unless a
subsequent effective date within 90 days after received
date is stated in the document
Name
Address
City
State
ZIP Code
ñ
Document will be returned to the name and address you enter
above.
ñ If left blank document will be mailed to the registered
office.
EFFECTIVE DATE:
CERTIFICATE OF
AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Profit and
Nonprofit Corporations (Please
read information and instructions on the last page)
Pursuant to the
provisions of Act 284, Public Acts of 1972, (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit
corporations), the undersigned corporation executes the
following Certificate:
1.
The present name of the corporation is:
Pulte Homes, Inc.
2.
The identification number assigned by the Bureau is:
4. Profit or
Nonprofit Corporation: For amendments adopted by unanimous
consent of incorporators before the first meeting of the board
of directors or trustees.
,
,
in accordance with the provisions of the Act by the unanimous
consent of the incorporator(s) before the first meeting of the
Board of Directors or Trustees.
Signed this
day of
,
(Signature)
(Signature)
(Type or Print Name)
(Type or Print Name)
(Signature)
(Signature)
(Type or Print Name)
(Type or Print Name)
5. Profit
Corporation Only: Shareholder or Board Approval
The foregoing
amendment to the Articles of Incorporation proposed by the board
was duly adopted on the
day of
,
2009 , by the:
(check one of the following)
þ
shareholders at a
meeting in accordance with Section 611(3) of the Act.
o
written consent of
the shareholders having not less than the minimum number of
votes required by statute in accordance with Section 407(1)
of the Act. Written notice to shareholders who have not
consented in writing has been given. (Note: Written consent by
less than all of the shareholders is permitted only if such
provision appears in the Articles of Incorporation.)
o
written consent of
all the shareholders entitled to vote in accordance with
Section 407(2) of the Act.
o
board of a profit
corporation pursuant to section 611(2) of the Act.
Profit Corporations
and Professional Service Corporations
Signed this
day of
,
By
(Signature of an authorized officer or agent)
(Type
or Print Name)
F-2
6.
Nonprofit
corporation only: Member, shareholder, or board
approval
The foregoing
amendment to the Articles of Incorporation was duly adopted on
the
day of
,
by
the (check one of the following)
Member or
shareholder approval for nonprofit corporations organized on a
membership or share basis
o
members or shareholders at a meeting in accordance with Section
611(2) of the Act.
o
written consent of the members or shareholders having not less
than the minimum number of votes required by statute in
accordance with Section 407(1) and (2) of the Act.
Written notice to members or shareholders who have not consented
in writing has been given. (Note: Written consent by less than
all of the members or shareholders is permitted only if such
provision appears in the Articles of Incorporation.)
o
written consent of all the members or shareholders entitled to
vote in accordance with section 407(3) of the Act.
Directors (Only
if the Articles state that the corporation is organized on a
directorship basis)
o
directors at a meeting in accordance with Section 611(2) of
the Act.
o
written consent of all directors pursuant to Section 525 of
the Act.
Nonprofit
Corporations
Signed
this
day of
,
By
(Signature of President, Vice-President, Chairperson or Vice-Chairperson)
(Type
or Print
Name) (Type
or Print Title)
F-3
Dates Referenced Herein and Documents Incorporated by Reference
