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As filed with the Securities and Exchange Commission on January 6, 2017

Registration No. 333-214566

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 3

to

FORM S-4/A

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

Lennar Corporation

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware		1520		95-4337490
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

700 Northwest 107th Avenue

Miami, Florida 33172

(305) 559-4000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Mark Sustana

General Counsel and Secretary

Lennar Corporation

700 Northwest 107th Avenue

Miami, Florida 33172

(305) 559-4000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

David W. Bernstein, Esq. Goodwin Procter LLP 620 Eighth Avenue New York, New York 10018 (212) 813-8800		Keith E. Bass Vivien N. Hastings, Esq. WCI Communities, Inc. 24301 Walden Center Drive Bonita Springs, Florida 34134 (239) 947-2600		Charles K. Ruck, Esq. Thomas J. Malone, Esq. Latham & Watkins LLP 885 Third Avenue New York, New York 10022 (212) 906-1200

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed merger contemplated by the Agreement and Plan of Merger, dated as of September 22, 2016, described in the enclosed proxy statement/prospectus, have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer		☒		Accelerated filer		☐
Non-accelerated filer		☐  (Do not check if a smaller reporting company)		Smaller reporting company		☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

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The information in this proxy statement/prospectus is not complete and may be changed. We may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer, solicitation or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED JANUARY 6, 2017

 

 

[                    ], 2017

PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT

 

 

Dear Stockholders:

Each of the boards of directors of Lennar Corporation (“Lennar”) and WCI Communities, Inc. (“WCI”) has unanimously approved a strategic transaction for the combination of Lennar and WCI, as described below (the “mergers”). WCI is sending you this proxy statement/prospectus to invite you to attend a special meeting of holders of WCI common stock (the “WCI stockholders”) and to ask you to vote at the special meeting in favor of adopting the agreement and plan of merger.

Lennar and WCI entered into an agreement and plan of merger on September 22, 2016 (the “merger agreement”) pursuant to which, subject to WCI stockholder approval and certain other customary closing conditions, Lennar and WCI will combine their businesses through the merger of a newly formed, direct, wholly owned subsidiary of Lennar with and into WCI (the “initial merger”), which is expected to be followed immediately by a second merger of that entity with and into another direct, wholly owned subsidiary of Lennar.

If the initial merger is completed, each WCI stockholder will have the right to receive with regard to each share of WCI common stock held at the time of the initial merger (1) at least $11.75 in cash (the “cash consideration”) and (2) a number of shares of Lennar Class A common stock (“Lennar Class A stock”) equal to (a) $23.50 minus the amount of the cash consideration divided by (b) the average of the volume weighted average price of Lennar Class A stock reported on the New York Stock Exchange (the “NYSE”) on each of the ten trading days immediately preceding the closing of the initial merger (the “share consideration”, and together with the cash consideration, the “merger consideration”), as described in more detail in the enclosed proxy statement/prospectus in the section titled “The Merger Agreement—Terms of the Mergers” beginning on page 82. No fractional shares of Lennar Class A stock will be issued in the initial merger, and WCI stockholders will, instead, have the right to receive cash in lieu of fractional shares, if any. Assuming the merger consideration is paid half in cash and half with Lennar Class A stock, upon completion of the initial merger, WCI’s former stockholders will own approximately 3.4% of the then-outstanding Lennar Class A stock, based on the number of shares and equity awards of Lennar and WCI outstanding on September 30, 2016, assuming that the value of Lennar Class A Stock to be issued in the initial merger is $43.20482. The number of shares of Lennar Class A stock you will receive will depend on the amount Lennar elects to pay as cash consideration and the price of Lennar’s Class A stock during the ten NYSE trading days preceding the closing of the initial merger. Therefore, the exact fraction of a share of Lennar Class A stock issuable with regard to each share of WCI common stock will not be determinable until the close of trading on the last trading day prior to the closing date of the initial merger.

Lennar Class A stock is listed on the NYSE under the symbol “LEN.” WCI common stock is listed on the NYSE under the symbol “WCIC.” We urge you to obtain current market quotations for the shares of common stock of Lennar and WCI.

 

 

The vote of WCI stockholders is very important regardless of the number of shares of WCI common stock you own. The mergers cannot be completed unless WCI stockholders adopt the merger agreement. WCI is holding a special meeting of its stockholders to vote on the proposal to adopt the merger agreement. Approval of that proposal will require the affirmative vote of holders of a majority of the outstanding shares of WCI common stock entitled to vote on the proposal. Therefore, not voting has the same effect as voting against the proposal. Information about the special meeting, the mergers and the other business to be considered by WCI stockholders at the special meeting is contained in the enclosed proxy statement/prospectus. We urge you to read this proxy statement/prospectus carefully. You should also carefully consider the risks that are described in the section titled “Risk Factors” beginning on page 19.

Whether or not you plan to attend WCI’s special meeting of stockholders, please submit your proxy as soon as possible to make sure that your shares are represented at that meeting.

The WCI board of directors unanimously recommends that WCI stockholders vote “FOR” the proposal to adopt the merger agreement, which is necessary to complete the mergers.

Keith E. Bass

President and Chief Executive Officer

WCI Communities, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the mergers or the other transactions described in the enclosed proxy statement/prospectus or the securities to be issued in connection with the mergers or determined if the enclosed proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated [                        ], 2017, and is first being mailed to WCI stockholders on or about [                        ], 2017.

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24301 Walden Center Drive

Bonita Springs, FL 34134

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [                    ], 2017

 

 

To the Stockholders of WCI Communities, Inc.:

Notice is hereby given that a special meeting of stockholders of WCI Communities, Inc. (“WCI”) will be held on [                    ], 2017, at [                ], Eastern time, at the offices of Latham & Watkins LLP, WCI’s outside counsel, located at 885 3rd Avenue, New York, NY 10022, for the following purposes:

 

1.

Merger proposal: To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 22, 2016 (as it may be amended from time to time, the “merger agreement”), by and among WCI, Lennar Corporation, Marlin Green Corp. and Marlin Blue LLC, a copy of which is attached as Annex A to the proxy statement/prospectus accompanying this notice; and

 

2.	Adjournment proposal: To consider and vote on a proposal to approve the adjournment of the WCI special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the WCI special meeting.

Approval of the merger proposal is required for completion of the mergers contemplated by the merger agreement. Approval of the adjournment proposal is not a condition to the obligations of Lennar or WCI to complete the mergers.

WCI will transact no other business at the WCI special meeting, except for business properly brought before the WCI special meeting or any adjournment or postponement thereof.

The accompanying proxy statement/prospectus further describes the matters to be considered at the WCI special meeting.

The WCI board of directors has set December 23, 2016 as the record date for the WCI special meeting. Only WCI stockholders of record at the close of business on December 23, 2016 will be entitled to notice of or to vote at the WCI special meeting or any adjournments thereof.

Your vote is very important. Failure to vote will have the same effect as a vote against the merger proposal. To ensure your representation at the WCI special meeting, please complete and return the enclosed proxy card, which you can do by mail, or submit your proxy by telephone or through the Internet. Please submit your proxy promptly whether or not you expect to attend the WCI special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the WCI special meeting and the proxy will be disregarded as to any matter on which you vote in person.

The WCI board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the merger proposal and “FOR” the adjournment proposal, if necessary.

By Order of the Board of Directors of WCI Communities, Inc.,

Vivien N. Hastings

Senior Vice President, Secretary and General Counsel

[                        ], 2017

PLEASE SUBMIT YOUR PROXY PROMPTLY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT SUBMITTING A PROXY FOR YOUR SHARES, PLEASE CALL MACKENZIE PARTNERS, INC. TOLL-FREE AT (800) 322-2885 (BANKS AND BROKERS CALL COLLECT AT (212) 929-5500).

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PROXY STATEMENT/PROSPECTUS

 

 

ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form S-4 filed with the Securities and Exchange Commission, which we refer to as the “SEC” in this proxy statement/prospectus, by Lennar (File No. 333-214566), constitutes a prospectus of Lennar Corporation, which we refer to, together with its subsidiaries unless the context indicates otherwise, as “Lennar” in this proxy statement/prospectus, under Section 5 of the Securities Act of 1933, as amended, which we refer to as the “Securities Act” in this proxy statement/prospectus, with respect to the Lennar Class A common stock, which we refer to as “Lennar Class A stock” in this proxy statement/prospectus, to be issued pursuant to an Agreement and Plan of Merger, dated as of September 22, 2016, among WCI Communities, Inc., which we refer to, together with its subsidiaries unless the context indicates otherwise, as “WCI” in this proxy statement/prospectus, Lennar, Marlin Green Corp. and Marlin Blue LLC, which we refer to as the “merger agreement” in this proxy statement/prospectus. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act” in this proxy statement/prospectus, with respect to the special meeting, which we refer to as the “WCI special meeting” in this proxy statement/prospectus, of stockholders of WCI, which we refer to as “WCI stockholders” in this proxy statement/prospectus, at which WCI stockholders will be asked to consider and vote on, among other matters, a proposal to adopt the merger agreement and approve the merger of a direct, wholly-owned subsidiary of Lennar into WCI under the merger agreement, which we refer to as the “initial merger” in this proxy statement/prospectus.

As a result of the initial merger, each WCI stockholder will receive with regard to each share of WCI common stock held at the time of the initial merger, consideration valued at $23.50. This will consist of (a) at least $11.75 in cash, which we refer to as “cash consideration” in this proxy statement/prospectus, and (b) a number of shares of Lennar Class A stock equal to (i) $23.50 minus the amount of the cash consideration divided by (ii) the average of the volume weighted average price of Lennar Class A stock reported on the New York Stock Exchange, which we refer to as the “NYSE” in this proxy statement/prospectus, on each of the ten trading days immediately preceding the closing of the initial merger, which we refer to as the “share consideration” in this proxy statement/prospectus, as described in more detail in the enclosed proxy statement/prospectus in the section titled “The Merger Agreement—Terms of the Mergers” beginning on page 82. We refer to the cash consideration and the share consideration together as the “merger consideration” in this proxy statement/prospectus. Lennar may elect to pay more than $11.75 per share in cash, including paying the entire $23.50 in cash, and if the share consideration would be less than 41% of the entire merger consideration, as calculated for tax purposes, Lennar will be required to pay the entire merger consideration in cash. The terms of the merger consideration are described in more detail in the section of this proxy statement/prospectus titled “The Merger Agreement—Terms of the Mergers” beginning on page 82. For example, if the merger consideration is paid half in cash and half with Lennar Class A stock, based on the volume weighted average price of Lennar Class A stock on the ten NYSE trading days ended January 5, 2017, which was $43.20482 per share of Lennar Class A stock, a WCI stockholder would receive 0.27196 shares of Lennar Class A stock (as well as $11.75 in cash) with regard to each share of WCI common stock. However, the fraction of a share of Lennar Class A stock a WCI stockholder will receive with regard to a share of WCI common stock will depend on the amount Lennar elects to pay as cash consideration and the volume weighted average price of Lennar’s Class A stock during each of the ten NYSE trading days preceding the closing of the initial merger. Therefore, the actual fraction of a share of Lennar Class A stock that will be included in the merger consideration probably will be different from the number in the example. At the time a WCI stockholder votes by proxy on the proposal to adopt the merger agreement, the WCI stockholder will not know the exact fraction of a share of Lennar Class A stock that will be included in the merger consideration with regard to a share of WCI common stock. That fraction will not be determinable until the close of trading on the last trading day prior to the closing date of the initial merger. No fractional shares of Lennar Class A stock will be issued in the initial merger and WCI stockholders will, instead, receive cash in lieu of any fractional shares.

The stockholders meeting at which WCI stockholders will vote on the proposal to adopt the merger agreement will be held on [                    ], 2017. The initial merger is expected to become effective on that day or the following business day.

You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated [                    ], 2017. The information contained in this proxy statement/prospectus is accurate only as of that date or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Neither the mailing of this proxy statement/prospectus to WCI stockholders nor the issuance by Lennar of Lennar Class A stock pursuant to the merger agreement will create any implication to the contrary.

This proxy statement/prospectus, including the documents incorporated by reference into it, contains statements of opinion or belief regarding market conditions and similar matters. In many instances those opinions and beliefs are based upon general observations by members of Lennar’s or WCI’s management, anecdotal evidence and their experience in the conduct of the two companies’ businesses, without specific investigation or statistical analyses. Therefore, while they reflect the applicable company’s view of the industries and markets in which it is involved, they should not be viewed as reflecting verifiable views that are necessarily shared by all who are involved in those industries or markets.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

The information concerning Lennar contained in this proxy statement/prospectus or incorporated by reference has been provided by Lennar, and the information concerning WCI contained in this proxy statement/prospectus or incorporated by reference has been provided by WCI.

ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about Lennar and WCI from other documents that are not included in or delivered with this proxy statement/prospectus. For a listing of the documents incorporated by reference into this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 122.

You can obtain any of the documents incorporated by reference into this proxy statement/prospectus free of charge by requesting them in writing or by telephone from MacKenzie Partners, Inc., WCI’s proxy solicitor, at the following address and telephone number:

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

proxy@mackenziepartners.com

(800) 322-2885 (toll-free)

(212) 929-5500 (banks and brokers only)

To receive timely delivery of the documents in advance of the WCI special meeting, you should make your request no later than [                    ], 2017.

You may also obtain any of the documents incorporated by reference into this proxy statement/prospectus without charge through the SEC website at www.sec.gov. In addition, you may obtain copies of documents filed by Lennar with the SEC by accessing Lennar’s website at www.lennar.com under the tab “Investor Relations” and then under the heading “SEC Filings.” You may also obtain copies of documents filed by WCI with the SEC by accessing WCI’s website at www.wcicommunities.com under the tab “Investors” and then under the heading “Financial Information” and the subheading “SEC Filings.”

We are not incorporating the contents of the websites of the SEC, Lennar, WCI or any other entity into this proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites only for your convenience.

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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE WCI SPECIAL MEETING			i
SUMMARY			1
Information About Lennar			1
Information About WCI			2
Information About Corporate Sub and LLC Sub			2
The Mergers			3
Terms of the Mergers; Exchange and Payment Procedures			3
Treatment of WCI Equity Awards			3
Board of Directors and Executive Officers After Completion of the Mergers			4
WCI Board Recommendation and its Reasons for the Mergers			4
Opinions of WCI’s Financial Advisors			4
Interests of WCI Directors and Executive Officers in the Initial Merger			5
U.S. Federal Income Tax Considerations			6
Accounting Treatment of the Mergers			6
Appraisal Rights			6
Regulatory Approvals Required for the Mergers			7
Conditions to Completion of the Mergers			7
Completion of the Initial Merger			8
Transaction Solicitation Period			8
No Solicitation of Other Offers			9
Termination of the Merger Agreement			9
Purpose of the WCI Special Meeting; Required Vote			11
Voting by WCI Directors and Executive Officers			11
Litigation Related to the Mergers			11
SELECTED HISTORICAL FINANCIAL DATA OF LENNAR			12
SELECTED HISTORICAL FINANCIAL DATA OF WCI			14
COMPARATIVE PER SHARE DATA			16
MARKET PRICES AND DIVIDENDS			17
RISK FACTORS			19
Risks Relating to the Mergers			19
Risks Relating to the Combined Company Following the Mergers			22
Risks Inherent in an Investment in Lennar			23
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			26
THE MERGERS			28
Background of the Mergers			28
Lennar’s Reasons for the Mergers			45
WCI Board Recommendation and Its Reasons for the Mergers			45
Opinions of WCI’s Financial Advisors			49
Certain Unaudited Financial and Operating Forecasts Prepared by the Management of WCI			61
Board of Directors and Executive Officers After Completion of the Mergers			65
Accounting Treatment of the Mergers			65
Regulatory Approvals Required for the Mergers			65
Restrictions on Sales of Shares of Lennar Class A Stock Received in the Initial Merger			65
Appraisal Rights			66
NYSE Listing of Lennar Class A Stock; Delisting and Deregistration of WCI Common Stock			71
Interests of WCI Directors and Executive Officers in the Initial Merger			71
Litigation Relating to the Mergers			78
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS			79
THE MERGER AGREEMENT			82
Terms of the Mergers			82
Exchange and Payment Procedures			82
Treatment of WCI Equity Awards			83
Completion of the Mergers			83
Conditions to Completion of the Mergers			84
Representations and Warranties			85
Conduct of Business Prior to Closing			87

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Transaction Solicitation Period			89
No Solicitation; Notice of Proposals			90
Board Recommendation; Fiduciary Out			91
Reasonable Best Efforts to Obtain Required Stockholder Approval			92
Agreement to Take Further Action and to Use Reasonable Best Efforts			92
Employee Benefits Matters			92
Other Covenants and Agreements			93
Termination of the Merger Agreement			95
Effect of Termination; Termination Fees			96
Amendment and Waiver			97
Assignment			97
Specific Performance			97
Governing Law			97
INFORMATION ABOUT LENNAR			98
Business			98
Directors and Executive Officers			99
INFORMATION ABOUT WCI			100
Business			100
Security Ownership of Certain Beneficial Owners and Management			100
INFORMATION ABOUT CORPORATE SUB AND LLC SUB			103
Corporate Sub			103
LLC Sub			103
WCI SPECIAL MEETING			104
Date, Time and Place			104
Purpose of the WCI Special Meeting			104
Recommendation of the WCI Board			104
WCI Record Date; Stock Entitled to Vote			104
Quorum			105
Required Vote			105
Treatment of Abstentions; Failure to Vote			105
Voting of Proxies; Incomplete Proxies			105
Shares Held in Street Name; Broker Non-Votes			106
Revocability of Proxies and Changes to a WCI Stockholder’s Vote			106
Solicitation of Proxies			106
Voting by WCI Directors and Executive Officers			106
Stockholders Should Not Send Certificates with Their Proxies			107
Attending the WCI Special Meeting			107
No Other Business			107
WCI PROPOSALS			108
Item 1. The Merger Proposal			108
Item 2. The Adjournment Proposal			108
DESCRIPTION OF LENNAR CAPITAL STOCK			109
General			109
Description of Common Stock			109
Description of Preferred Stock			110
Description of Participating Preferred Stock			110
Anti-Takeover Effects of Lennar’s Certificate of Incorporation and Bylaws			111
Delaware Anti-Takeover Statute			111
Transfer Agent and Registrar			112
COMPARISON OF RIGHTS OF STOCKHOLDERS OF WCI AND LENNAR			113
LEGAL MATTERS			119
EXPERTS			120
DATES FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2017 ANNUAL MEETINGS			121
Lennar			121
WCI			121
WHERE YOU CAN FIND MORE INFORMATION			122

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Annex A     Merger Agreement			A-1
Annex B     Opinion of Citigroup Global Markets Inc.			B-1
Annex C     Opinion of Credit Suisse Securities (US) LLC			C-1
Annex D     Section 262 of the General Corporation Law of the State of Delaware: Appraisal Rights			D-1

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QUESTIONS AND ANSWERS ABOUT THE WCI SPECIAL MEETING

The following questions and answers briefly address some likely questions about the WCI special meeting. They may not include all the information that is important to WCI stockholders. WCI stockholders should carefully read this entire proxy statement/prospectus, including the annexes and the other documents referred to herein.

 

Q:	Why am I receiving this proxy statement/prospectus?

 

A:

Lennar and WCI have agreed to a series of mergers, pursuant to which a direct, wholly owned corporate subsidiary of Lennar will merge with and into WCI, with WCI surviving as a direct, wholly owned subsidiary of Lennar, and that immediately thereafter, WCI will (subject to certain conditions) be merged with and into a direct, wholly owned LLC subsidiary of Lennar, with this LLC subsidiary surviving the subsequent merger as a direct, wholly owned subsidiary of Lennar. WCI is sending this proxy statement/prospectus to its stockholders to help them decide how to vote their shares of WCI common stock, par value $0.01 per share, which we refer to as “WCI common stock” in this proxy statement/prospectus, with respect to the mergers and other matters to be considered at the WCI special meeting.

The mergers cannot be completed unless WCI stockholders adopt the merger agreement. WCI is holding a special meeting of its stockholders to vote on the proposal necessary to complete the mergers. Information about the WCI special meeting, the mergers and the other business to be considered by WCI stockholders at the WCI special meeting is contained in this proxy statement/prospectus.

This document constitutes both a proxy statement of WCI and a prospectus of Lennar. It is a proxy statement because the WCI board of directors, which we refer to as the “WCI board” in this proxy statement/prospectus, is soliciting proxies from WCI stockholders. It is a prospectus because Lennar will issue shares of Lennar Class A stock in exchange for outstanding shares of WCI common stock in the initial merger.

 

Q:	What will happen in the mergers?

 

A:

Under the merger agreement, in the initial merger, Marlin Green Corp., a direct, wholly owned subsidiary of Lennar, which we refer to as “Corporate Sub” in this proxy statement/prospectus, will merge with and into WCI, with WCI continuing as the surviving entity and a direct, wholly owned subsidiary of Lennar. After completion of the initial merger, WCI will merge with and into Marlin Blue LLC, a direct, wholly owned subsidiary of Lennar, which we refer to as “LLC Sub” in this proxy statement/prospectus, with LLC Sub continuing as the surviving entity and a direct, wholly owned subsidiary of Lennar, in a transaction which we refer to as the “subsequent merger” in this proxy statement/prospectus, unless Lennar notifies WCI that the merger consideration in the initial merger will consist solely of cash and elects that there will not be a subsequent merger. Collectively, we refer to the initial merger and the subsequent merger as the “mergers” in this proxy statement/prospectus.

 

Q:	What will I receive in the initial merger?

 

A:

Upon completion of the initial merger, each WCI stockholder will have the right to receive with regard to each share of WCI common stock held at the time of the initial merger consideration valued at $23.50 per share of WCI common stock, which will consist of (a) at least $11.75 in cash, which we refer to as the “cash consideration” in this proxy statement/prospectus, plus (b) a number of shares of Lennar Class A stock, which we refer to as the “share consideration” in this proxy statement/prospectus, equal to (i) $23.50 minus the amount of the cash consideration divided by (ii) the average of the volume weighted average price of Lennar Class A stock reported on the New York Stock Exchange, which we refer to as the “NYSE” in this proxy statement/prospectus, on each of the ten trading days immediately preceding the closing of the mergers (or, if there is no subsequent merger because Lennar notifies WCI that the merger consideration will consist solely of cash, preceding the closing of the initial merger), which we refer to as the “ten day VWAP” in this proxy statement/prospectus. Collectively, we refer to the cash consideration and the share consideration as the “merger consideration” in this proxy statement/prospectus. Lennar may elect to pay more than $11.75 per share in cash, including paying the entire $23.50 in cash, and if the share consideration would be less than 41% of the entire merger consideration, as calculated for tax purposes, Lennar will be required to pay the entire merger consideration in cash. The terms of the merger consideration are described in more detail in the section of this proxy statement/prospectus titled “The Merger Agreement—Terms of the Mergers” beginning on page 82. Both because the value attributed to a share of Lennar Class A stock will not be known at least until the close of trading on the day before the day of the special meeting and because Lennar may elect to pay more than $11.75 of the merger consideration in cash, you will not know when you vote by proxy what fraction of a share of Lennar Class A common stock will be included in the merger consideration with regard to a share of WCI common stock. No fractional shares of Lennar Class A stock will be issued in the initial merger, and WCI stockholders will, instead, have the right to receive cash in lieu of fractional shares of Lennar Class A stock, if any.

 

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Q:	How, if at all, will I be affected by the subsequent merger, if there is one?

 

A:

Pre-merger WCI stockholders will not be affected by the subsequent merger if there is one, or by absence of a subsequent merger, if Lennar notifies WCI that the merger consideration in the initial merger will consist solely of cash and elects that there will not be a subsequent merger. The initial merger is not conditioned on there being a subsequent merger, and once the initial merger takes place, pre-merger WCI stockholders will no longer have any ownership interest or other interest in WCI or WCI common stock.

 

Q:	When do Lennar and WCI expect to complete the initial merger?

 

A:

The initial merger is expected to take place either on the day of the WCI special meeting or on the following day. However, it is possible the initial merger will be delayed because of conditions beyond the control of either WCI or Lennar. See “The Merger Agreement—Conditions to Completion of the Mergers” beginning on page 84.

 

Q:	What happens if the initial merger is not completed?

 

A:

If the merger proposal is not approved by WCI stockholders or if the initial merger is not completed for any other reason, you will not receive any form of consideration for your shares of WCI common stock in connection with the mergers. Instead, WCI will remain an independent publicly traded corporation and WCI common stock will continue to be listed and traded on the NYSE. If the merger agreement is terminated under specified conditions, including with respect to WCI’s termination of the merger agreement in connection with a superior proposal, as described in the section titled “The Merger Agreement—No Solicitation; Notice of Proposals”, made by a party after the “go shop” period (a 35-day period during which WCI was permitted to solicit alternative acquisition proposals, which we refer to as the “transaction solicitation period” in this proxy statement/prospectus, which ended on October 26, 2016 without any alternative acquisition proposals being received), WCI will be required to pay Lennar a termination fee of $22.50 million, which we refer to as the “termination fee” in this proxy statement/prospectus. Following payment of the termination fee, WCI will not have any further liability to Lennar in respect of the merger agreement (other than liability for any willful breach or fraud). See “The Merger Agreement—Effect of Termination; Termination Fees” beginning on page 96.

 

Q:	What am I being asked to vote on and why is this approval necessary?

 

A:	WCI stockholders are being asked to vote on the following proposals:

 

1.	Merger proposal: To consider and vote on a proposal to adopt the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus; and

 

2.	Adjournment proposal: To consider and vote on a proposal to approve the adjournment of the WCI special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the WCI special meeting.

Approval of the merger proposal is required for completion of the mergers. Approval of the adjournment proposal is not a condition to the obligations of Lennar or WCI to complete the mergers.

 

Q:	What vote is required to approve each proposal at the WCI special meeting?

 

1.	Merger proposal: The affirmative vote of holders of a majority of the outstanding shares of WCI common stock entitled to vote on the merger proposal.

 

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2.	Adjournment proposal: The majority of the votes cast affirmatively or negatively (excluding abstentions and broker non-votes).

 

Q:	What constitutes a quorum?

 

A:

A quorum requires the presence, in person or by proxy, of WCI stockholders who hold a majority of the voting power of WCI common stock entitled to vote at the WCI special meeting. Any shares that are the subject of abstentions will be treated as present for the purposes of determining whether a quorum exists at the WCI special meeting, even though they will not be voted. However, uninstructed shares (which would include any broker non-votes) do not have any voting power, and thus would not be counted in the quorum calculation.

 

Q:	How does the WCI board recommend that I vote?

 

A:	The WCI board unanimously recommends that WCI stockholders vote “FOR” the merger proposal and “FOR” the adjournment proposal, if necessary.

 

Q:	What do I need to do now?

 

A:

After carefully reading and considering the information contained in this proxy statement/prospectus, please submit a proxy or voting instructions for your shares by following the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker, bank or other nominee.

 

Q:	How do I vote?

 

A:	If you are a stockholder of record of WCI as of December 23, 2016, which we refer to as the “record date” in this proxy statement/prospectus, you may vote by proxy before the WCI special meeting in one of the following ways:

 

•

By Telephone: By dialing the toll-free number specified on the proxy card and following the instructions on the proxy card;

 

•

Via the Internet: By accessing the website specified on the proxy card and following the instructions on the proxy card; or

 

•

By Mail: By completing and returning the proxy card in the enclosed envelope. The envelope requires no additional postage if mailed in the United States.

You may also cast your vote in person at the WCI special meeting.

If your shares are held in “street name” through a broker or other nominee, that institution will send you separate instructions describing the procedure that you must follow in order to have your shares voted.

 

Q:	When and where is the WCI special meeting?

 

A:

The WCI special meeting will be held at the offices of Latham & Watkins LLP located at 885 3rd Avenue, New York, NY 10022 on [                ], 2017. Subject to space availability, all WCI stockholders as of the record date, or their duly appointed proxies, may attend the meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at [            ] Eastern time on the day of the WCI special meeting.

 

Q:	If my shares are held in “street name” by a broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?

 

A:

Not unless you instruct them to do so. If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee.

 

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Please note that you may not vote shares held in street name by returning a proxy card directly to WCI or by voting in person at the WCI special meeting unless you provide a “legal proxy”, which you must obtain from your broker, bank or other nominee.

If you do not provide voting instructions to your broker or other nominee, your shares will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote. In this proxy statement/prospectus, we refer to a failure of a broker or other nominee to vote shares because it did not receive a voting instruction from the beneficial owner of the shares as a “broker non-vote”. Under the current NYSE rules, brokers do not have discretionary authority to vote on either of the proposals, including the merger proposal, that will be voted on at the WCI special meeting. A broker non-vote of a share of WCI common stock will have the same effect as a vote “AGAINST” the merger proposal and will have no effect on the outcome of the vote on the adjournment proposal.

 

Q:	What if I do not vote or abstain?

 

A:	For purposes of the WCI special meeting, an abstention occurs when a stockholder who has not submitted a proxy attends the special meeting in person and does not vote or a stockholder returns a proxy with an “abstain” vote.

Because approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of WCI common stock, if you fail to vote or fail to instruct your broker, bank or other nominee how to vote on the merger proposal or you mark your proxy “abstain” with regard to the merger proposal, that will have the same effect as a vote “AGAINST” the merger proposal. Failure to vote will have no effect on the outcome of the vote on the adjournment proposal.

 

Q:	What will happen if I return my proxy or voting instruction card without indicating how to vote?

 

A:

If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the WCI common stock represented by your proxy will be voted as recommended by the WCI board with respect to that proposal. That means that a signed proxy or voting instruction card that does not indicate how to vote will be voted “FOR” both proposals.

 

Q:	May I revoke my proxy and/or change my vote after I have delivered my proxy or voting instruction card?

 

A:	Yes. You may revoke your proxy and/or change your voting instructions with regard to a matter that will be voted upon at the WCI special meeting at any time before your shares of WCI common stock are voted with regard to that matter at the WCI special meeting. You may do this by:

 

•

sending a written notice, which is received prior to your vote being cast with regard to the matter at the WCI special meeting, to WCI Communities, Inc., 24301 Walden Center Drive, Bonita Springs, Florida 34134, Attention: Corporate Secretary, that bears a date later than the date of the proxy and states that you revoke your proxy with regard to the matter (or in its entirety);

 

•

submitting a valid, later-dated proxy by mail, telephone or via the internet that is received prior to your vote being cast with regard to the matter at the WCI special meeting; or

 

•

attending the WCI special meeting and voting by ballot in person with regard to the matter (your attendance at the WCI special meeting will not, by itself, revoke any proxy that you have previously given).

If you hold your shares of WCI common stock through a broker or other nominee, you must follow the directions you receive from your broker or other nominee in order to revoke your proxy or change your voting instructions.

 

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Q:	What happens if I sell my shares of WCI common stock after the record date but before the WCI special meeting?

 

A:

The record date for the WCI special meeting is earlier than the date of the WCI special meeting and earlier than the date that the mergers are expected to be completed. If you sell or otherwise transfer your shares of WCI common stock after the record date but before the date of the WCI special meeting, you will retain your right to vote at the WCI special meeting. However, you will not have the right to receive the merger consideration to be received by WCI stockholders in the initial merger. In order to receive the merger consideration, you must hold your shares of WCI common stock through completion of the initial merger.

 

Q:	What does it mean if I receive more than one proxy card or vote instruction card?

 

A:

Your receipt of more than one proxy card or vote instruction card may mean that you have multiple accounts with WCI’s transfer agent or with a brokerage firm, bank or other nominee. If voting by proxy by mail, you will need to sign and return all proxy cards or vote instruction cards to ensure that all of your shares of WCI common stock are voted. Each proxy card or vote instruction card represents a distinct number of shares of WCI common stock and it is the only means by which those particular shares of WCI common stock may be voted by proxy.

 

Q:	What are the U.S. federal income tax consequences of the mergers?

 

A:

Unless Lennar elects to pay the merger consideration entirely in cash, it is a condition to the obligation of WCI to complete the initial merger that WCI receive an opinion from Latham & Watkins LLP, special counsel to WCI, dated the closing date of the initial merger, to the effect that, on the basis of facts, representations, assumptions and exclusions set forth or referred to in such opinion, the initial merger and the subsequent merger, considered together, will qualify 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 “Code” in this proxy statement/prospectus. In such case, the U.S. holders (as defined in “Certain U.S. Federal Income Tax Considerations” beginning on page 79) of WCI common stock will recognize gain (but not loss) in an amount equal to the lesser of (a) the excess (if any) of the amount of cash and the fair market value of Lennar Class A stock received in the initial merger over such holder’s adjusted tax basis in its WCI common stock and (b) the amount of cash received (other than cash received in lieu of fractional shares of Lennar Class A stock). U.S. holders will recognize gain or loss with regard to cash received in respect of a fractional share of Lennar Class A stock equal to the difference, if any, between the amount of the cash received and the tax basis in the fractional share. If Lennar elects to pay the merger consideration entirely in cash, then the mergers will not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and U.S. WCI stockholders are expected to recognize gain or loss equal to the difference between the amounts of cash received and such holders’ adjusted tax basis in their WCI common stock.

You should read the section titled “Certain U.S. Federal Income Tax Considerations” beginning on page 79 for a more complete discussion of the United States federal income tax consequences of the initial merger. Tax matters can be complicated and the tax consequences of the mergers to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the initial merger to you.

 

Q:	Do I have appraisal rights in connection with the initial merger?

 

A:

Yes. WCI stockholders who do not vote in favor of the merger proposal and who continuously hold their shares until the effective time of the initial merger are entitled to appraisal rights under Section 262 of the General Corporation Law of the State of Delaware, which we refer to as the “DGCL” in this proxy statement/prospectus, provided they follow the procedures and satisfy the conditions set forth in Section 262 of the DGCL. For more information regarding appraisal rights, see “The Mergers—Appraisal Rights” beginning on page 66. In addition, a copy of Section 262 of the DGCL is attached as Annex D to this proxy statement/prospectus. Failure to strictly comply with Section 262 of the DGCL may result in your waiver of, or inability to exercise, appraisal rights.

 

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Q:	What will holders of WCI equity awards receive in the initial merger?

 

A:

LTIP Awards. Upon completion of the initial merger, each outstanding award under WCI’s Amended and Restated 2013 Long Term Incentive Plan, as amended, and Amended and Restated 2013 Director Long Term Incentive Plan, as amended, which we refer to, collectively, as the “LTIP Awards” in this proxy statement/prospectus, whether or not it is vested or subject to possible forfeiture, will become the right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) $11.75 plus any additional increases to the cash consideration plus (y) the market value, based on the ten day VWAP, of the total share consideration, multiplied by (ii) the number of shares of WCI common stock that would have been issuable upon settlement of such LTIP Award.

Restricted Shares. Upon completion of the initial merger, each WCI restricted share that is outstanding and unvested or otherwise subject to possible forfeiture will become vested immediately prior to the completion of the initial merger and become a right to receive an amount in cash equal to the greater of (A) $23.50 and (B)(x) $11.75 plus any additional increases to the cash consideration plus (y) the market value, based on the ten day VWAP, of the total share consideration, except that one holder of restricted shares may be required to accept the same combination of cash and stock as WCI stockholders generally if necessary to cause the initial merger to constitute a tax free reorganization.

Performance Share Units. Upon completion of the initial merger, the WCI performance share unit awards that are outstanding, even though unvested or otherwise subject to possible forfeiture, will be terminated in exchange for a right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) $11.75 plus any additional increases to the cash consideration plus (y) the market value, based on the ten day VWAP, of the total share consideration, multiplied by (ii) the number of shares of WCI common stock that would otherwise have become issuable thereafter pursuant to the terms of the applicable performance share unit award agreement had such award vested and been settled in shares.

Restricted Share Units. Upon completion of the initial merger, the WCI restricted share unit awards that are outstanding, even though unvested or otherwise subject to possible forfeiture, will be terminated at the time of the initial merger in exchange for a right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) $11.75 plus any additional increases to the cash consideration plus (y) the market value, based on the ten day VWAP, of the total share consideration, multiplied by (ii) the number of WCI restricted share unit awards.

 

Q:	Whom should I contact if I have any questions about the proxy materials or voting?

 

A:

If you have any questions about the mergers or if you need assistance submitting your proxy or voting your shares or need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact the proxy solicitation agent MacKenzie Partners, Inc., toll-free at (800) 322-2885 (banks and brokers call collect at (212) 929-5500).

 

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RISK FACTORS

In addition to the other information included or incorporated by reference into this proxy statement/prospectus, including the matters addressed in the section titled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 26, you should carefully consider the following risks before deciding how to vote. In addition, you should read and carefully consider the risks associated with each of Lennar and WCI and their respective businesses. Descriptions of these risks can be found in Lennar’s Annual Report on Form 10-K for the year ended November 30, 2015 and WCI’s Annual Report on Form 10-K for the year ended December 31, 2015 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016, which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. For further information regarding the documents incorporated into this proxy statement/prospectus by reference, please see “Where You Can Find More Information” beginning on page 122. Realization of any of the risks described below, any of the events described in the section titled “Cautionary Statement Regarding Forward-Looking Statements” or any of the risks or events described in the documents incorporated by reference could have a material adverse effect on Lennar’s, WCI’s or the combined company’s businesses, financial conditions, cash flows and results of operations and could result in a decline in the trading prices of their respective shares of common stock.

Risks Relating to the Mergers

Because the market price of Lennar Class A stock will fluctuate, WCI stockholders cannot be sure of the number of shares of Lennar Class A stock they will receive at the time of the WCI special meeting or at any time prior to the completion of the initial merger.

Upon completion of the initial merger, each share of WCI common stock will be converted into the right to receive merger consideration consisting of shares of Lennar Class A stock and cash (or, at Lennar’s election, consisting entirely of cash) pursuant to the terms of the merger agreement. The value of the merger consideration to be received by WCI stockholders will equal $23.50 per share, subject to adjustment in certain cases as further discussed in the section titled “The Merger Agreement—Terms of the Mergers” beginning on page 82. However, the number of shares of Lennar Class A stock that a WCI stockholder will receive upon completion of the initial merger will be based on the ten day VWAP of Lennar Class A stock. The ten day VWAP may be different from the closing price of Lennar Class A stock on the last NYSE trading day before the date we announced the mergers, on the date that this proxy statement/prospectus is being mailed to WCI stockholders, on the date of the special meeting or on the closing date of the initial merger. Any change in the market price of Lennar Class A stock prior to completion of the initial merger will affect the number of shares of Lennar Class A stock that WCI stockholders will receive upon completion of the initial merger. In addition, Lennar may elect to pay a greater proportion, up to all (in the amount of $23.50), of the merger consideration in cash. Accordingly, at the time of the WCI special meeting, WCI stockholders may not be able to calculate the number of shares of Lennar Class A stock, if any, they would receive upon completion of the initial merger. Neither company is permitted to terminate the merger agreement or resolicit the vote of WCI stockholders solely because of changes in the market prices of either company’s stock. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in WCI’s or Lennar’s respective businesses, operations or prospects, and regulatory considerations. Many of these factors are beyond WCI’s or Lennar’s control. You should obtain current market quotations for shares of Lennar Class A stock and for shares of WCI common stock.

Current WCI stockholders will have a reduced ownership and voting interest after the initial merger and will exercise less influence over management.

WCI stockholders currently have the right to vote for WCI directors and on other matters affecting WCI. When the initial merger occurs, the shares of Lennar Class A stock that each WCI stockholder receives in exchange for its shares of WCI common stock will represent a percentage ownership of the combined company that is significantly smaller than the WCI stockholder’s percentage ownership of WCI. Also, the chief executive officer of Lennar owns or has the power to vote shares of Lennar Class A and Class B common stock that, after the mergers, will enable him to cast approximately 41.7% of the votes that can be cast by the Lennar common stockholders voting together (which they do on virtually all matters). As a result, former WCI stockholders will have less influence on the management and policies of Lennar than they now have with respect to WCI.

 

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The merger agreement contains provisions that limit WCI’s ability to pursue alternatives to the mergers, which could discourage a potential acquirer of WCI from making an alternative transaction proposal and, in certain circumstances, could require WCI to pay Lennar a termination fee.

The merger agreement contains “no-shop” provisions that, since the expiration of the transaction solicitation period on October 26, 2016, subject to limited exceptions, have prohibited WCI, its subsidiaries and their respective representatives from, directly or indirectly, initiating, soliciting, knowingly encouraging or otherwise knowingly facilitating any third-party proposal for the acquisition of WCI’s stock or assets or any inquiry, proposal or offer with respect to a possible acquisition of WCI’s stock or assets. In addition, the parties are generally required to negotiate in good faith to modify the terms of the merger agreement in response to any competing acquisition proposals before the WCI board may terminate the merger agreement in order to accept a competing acquisition proposal, and the WCI board may not terminate the merger agreement in order to enter into a transaction that is the subject of an alternate acquisition proposal if Lennar agrees to amend the merger agreement so that, in the good faith determination of the WCI board, the amended terms of the merger agreement are at least as favorable to WCI stockholders as the competing acquisition proposal. In some circumstances, upon termination of the merger agreement, WCI may be required to pay Lennar a termination fee of $22.50 million if such termination occurs in connection with a superior proposal made by a person after the end of the transaction solicitation period (if such termination had occurred in connection with WCI entering into an alternative acquisition agreement in respect of a superior proposal initially made prior to the end of the transaction solicitation period, the termination fee WCI would have been required to pay would have been $11.25 million).

See “The Merger Agreement—No Solicitation; Notice of Proposals” beginning on page 90; “The Merger Agreement—Termination of the Merger Agreement” beginning on page 95; and “The Merger Agreement—Effect of Termination; Termination Fees” beginning on page 96.

These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of WCI’s stock or assets from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the mergers. Similarly, these provisions might result in a potential third-party acquirer proposing to pay a lower price to WCI stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable. If the merger agreement is terminated and WCI determines to seek another business combination, it may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the mergers.

WCI will be subject to various uncertainties and contractual restrictions while the mergers are pending that could adversely affect its financial results.

Uncertainty about the effect of the mergers on employees, suppliers and existing and prospective customers may have an adverse effect on WCI. These uncertainties may impair WCI’s ability to attract, retain and motivate key personnel until the mergers are completed, and could cause customers, suppliers and others that deal with WCI to seek to change existing business relationships with WCI. Employee retention and recruitment for WCI may be particularly challenging prior to completion of the mergers, as employees and prospective employees may experience uncertainty about their future roles with the combined company.

The pursuit of the mergers and the preparation for the integration may place a significant burden on WCI’s management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect WCI’s financial results.

In addition, the merger agreement restricts WCI, without Lennar’s consent, from making certain acquisitions and dispositions, excluding purchases or sales in accordance with contracts entered into before the date of the merger agreement and certain ordinary course acquisitions, and taking other specified actions while the mergers are pending. These restrictions may prevent WCI from pursuing attractive business opportunities and making other changes to its business prior to completion of the initial merger or termination of the merger agreement. See “The Merger Agreement—Conduct of Business Prior to Closing” beginning on page 87.

 

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The mergers and related transactions are subject to approval by WCI stockholders.

In order for the mergers to be completed, WCI stockholders must approve the merger proposal, which requires the approval of the holders of a majority of the outstanding shares of WCI common stock entitled to vote on the merger proposal as of the record date for the WCI special meeting.

The mergers are subject to conditions, including certain conditions that may not be satisfied, or completed on a timely basis, if at all.

The mergers are subject to a number of other conditions beyond Lennar’s and WCI’s control that may prevent, delay or otherwise materially adversely affect their completion, including the need for approval of the merger proposal by WCI stockholders. Neither Lennar nor WCI can predict whether and when these other conditions will be satisfied. Any delay in completing the mergers could cause the combined company not to realize some or all of the synergies expected to be achieved if the mergers are successfully completed within their expected time frame. See “The Merger Agreement—Conditions to Completion of the Mergers” beginning on page 84.

Failure to complete the initial merger could negatively affect WCI’s stock price, its future business and financial results.

If the initial merger is not completed, WCI’s ongoing businesses may be adversely affected and WCI will be subject to several risks and possible consequences, including the following:

 

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the last reported sale price of WCI common stock on September 21, 2016, the last NYSE trading day before the day on which the signing of the merger agreement was announced, was $17.16 per share. Following the announcement of the signing of the merger agreement, the price of WCI common stock almost immediately increased to more than the $23.50 value placed on the merger consideration, and since then the price of WCI common stock has remained above the level at which it was trading before the signing of the merger agreement was announced (although, since the end of the transaction solicitation period, it has traded below $23.50). There is no assurance that if WCI stockholders do not approve the proposal to adopt the merger agreement, the price of WCI common stock will not fall to, or even below, the price at which it was trading before announcement of the signing of the merger agreement;

 

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under the merger agreement, WCI may be required, under certain circumstances, to pay Lennar a termination fee of $22.50 million if such termination occurs in connection with a superior proposal made by a party after the transaction solicitation period;

 

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WCI will be required to pay certain costs relating to the mergers, whether or not the mergers are completed, such as legal, accounting, financial advisor and printing fees;

 

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WCI would not realize the expected benefits of the mergers;

 

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under the merger agreement, WCI is subject to certain restrictions on the conduct of its business prior to completing the initial merger, which may adversely affect its ability to execute certain of its business strategies;

 

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matters relating to the mergers may require substantial commitments of time and resources by WCI management, which could otherwise have been devoted to other opportunities that may have been beneficial to WCI as an independent company; and

 

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WCI may lose key employees during the period in which WCI and Lennar are pursuing the mergers, which may adversely affect WCI in the future if it is not able to hire and retain qualified personnel to replace departing employees.

In addition, if the initial merger is not completed, WCI may experience negative reactions from the financial markets and from its customers and employees. WCI also could be subject to litigation related to any failure to complete the initial merger or to enforcement proceedings commenced against WCI to attempt to force WCI to perform its obligations under the merger agreement.

 

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Lennar and WCI will incur substantial transaction fees and merger-related costs in connection with the mergers.

Lennar and WCI expect to incur non-recurring transaction fees totaling approximately $[        ] million, which include legal and advisory fees and substantial merger-related costs associated with completing the mergers, combining the operations of the two companies and achieving desired synergies. Additional unanticipated costs may be incurred in the course of the integration of the businesses of Lennar and WCI. The companies cannot be certain that the realization of other benefits related to the integration of the two businesses will offset the transaction and merger-related costs in the near term, or at all.

Certain WCI directors and executive officers have interests in the initial merger that are different from, or in addition to, those of other WCI stockholders, which could have influenced their decisions to support or approve the merger proposal.

In considering whether to approve the proposals at the WCI special meeting, WCI stockholders should recognize that certain WCI directors and executive officers have interests in the initial merger that differ from, or that are in addition to, their interests as WCI stockholders. These interests include, among others, accelerated vesting of certain equity awards, eligibility to receive retention and/or transaction bonuses, and/or eligibility to receive certain severance benefits that result from the initial merger. These interests, among others, may influence the WCI directors and executive officers to support or approve the merger proposal. See “The Mergers—Interests of WCI Directors and Executive Officers in the Initial Merger” beginning on page 71.

Completion of the mergers may trigger change in control or other provisions in certain agreements to which WCI is a party.

Completion of the mergers may trigger change in control or other provisions in certain agreements to which WCI is a party. If Lennar and WCI are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Lennar and WCI are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to WCI or the combined company.

Lennar’s ability to use WCI net operating losses or certain WCI tax credits to offset future taxable income may be subject to certain limitations.

In general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses or tax credits to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate percentage stock ownership of stockholders or groups of stockholders who own at least 5% of a corporation’s stock increases by more than 50 percentage points over its lowest ownership percentage within a specified testing period. WCI’s existing net operating losses and credits already are subject to substantial limitations arising from previous ownership changes, and the initial merger is expected to constitute another WCI ownership change. Accordingly, Lennar and WCI may not be able to utilize a material portion of WCI’s existing net operating losses or credits

Legal proceedings in connection with the mergers, the outcomes of which are uncertain, could delay or prevent the completion of the mergers.

Since the announcement of the proposed mergers, WCI, Lennar and the WCI directors have been named as defendants in two class action complaints, one filed on November 23, 2016, by plaintiff Paul Parshall, in the U.S. District Court for the Middle District of Florida, and the other filed on November 29, 2016, by plaintiff Stephen Bushansky, in the Court of Chancery of the State of Delaware. The first complaint alleges that the registration statement on Form S-4 filed by WCI on November 10, 2016 omits material information with respect to the proposed transaction, which renders the registration statement false and misleading. The second complaint alleges that the WCI board breached its fiduciary duties in connection with the merger agreement, including with respect to the process by which the merger agreement was negotiated and approved and with respect to the omissions of information that allegedly cause the registration statement to be false and misleading. Among other remedies, both complaints seek an injunction preventing the consummation of the initial merger. It is possible that additional lawsuits will be commenced. Such legal proceedings could delay or prevent the mergers from becoming effective within the agreed upon timeframe

WCI and Lennar believe that these lawsuits are without merit and intend to defend against them vigorously. For more information, see “The Mergers—Litigation Relating to the Mergers” beginning on page 78.

Risks Relating to the Combined Company Following the Mergers

If completed, the mergers may not achieve their intended results, and Lennar and WCI may be unable to successfully integrate their operations.

Lennar and WCI entered into the merger agreement with the expectation that the mergers will result in various benefits, including, among other things, expanding Lennar’s asset base and creating synergies. Achieving the anticipated benefits of the mergers is subject to a number of uncertainties, including whether the businesses of Lennar and WCI can be integrated in an efficient and effective manner.

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees and, the disruption of WCI’s ongoing businesses or inconsistencies in business methods could adversely affect Lennar’s ability to achieve

 

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the anticipated benefits of the mergers. Lennar’s future results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur prior to the closing of the initial merger. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, that they will be realized within the anticipated time. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues from WCI’s businesses and could adversely affect the combined company’s future business or Lennar’s operating results.

The market price of the shares of the combined company and the results of operations of the combined company after the mergers may be affected by factors different from those affecting WCI or Lennar currently.

The businesses of Lennar and WCI differ in some respects and, accordingly, Lennar’s results of operations and the market price of its Class A common stock following the mergers may be affected by factors different from those currently affecting the independent results of operations and market prices of Lennar and WCI. For a discussion of the businesses of Lennar and WCI and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in this document and referred to in “Where You Can Find More Information” beginning on page 122.

The combined company is expected to incur expenses related to the integration of Lennar and WCI.

Lennar is expected to incur expenses in connection with the integration of WCI into Lennar. There are a large number of processes, policies, procedures, operations, technologies and systems that must be converted, including purchasing, accounting and finance, sales, billing, payroll, pricing, revenue management, maintenance, marketing and benefits. While Lennar and WCI have assumed that a certain level of expenses will be incurred, there are many factors beyond their control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent they exceed what is currently anticipated, that could adversely affect Lennar’s operating results for periods following completion of the mergers.

Uncertainties associated with the mergers may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.

WCI is dependent on the experience and industry knowledge of its officers and other key employees to execute its business plans. WCI’s success until the mergers and the combined company’s success after the mergers will depend in part upon the ability of WCI and Lennar to retain key management personnel and other key employees before and after the mergers. Current and prospective WCI employees may experience uncertainty about their roles within the combined company following the mergers, which may have an adverse effect on the ability of WCI to attract or retain key management and other key personnel. Accordingly, no assurance can be given that the combined company will be able to attract or retain key management personnel and other key WCI employees to the same extent that WCI has previously been able to attract or retain its employees.

Risks Inherent in an Investment in Lennar

All of Lennar’s businesses are subject to risks.

Lennar is engaged in several businesses. Although the principal source of its revenues and income are its homebuilding business, Lennar is also engaged in mortgage lending and other real estate related services, managing and advising funds and entities that invest in real estate related assets, developing multifamily residential projects and investing in multi-use real estate developments, as well as a number of businesses related to those activities. Each of Lennar’s businesses is subject to risks and uncertainties, most, but not all, of which affect many companies engaged in the businesses in which Lennar is engaged. These risks are discussed in detail in Lennar’s Annual Report on Form 10-K for the year ended November 30, 2015, which is incorporated by reference into this proxy statement/prospectus.

 

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Lennar’s results of operations could be adversely affected if legal claims are not resolved in its favor.

In the ordinary course of its business, Lennar is subject to legal claims by homebuyers, borrowers against whom it has instituted foreclosure proceedings, persons with whom it has land purchase contracts and a variety of other persons. It establishes reserves against legal claims and believes that, in general, they will not have a material adverse effect on its business or financial condition. However, unanticipated adverse results in legal proceedings could materially adversely affect Lennar’s operating results in particular fiscal periods. Among other things, Lennar has a substantial judgment against it in a contract suit, which it has bonded and is appealing. This suit is described in Lennar’s Annual Report on Form 10-K for the year ended November 30, 2015, which is incorporated by reference into this proxy statement/prospectus.

Lennar has a class of common stock that entitles holders to ten votes per share.

The stock Lennar has agreed to issue to WCI stockholders in the initial merger is Class A common stock. The Class A common stock entitles the holders to one vote per share. Lennar also has outstanding Class B common stock, which is substantially identical with the Class A common stock, except that the Class B common stock entitles the holders to ten votes per share. Although Lennar has more than six times as many shares of Class A common stock outstanding as it has outstanding shares of Class B common stock, the ten votes per share give the Lennar Class B stockholders voting control of Lennar.

Lennar has a stockholder who can exercise significant influence over matters that are brought to a vote of its stockholders.

Stuart A. Miller, Lennar’s Chief Executive Officer and a director, has voting control, through personal holdings and holdings by family-owned entities, of Lennar Class B stock, and to a lesser extent Lennar Class A stock, that, based on shares of Lennar common stock outstanding as of September 30, 2016, enables Mr. Miller to cast 42.3% of the votes that can be cast by the Lennar common stockholders combined (41.7% after the anticipated issuance of shares in connection with the initial merger). That effectively gives Mr. Miller the power to control the election of Lennar directors and the approval of matters that are presented to its stockholders. Mr. Miller’s voting power might discourage someone from seeking to acquire Lennar or from making a significant equity investment in Lennar, even if Lennar needed the investment to meet its obligations or to operate its businesses. Also, because of his voting power, Mr. Miller could potentially cause Lennar common stockholders to approve actions that are contrary to the desires of Lennar’s other stockholders.

Lennar has a substantial amount of indebtedness, which may have an adverse effect on its businesses or limit its ability to take advantage of business, strategic or financing opportunities.

As of August 31, 2016, Lennar’s consolidated debt, net of debt issuance costs and excluding amounts outstanding under its credit facilities, was $5.2 billion. The indentures governing Lennar’s senior notes and convertible senior notes do not restrict the incurrence of future secured or unsecured debt, and the agreement governing its principal credit facility allows it to incur a substantial amount of future unsecured debt. Lennar’s substantial level of indebtedness increases the possibility that it may be unable to generate cash sufficient to pay the principal, interest or other amounts due on its indebtedness. Lennar’s reliance on debt to help support its operations exposes it to a number of risks, including:

 

•

it may be particularly vulnerable to adverse general economic or homebuilding industry conditions;

 

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it may find it difficult, or may be unable, to obtain financing to fund future working capital, capital expenditures and other general corporate requirements that would be in its best long-term interests;

 

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it may be required to dedicate a substantial portion of its cash flow from operations to the payment of principal and interest on its debt, reducing the cash flow available to fund operations and investments;

 

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it may have reduced flexibility in planning for, or reacting to, changes in its businesses or the industries in which they are conducted;

 

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it may have a competitive disadvantage relative to other companies engaged in similar businesses that are less leveraged; and

 

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•

it may be required to sell debt or equity securities or sell some of its core assets, possibly on unfavorable terms, in order to meet payment obligations.

Lennar could be adversely affected if it were unable to fulfill covenants regarding its credit facility.

Lennar has a $1.8 billion credit facility (including an accordion feature) and uses borrowings under that facility in connection with its operations. The Credit Agreement relating to that facility requires Lennar to maintain at the end of each fiscal quarter (i) minimum consolidated tangible net worth of approximately $1.5 billion plus the sum of 50% of its cumulative consolidated net income from February 29, 2012, if positive, and 50% of net cash proceeds from any equity offerings after that date, minus the lesser of 50% of the amount paid after June 24, 2016 to repurchase common stock or $100 million, (ii) a leverage ratio that does not exceed 65.0% (which may be reduced to as low as 60.0% in the future) and (iii) liquidity equal to or greater than 1.0 times consolidated interest incurred for the preceding twelve months or an interest coverage ratio equal to or greater than 1.50:1.00 for those twelve months. At August 31, 2016, Lennar substantially exceeded each of the requirements. The levels required by the covenants in the Credit Agreement and Lennar’s actual levels at that date were as follows:

 

(Dollars in thousands)		Required Level				Actual Level
Minimum net worth test			$2,873,260			$	5,337,043
Maximum leverage ratio test			65.0	%			43.6	%
Liquidity test(1)			1.00				2.12

 

(1)

As of the end of each fiscal quarter, Lennar is required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended.

If Lennar failed to achieve the levels required by the debt covenants in the Credit Agreement, Lennar could lose access to its credit facility, which could require it to reduce the level of its activities in its homebuilding business and other aspects of its business.

The Lennar board can at any time cause Lennar to stop paying dividends.

For a number of years, Lennar has paid dividends of $0.16 per year per share with regard to its Class A and Class B common stock. However, the Lennar board may at any time cause Lennar to reduce the dividend or stop paying dividends.

Lennar is able to issue, without stockholder approval, shares of preferred stock that give its holders greater rights than those of Lennar common stockholders.

The Lennar board is authorized to issue one or more series of preferred stock without any action on the part of Lennar stockholders. This preferred stock can give its holders preferences as to voting rights, dividend rights and other matters that the Lennar board deems appropriate when it authorizes particular series of preferred stock. These preferences can, among other things, reduce the extent to which Lennar common stockholders will share in Lennar’s net income and net assets.

Lennar is able to issue, without stockholder approval, a substantial amount of common stock, which could dilute the value of shares that are already outstanding.

Lennar is authorized to issue 300,000,000 shares of Class A common stock and 90,000,000 shares of Class B common stock. At September 30, 2016, it had a total of 196,496,000 shares of Class A common stock and 31,303,000 shares of Class B common stock outstanding. In addition, at September 30, 2016, it had 6,680,000 shares of Class A stock reserved for issuance on conversion of outstanding convertible debt securities. If the shares of Lennar Class A stock it issues in connection with the initial merger are valued at $43.20482 per share (the value that would be attributed to them if the initial merger took place on the date of this proxy statement/prospectus), Lennar would issue approximately 6,902,000 additional shares of Lennar Class A stock as a result of the initial merger. That would leave Lennar with 89,922,000 additional shares of Lennar Class A stock and 58,697,000 additional shares of Lennar Class B stock that it could issue from time to time, in most instances without needing stockholder approval. Depending on the consideration received, issuance of that many shares could dilute the interest of existing stockholders, including WCI stockholders who receive Lennar shares as part of the merger consideration, in Lennar’s assets and earnings, and could reduce the market price of Lennar’s shares.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus and the documents incorporated by reference into it include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. The statements contained in this proxy statement/prospectus that are not historical facts are forward-looking statements that represent Lennar and WCI management’s beliefs and assumptions based on currently available information. These statements may be made directly in this proxy statement/prospectus or may be incorporated by reference to other documents and may include statements for periods after completion of the mergers. These forward-looking statements relate to, among other things, outlooks or expectations for earnings, revenues, expenses, asset quality or other future financial or business performance, strategies or expectations, or the effect of legal, regulatory or supervisory matters on business, results of operations or financial condition, and include, among others:

 

•

statements about the benefits of the proposed mergers, including future financial and operating results, Lennar’s and WCI’s plans, objectives, expectations and intentions, and the expected timing of completion of the mergers;

 

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other statements that are not historical facts, including future results of operations, projected cash flow and liquidity, business strategy and other plans and objectives for future operations; and

 

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all statements that are not historical facts, which can be identified by the use of forward-looking terminology such as the words “may”, “will”, “could”, “should”, “would”, “expect”, “plan”, “project”, “intend”, “anticipate”, “believe”, “estimate”, “forecast”, “predict”, “potential”, “pursue”, “target” or “continue”, the negative of such terms or variations thereon, or other comparable terminology, or by discussions of strategy or trends.

These forward-looking statements represent Lennar’s and WCI’s intentions, plans, expectations, assumptions and beliefs about future events, including the completion of the mergers, and are subject to risks, uncertainties and other factors. Many of these factors are outside the control of Lennar and WCI and could cause actual results to differ materially from the results expressed or implied by these forward-looking statements. Some factors, risks and uncertainties related to the initial merger that could cause actual results to differ include:

 

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the ability to obtain the requisite WCI stockholder approval and complete the initial merger;

 

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the risk that a condition to closing of the initial merger may not be satisfied;

 

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the timing to consummate the initial merger;

 

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the risk that the businesses will not be integrated successfully;

 

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the risk that cost savings and any other synergies expected from the transaction may not be fully realized or may take longer to realize than expected;

 

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disruption from the transaction making it more difficult to maintain relationships with WCI’s customers, employees, subcontractors or suppliers;

 

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the diversion of management time on merger-related issues;

 

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the failure to renew, or the revocation of, any license or other required permits;

 

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unanticipated environmental concerns;

 

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competition, government regulations or governmental actions;

 

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the ability of management to execute its plans to meet its goals;

 

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the results of litigation regarding the mergers;

 

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•

risks inherent in Lennar’s and WCI’s businesses that are discussed in Lennar’s and WCI’s most recent annual reports on Form 10-K and quarterly reports on Form 10-Q, respectively, and in other Lennar and WCI reports on file with the SEC, which discussions are incorporated by reference into this proxy statement/prospectus;

 

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factors discussed in Lennar’s and WCI’s most recent annual reports on Form 10-K and quarterly reports on Form 10-Q, and in other Lennar and WCI reports on file with the SEC, that could cause actual results to differ materially from those anticipated by forward looking statements in those reports, which discussions are incorporated by reference into this proxy statement/prospectus; and

 

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risks set forth in or incorporated by reference into this proxy statement/prospectus in the section titled “Risk Factors” beginning on page 19.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this proxy statement/prospectus, or in the case of a document incorporated by reference, as of the date of that document. Except as required by law, neither Lennar nor WCI undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date that they were made or to reflect the occurrence of unanticipated events.

Additional factors, risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Lennar and WCI. See “Where You Can Find More Information” beginning on page 122 for a list of the documents incorporated by reference.

 

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THE MERGERS

The following is a discussion of the mergers and the material terms of the merger agreement between Lennar and WCI. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Annex A to this proxy statement/prospectus and incorporated by reference herein.

Background of the Mergers

WCI was incorporated in Delaware in 2009. Its predecessor company emerged from bankruptcy on September 3, 2009 and WCI was operated as a privately held company until July 2013 when it completed an initial public offering of its common stock.

The WCI board, in its ongoing efforts to enhance stockholder value, periodically reviews and assesses WCI’s business strategy, the various trends and conditions affecting WCI’s industry, WCI’s businesses generally and a variety of potential strategic alternatives for WCI, including a potential sale of WCI. As part of this process, the WCI board and/or WCI’s management have, over the past few years preceding the current sale process, engaged in general discussions with third parties, which included potential strategic partners and investment banking firms prominent in the homebuilding industry and/or which have worked with WCI, including Citi, regarding industry dynamics and potential strategic alternatives for WCI.

Since WCI completed its initial public offering, multiple analysts had suggested that WCI would be an attractive takeover candidate. On April 27, 2016, WCI reported first quarter results and the closing price per share of WCI common stock decreased by approximately 9.5% over the course of that day, closing at $17.62 per share. The next day, April 28, 2016, Zelman & Associates, an institutional research and investment banking services firm specializing in the housing sector, issued a report in which it gave WCI a buy rating with a $20.50 per share stock price target, highlighting that WCI was “poised to deliver above-average long term earnings growth” and highlighted that WCI “could be an attractive takeover candidate in the future.”

As a result of stockholder agreements WCI entered into at the time of the initial public offering, WCI’s two largest stockholders, Monarch Alternative Capital LP (and certain of its affiliates), which we refer to collectively as “Monarch” in this proxy statement/prospectus, and Stonehill Institutional Partners, L.P. (and certain of its affiliates), which we refer to collectively as “Stonehill” in this proxy statement/prospectus, each had the right to nominate two directors to the WCI board and, as a result of decreased share ownership, each now currently has the right to nominate one director to the WCI board. From time to time, Monarch and Stonehill has each expressed interest in liquidating its respective equity positions in WCI and three times throughout 2015 Monarch and Stonehill sold shares of WCI common stock in secondary offerings or in the open market.

During the period from March to early May 2016, in the ordinary course of business, representatives of Citi had discussions with representatives of Lennar regarding strategic opportunities in the homebuilding industry and certain industry participants, including WCI, based on publicly available information.

On May 4, 2016, a representative of Citi met as part of a broader market update meeting with representatives of Stonehill, including Christopher Wilson, a member of the WCI board, and discussed on a general level the homebuilding industry, liquidity arrangements for Stonehill’s holdings and strategic transaction opportunities for large and small cap industry participants such as WCI and Lennar. On the same day, Lennar asked Citi to contact WCI or Stonehill to ascertain whether WCI would have any interest in exploring a possible transaction with Lennar. In a subsequent follow-up call to Mr. Wilson, the Citi representative mentioned to Mr. Wilson that there was an industry participant that might be interested in a possible transaction with WCI and inquired whether WCI would be interested in exploring such a transaction. On May 9, 2016, in advance of a meeting of the WCI board scheduled for May 10, 2016, Mr. Wilson informed Keith Bass, WCI’s Chief Executive Officer, of his conversation with Citi and suggested that Mr. Bass schedule a meeting with Citi to obtain additional information.

On May 10, 2016, the WCI board held a regularly scheduled in-person meeting at which senior WCI executives of each region presented detailed reviews of their respective operations (on a community by community basis), 2016 objectives and financial performance, forecasts for fiscal year-end, and future planned communities/developments and initiatives. The senior vice president of Real Estate Services also provided an overview of WCI’s real estate brokerage and title service businesses, financial performance, and future markets and initiatives. In addition, representatives of Zelman & Associates were invited to discuss with the WCI board and WCI’s management economic trends in the homebuilding industry and the potential impact of those trends on WCI’s business and valuation. Later, in an executive session of the WCI board, during only a portion of which Mr. Bass was present, the WCI board discussed Mr. Wilson’s conversations with Citi as described above and the possibility of receiving inbound acquisition inquiries given the equity market conditions for WCI and smaller cap builders in general.

That evening, Mr. Bass and a representative of Citi met in person during which meeting Citi indicated that it had discussed WCI with Lennar based on publicly available information and that Lennar had expressed interest, after conducting a significant amount of analysis, in seeking a meeting with WCI’s management in order to explore a

 

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potential acquisition of WCI. Citi indicated that Lennar had suggested a preliminary structure that would include an acquisition of the entire company for a combination of cash and stock. Citi inquired whether WCI would be interested in a potential strategic transaction, indicating that Citi could facilitate a meeting between WCI and Lennar, and discussed with Mr. Bass Citi’s possible role as a financial advisor in connection with a potential transaction involving WCI. Mr. Bass informed Citi that before responding he would discuss this with the WCI board.

Following WCI’s annual stockholder meeting on May 11, 2016, the WCI board held a special in-person meeting, with representatives of WCI’s management present, to discuss Mr. Bass’s meeting with Citi the prior evening and the preliminary inquiry from Lennar. In determining how to respond to Lennar’s inquiry, the WCI board discussed current equity market conditions for WCI and similarly situated small cap builders and the cyclical nature of the homebuilding industry. The WCI board discussed that, given Lennar’s size and expertise, it believed that Lennar would have the ability to provide a compelling proposal for WCI and its stockholders. The WCI board also discussed potential financial advisors, including Citi and others, some of which had performed work for WCI in the past. Following discussion, the WCI board determined to explore a potential strategic transaction with Lennar and directed WCI’s management to negotiate and execute a nondisclosure agreement with Lennar on customary terms and to meet with representatives of Lennar and Citi, as applicable, to further discuss Lennar’s interest in pursuing a potential transaction with WCI. The WCI board also directed WCI’s management to retain Latham & Watkins LLP, which we refer to as “Latham” in this proxy statement/prospectus, as WCI’s legal advisor in connection with the evaluation and negotiation of a potential strategic transaction with Lennar on the basis of Latham’s knowledge and expertise in the homebuilding industry and its history and experience with the Company. The closing price of WCI common stock on that day was $15.90 per share.

Later on May 11, 2016, WCI’s management engaged Latham.

On May 12, 2016, Mr. Bass and Rick Beckwitt, President of Lennar, participated in an introductory telephone call, during which they scheduled an in-person meeting for May 18, 2016, and discussed the homebuilding industry, including current demand trends, market positioning and competitors. Mr. Beckwitt informed Mr. Bass that Lennar had already performed an analysis of WCI based on publicly available information and did not plan to engage a financial advisor with respect to a potential strategic transaction with WCI. Mr. Beckwitt and Mr. Bass discussed several potential financial advisors, including Citi, that might act as financial advisor to WCI. Mr. Beckwitt informed Mr. Bass that Lennar would be in a position to make a specific offer for the Company following two weeks of diligence.

On May 13, 2016, WCI entered into a nondisclosure agreement with Lennar on customary terms, including customary non-solicitation and standstill provisions.

On May 18, 2016, Mr. Bass met with Mr. Beckwitt in person, at which time WCI began sharing certain non-public information with Lennar. During the meeting, Messrs. Bass and Beckwitt discussed WCI’s business and certain materials for such meeting, including an agenda that had been prepared with Citi’s assistance. At this meeting, Mr. Beckwitt indicated to Mr. Bass that Lennar would only proceed with negotiations regarding a potential strategic transaction with WCI if WCI negotiated exclusively with Lennar and that Lennar would not participate in a broader sale process in which other parties were solicited to acquire WCI. At this meeting, Mr. Beckwitt indicated on a preliminary basis that Lennar was considering a proposal to acquire the Company for $20.00 per share of WCI common stock. Mr. Bass responded that, based on his previous discussions with the WCI board, he believed the WCI board would expect a significantly higher purchase price. Mr. Beckwitt indicated that he would revert with a formal proposal in the following days. Subsequent to this meeting, WCI contacted Citi regarding Citi’s potential engagement as WCI’s financial advisor in connection with a potential transaction with Lennar. The closing price of WCI common stock on that day was $15.86 per share.

On May 20, 2016, Mr. Beckwitt contacted Mr. Bass by telephone and indicated that Lennar was interested in acquiring WCI for $20.00 per share of WCI common stock, payable 100% in Lennar Class A stock, but also suggested that Lennar might be able to accommodate a structure whereby the merger consideration would be payable 25% in cash and 75% in Lennar Class A stock. Mr. Bass informed Mr. Beckwitt that he would relay Lennar’s proposal to the WCI board, but noted that the WCI board would likely not be willing to pursue a transaction at that price. Mr. Bass suggested that Lennar increase its proposed purchase price to at least $25.00 per share of WCI common stock and maximize the cash component of the consideration because the WCI board was likely to emphasize the certainty of the total value offered. Mr. Beckwitt indicated that Lennar might be able to

 

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increase its proposed purchase price to $21.00 per share of WCI common stock, subject to additional diligence, but would not be prepared to offer $25.00 per share of WCI common stock. Messrs. Bass and Beckwitt also discussed Lennar’s request for exclusivity, including that Lennar would agree to a post-signing “go-shop” process for WCI to perform a market check. Messrs. Bass and Beckwitt also discussed the various methods for fixing the exchange ratio for the stock component of the consideration, the need for additional due diligence (including reverse due diligence of Lennar if a portion of the consideration was payable in stock) and the timeline for a potential transaction. Mr. Beckwitt indicated that Lennar would require approximately four weeks to complete its due diligence review of WCI. The closing price of WCI common stock on that day was $16.54 per share.

From May 20, 2016 to May 23, 2016, Mr. Bass called each of the members of the WCI board to update them on his recent conversations with Mr. Beckwitt.

On May 24, 2016, Mr. Bass and Mr. Beckwitt spoke by telephone and Mr. Bass informed Mr. Beckwitt that the next WCI board meeting was scheduled for May 31, 2016, at which time the WCI board would consider and discuss Lennar’s proposal.

On May 30, 2016, Mr. Bass received an email from the principal of a small cap potential strategic partner, which we refer to as “Party A” in this proxy statement/prospectus, expressing interest in meeting with Mr. Bass to discuss a potential strategic transaction.

On May 31, 2016, the WCI board held a regularly scheduled in-person meeting, with representatives of WCI’s management and Latham present, at which the WCI board discussed Lennar’s proposal and due diligence and timing considerations related to a potential strategic transaction with Lennar. The WCI board discussed that Mr. Bass, under the supervision of the WCI board, would lead negotiations of the key terms of any transaction with Lennar, including price. Representatives of Latham reviewed with the WCI board its fiduciary duties in connection with a potential sale transaction, including with respect to any potential conflicts of interest between any director and Lennar. WCI board member Michelle MacKay identified a publicly disclosed lawsuit between Lennar and her employer, iStar Financial, and Mr. Wilson and WCI board member Patrick J. Bartels, Jr., the board members associated with Stonehill and Monarch, respectively, disclosed the ownership of Lennar securities by themselves directly or by their principals, employers or affiliated funds, each as disclosed in public filings with the SEC, and Mr. Wilson disclosed that Stonehill had a short position in Lennar. Following discussion, the WCI board determined that none of these relationships created a conflict of interest that would impair any director’s ability to make an independent and informed judgment regarding a potential transaction with Lennar.

At the same meeting, the WCI board reviewed and discussed the engagement of Citi as WCI’s financial advisor in connection with a possible business combination involving the sale of WCI. The WCI board discussed Citi’s current and prior transactional and other material investment banking relationships with Lennar, including certain relationships with Lennar as described by Citi to the WCI board in a written disclosure dated May 29, 2016, which we refer to as the “May 2016 Citi Relationship Disclosure” in this proxy statement/prospectus. In the May 2016 Citi Relationship Disclosure, Citi included certain disclosures regarding, among other things: (i) Citi’s investment banking, commercial banking and other financial services to Lennar and aggregate compensation received for such services during the prior two-year period; (ii) that, during such period, Citi had not been engaged to provide merger and acquisition and financial advisory services to Lennar; and (iii) that, except as otherwise disclosed, neither Citi nor its affiliates or Citi deal team members were currently providing (or, during the course of the engagement, and without WCI’s prior written consent, would provide) such financial advisory services to Lennar in connection with the transaction contemplated by the engagement, noting that certain members of the proposed Citi deal team were coverage bankers for Lennar and, in the ordinary course of business, Citi employees, including such deal team members, meet with Lennar regularly to discuss strategic opportunities and potential transactions involving potential counterparties in Lennar’s industry, including WCI. The WCI board and WCI’s management discussed that the Citi relationships with Lennar were consistent with their expectations given Citi’s prominence in the homebuilding industry. The WCI board also discussed the proposed terms of Citi’s engagement, including fee arrangements, which provided, among other things, for an incentive fee structure that would result in an incremental transaction fee payable to Citi in the event the purchase price per share for WCI exceeded $20.00 (which, based on a purchase price of $23.50 per share, would result in a fee of approximately $10 million). Following discussion, the WCI board determined that Citi’s relationships with Lennar as disclosed in the May 2016 Citi Relationship Disclosure and the conversations between Citi and Stonehill as previously disclosed by Mr. Wilson would not preclude Citi from effectively advising WCI. The WCI board determined at this meeting to engage Citi to serve as WCI’s financial advisor and directed management to negotiate the terms of Citi’s engagement letter. In deciding to engage

 

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Citi, the WCI board discussed, among other things, Citi’s experience and reputation generally and specifically in the homebuilding industry, its familiarity with the businesses of WCI and Lennar and the resulting efficiencies of a transaction combining the two companies, its ability to access senior decision makers at competitors quickly to assess potential competing proposals, the WCI board’s intention that Mr. Bass would lead all negotiations, Citi’s incentivized fee structure and that Citi had no conflicts that in the judgment of the WCI board would preclude Citi from acting as WCI’s financial advisor.

Thereafter, representatives from Citi joined the meeting. With the representatives from Citi, the WCI board and WCI’s management discussed the potential transaction with Lennar as compared to certain other potential strategic alternatives for WCI and WCI’s standalone prospects. Citi provided a market update on the homebuilding sector and discussed certain financial metrics pertaining to WCI and Lennar based on publicly available information. Citi also provided an illustrative overview of the combination of the two companies at a range of $20.00 to $25.00 per share of WCI common stock based on then-current market metrics and illustrative potential pro forma financial impact of a transaction on Lennar. Citi also discussed with the WCI board certain benefits and other considerations with respect to potential strategic alternatives for WCI and other potential buyers of WCI and their perceived ability to consummate a transaction. Citi and Latham also discussed certain process considerations, including the availability of a variety of means to maximize stockholder value through pre- and post-signing market checks. The WCI board and management discussed concerns about the potential risks of market rumors regarding a possible sale of WCI. Citi expressed its belief that WCI could maximize stockholder value by performing a market check through a properly structured post-signing go-shop process and proceeding with negotiations with Lennar on an exclusive basis. The representatives from Citi were then excused from the meeting and the WCI board further discussed with WCI’s management and Latham other potential buyers, the advisability of a pre-signing market check, required stockholder votes, termination fees, due diligence and timing aspects, and certain other considerations related to Lennar’s proposal. Following discussion, the WCI board determined that Lennar’s proposal of $20.00 per share of WCI common stock, and even the potential $21.00 per share of WCI common stock suggested by Mr. Beckwitt, would not provide adequate value to WCI’s stockholders. The WCI board instructed Mr. Bass to reject Lennar’s proposal but to continue to explore a potential transaction with Lennar on more favorable terms to WCI and its stockholders, including a higher value and provisions that would provide certainty of value to WCI stockholders with respect to the stock component of Lennar’s proposal. The WCI board also further discussed considerations in conducting a pre-signing market check at this time, including the risks to WCI associated with market rumors, Lennar’s statement that it would not pursue a transaction with WCI if it engaged in a broader sale process and the belief that a properly structured post-signing go-shop would allow WCI to pursue competing bids from other credible potential buyers, including those with which WCI previously held discussions, after execution of a definitive agreement with Lennar. Also during this meeting, Mr. Bass informed the WCI board about the email he had received from the principal of Party A and updated the board on various discussions he had with industry leaders regarding the homebuilding industry generally. At this time, the WCI board also formed a transaction committee, composed of four directors (Stephen Plavin, Patrick Bartels, Keith Bass and Christopher Wilson), to allow for more flexibility in the process of evaluating a potential transaction with Lennar or another strategic party. Nevertheless, the full WCI board was able to attend all subsequent meetings and the transaction committee was therefore never needed or utilized. The closing price of WCI common stock on that day was $17.21 per share.

On June 1, 2016, Messrs. Bass and Beckwitt had a telephone conversation in which Mr. Bass informed Mr. Beckwitt that the WCI board did not believe that Lennar’s proposal of $20.00 per share (or even the possible $21.00 per share) provided adequate value to WCI stockholders. Mr. Bass further indicated that WCI would prefer a transaction consisting solely of cash and would require maximum certainty of value through provisions in the definitive agreement in the event a transaction involved stock consideration. Mr. Bass also informed Mr. Beckwitt that WCI had engaged Citi as WCI’s financial advisor. Mr. Beckwitt stated that he would consider WCI’s input on price and certainty as Lennar continued its due diligence review and reiterated that Lennar was not interested in proceeding without exclusivity, citing concerns associated with market rumors and the effects such rumors would have on the organization, people, assets and relationships of both companies.

Later on June 1, 2016, Messrs. Bass and Beckwitt had a telephone conversation in which Mr. Beckwitt informed Mr. Bass that Lennar required additional due diligence materials and a meeting with key executives of Lennar before Lennar could submit an increased proposal. Mr. Bass stated that WCI wanted to perform at least a limited pre-market check and Mr. Beckwitt replied that Lennar would not be interested in proceeding on that basis.

 

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During June and July 2016, the WCI board held several special telephonic meetings to discuss the potential transaction with Lennar and solicited input from WCI’s management and legal and financial advisors. The WCI board instructed Mr. Bass to continue to negotiate with Lennar for a higher price per share of WCI common stock in order to enhance value to WCI stockholders and, during this period, Mr. Bass continued to negotiate with Lennar regarding a potential transaction. The WCI board and WCI’s management also focused on the annual update to WCI’s strategic five-year plan, which we refer to as the “Five-Year Plan” in this proxy statement/prospectus.

On June 5, 2016, Lennar sent WCI a list of due diligence requests for, among other things, projections and potentially sensitive property-level information. On June 7, 2016, the WCI board held a special telephonic meeting, with representatives of WCI’s management, Latham and Citi present, to discuss these requests and the fact that the information requested was competitively sensitive. The WCI board decided that such information should not be necessary or relevant to Lennar’s valuation and should not be provided until Lennar offered a compelling value for the Company. Upon the recommendation of WCI’s management, the WCI board decided to press Lennar for an updated proposal and the WCI board directed WCI’s management to provide Lennar with only limited incremental confidential information. At this meeting, the WCI board also discussed the prior unsolicited inbound inquiry to Mr. Bass from Party A and Mr. Bass reported that Citi had informed him that Party A, without knowledge of WCI’s engagement of Citi, had contacted Citi and requested that Citi prepare certain materials for Party A regarding a possible strategic transaction with WCI. Citi then requested WCI’s guidance on an appropriate response to Party A and, after discussion, the WCI board determined that Citi should provide materials to Party A regarding a potential transaction with WCI based exclusively on publicly available information, which materials were shared with WCI and Party A, and that Mr. Bass should meet with Party A for a high-level discussion.

On June 9, 2016, Mr. Bass, together with a representative of Citi, met with executives of Lennar, at which meeting WCI provided Lennar with incremental due diligence information and requested an updated proposal from Lennar reflecting a higher value and more price certainty.

On June 14, 2016, Mr. Bass spoke by telephone with Mr. Beckwitt, and Mr. Beckwitt presented an updated verbal proposal to acquire WCI. This proposal included a purchase price of $22.00 per share of WCI common stock, consisting of 50% cash and 50% Lennar Class A stock, based on a floating exchange ratio with a $39.50 downward collar on the value of Lennar Class A stock (with a corresponding walk-away right for WCI at the $39.50 per share value), exclusivity of negotiations until signing, a 21-day go-shop period with a lower termination fee than the post-go-shop termination fee and matching rights for Lennar. On that day, the closing price of WCI common stock was $17.20 per share and the closing price of Lennar Class A stock was $45.58 per share.

During a special telephonic meeting of the WCI board on June 15, 2016, with representatives of WCI’s management, Latham and Citi present, the WCI board considered Lennar’s revised proposal and discussed value protections and other provisions that would be important in a potential transaction, including the advisability of an upward collar on the value of Lennar common stock, a fixed versus floating exchange ratio and expense reimbursement versus a termination fee during the go-shop period. Citi reviewed with the WCI board the financial terms of Lennar’s revised proposal and certain financial and market information, including preliminary financial analyses regarding WCI. Also during the meeting, WCI’s management presented the Five-Year Plan to the WCI board, including the financial metrics and assumptions underlying the Five-Year Plan. Following discussion, the WCI board informed WCI’s management that the WCI board would further evaluate and discuss the Five-Year Plan, Citi’s preliminary financial analyses and Lennar’s counterproposal.

During a special telephonic meeting of the WCI board on June 17, 2016, with representatives of WCI’s management and Latham present, the WCI board and WCI’s management considered whether the timing was appropriate for a sale of WCI, the current environment for small cap companies, WCI’s performance relative to its peer group, an assessment of execution risks in the Five-Year Plan, the likelihood of recession, the cyclical nature of the homebuilding industry generally and WCI stockholder price expectations for WCI common stock. The WCI board and WCI’s management also discussed other potential strategic alternatives to enhance stockholder value, including the possibility of a stock repurchase program, a divestiture of WCI’s Real Estate Services business segment and/or the sale of a key amenities facility. Representatives of WCI’s management also discussed their views on Citi’s preliminary financial analysis reviewed at the June 15, 2016 meeting of the WCI board. After discussions with representatives from Latham, the WCI board instructed Mr. Bass to inform Lennar that the WCI board believed that Lennar’s revised proposal did not represent adequate value for WCI stockholders and that WCI would present a counterproposal.

 

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On June 19, 2016, Mr. Bass spoke by telephone with Mr. Beckwitt. He informed Mr. Beckwitt that the WCI board thought that a purchase price of $22.00 per share of WCI common stock did not provide adequate value for WCI’s stockholders. There was no discussion of a counterproposal by WCI; however, Mr. Bass informed Mr. Beckwitt that he would provide a more definitive response after the next board meeting. Mr. Bass also stated that the WCI board might entertain a transaction consisting of 50% cash and 50% Lennar Class A stock at an appropriate value with downside stock price protection for Lennar as previously proposed by Mr. Beckwitt, but that WCI would also want an upside collar on the price at which Lennar Class A stock would be valued for purposes of the transaction. The final merger agreement had neither a downside nor an upside collar.

During a special telephonic meeting of the WCI board on June 22, 2016, with representatives of WCI’s management, Latham and Citi present, the WCI board and WCI’s management again discussed Lennar’s revised proposal. The WCI board considered the current slowing of WCI’s sales in the first half of 2016, uncertainty of future trends, the WCI common stock price performance, the value of WCI’s Amenities business segment, market risk, the upside and potential challenges in achieving the Five-Year Plan, the current environment for small cap versus large cap builders, the composition of WCI’s stockholder base and stockholder price expectations and the WCI board’s perception of Lennar’s views on WCI’s land and franchise value. Following discussion of the foregoing and potential next steps and negotiating strategies and taking into consideration preliminary financial analyses provided by Citi and WCI’s management, the WCI board directed Mr. Bass to provide a counterproposal to Lennar of $24.25 per share of WCI common stock, consisting of 50% cash and 50% stock consideration, noting that WCI would refrain from discussion of other terms until it received Lennar’s response. Mr. Bass delivered this counterproposal to Mr. Beckwitt later that same day. In that conversation and a brief conversation the following day, Messrs. Bass and Beckwitt discussed multiples, discounted cash flow valuations and other metrics, as well as the amount of goodwill that would appear on Lennar’s balance sheet if it paid the $24.25 per share price that WCI had proposed. The closing price of WCI common stock on June 22, 2016 was $17.05 per share.

On June 29, 2016, Mr. Bass and Mr. Beckwitt had a telephone discussion in which Mr. Beckwitt discussed the possible effects of Brexit on stock prices, housing demand and the overall economy and expressed his desire to defer further price discussions until Lennar could evaluate the effect Brexit would have on these matters.

On July 1, 2016, Mr. Bass provided the WCI board with an email update regarding his negotiations with Lennar, including Lennar’s initial response that WCI’s counterproposal was high and that while Lennar continued to have interest in a potential transaction, it would need additional time to consider the terms of a potential transaction.

On July 8, 2016, Mr. Beckwitt spoke with representatives of Citi to inform them that Lennar was still interested in pursuing a transaction.

On July 19, 2016, Messrs. Bass and Beckwitt discussed Lennar’s continuing interest in a potential transaction. During this call, Mr. Beckwitt indicated that Lennar would not respond to WCI’s counterproposal until WCI released its second quarter earnings on July 27, 2016.

During a special telephonic meeting of the WCI board on July 21, 2016, with representatives of WCI’s management and Latham present, the WCI board discussed Mr. Bass’s July 19 discussion with Mr. Beckwitt, the continuing disagreement on price and the absence of a further revised proposal from Lennar. Following discussion, the WCI board determined it would not be in the best interests of WCI to continue discussions with Lennar given the apparent impasse on price and Lennar’s failure to respond to WCI’s counterproposal. The WCI board directed WCI’s management to terminate all discussions with Lennar. The WCI board also directed WCI’s management to further explore the possibility of implementing a stock repurchase program for WCI and to report its findings to the WCI board.

On July 22, 2016, Mr. Bass called Mr. Beckwitt to inform him of the WCI board’s decision to terminate discussions, noting the lack of a further revised proposal from Lennar. Mr. Beckwitt stated that he was surprised and disappointed, but that Lennar continued to be interested in a transaction with WCI and that he would get back to Mr. Bass in any case after WCI reported its second quarter earnings. On July 26, 2016, WCI sent a written notice to Lennar requesting that Lennar return or destroy all non-public information it had received from WCI. However, Lennar did not return these materials.

On July 27, 2016, WCI reported second quarter results, with earnings exceeding consensus estimates, but order growth lower than analysts’ expectations. WCI results also included increased deliveries of homes from the prior year quarter, increased total revenues from the prior year quarter and a decreased average selling price per home delivered. The closing price per share of WCI common stock decreased by approximately 3% that day, closing at $17.46 per share.

 

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On August 2, 2016, Mr. Bass called a key decision maker at a large cap strategic homebuilder, which we refer to as “Party B” in this proxy statement/prospectus, to discuss Party B’s impressions of industry participants that could potentially be director candidates for the WCI board, and also discussed the homebuilding industry generally, including mergers and acquisitions activity, but WCI was not directly referenced and Mr. Bass was unable to ascertain whether Party B would be interested in discussing a potential transaction with WCI.

On August 4, 2016, Mr. Beckwitt contacted Citi and submitted an unsolicited, revised verbal proposal on behalf of Lennar to acquire WCI for $22.50 per share of WCI common stock on substantially similar terms as Lennar’s prior proposal. Citi then relayed to Mr. Bass Lennar’s proposal as outlined by Mr. Beckwitt.

During a special telephonic meeting of the WCI board on August 10, 2016, with representatives of WCI’s management present, the WCI board discussed Lennar’s revised proposal and whether to reengage in discussions with Lennar. The WCI board also considered other potential strategic alternatives, including a stock repurchase program and/or sale of WCI’s Real Estate Services business segment, and WCI’s ongoing prospects as a standalone company. The WCI board also discussed current market conditions and whether it was the appropriate time to sell the Company. The WCI board also discussed whether to conduct a pre-signing market check and, for the same reasons previously considered, including Lennar’s stated position that it would not negotiate other than on an exclusive basis, risks to WCI associated with market rumors and the belief, taking into consideration the input of WCI’s management and advisors, that a properly structured post-signing go-shop would allow WCI to pursue competing bids, decided not to conduct a pre-signing market check at that time. Following discussion of various alternative negotiation strategies, the WCI board directed Mr. Bass to submit to Lennar a counterproposal of $23.75 per share of WCI common stock, which, at Mr. Bass’ request, representatives of Citi conveyed to Lennar later that day. The closing price of WCI common stock on that day was $16.95 per share.

On August 13, 2016, Mr. Beckwitt contacted Citi and submitted a further revised verbal proposal to acquire WCI for $22.75 per share of WCI common stock on substantially the same terms as Lennar’s prior proposals, including the demand for exclusive negotiations. The closing price of WCI common stock was $17.24 per share on August 12, 2016, the prior trading day, and $17.57 per share on August 15, 2016, the next ensuing trading day.

On August 15, 2016, Mr. Bass returned an unsolicited phone call from a strategic party, which we refer to as “Party C” in this proxy statement/prospectus, to discuss Party C’s business growth ideas and general questions regarding the U.S. homebuilding industry and its potential desire to gain a platform in such industry. Mr. Bass advised Party C to contact an investment banking firm with industry knowledge regarding such matters and provided to Party C contact information for a representative of Citi. Mr. Bass then contacted the representative at Citi to note that he should anticipate hearing from Party C. In its conversation with Citi, Party C did not express specific interest in WCI but rather interest in understanding the U.S. homebuilding industry generally.

During a special telephonic meeting of the WCI board on August 22, 2016, with representatives of WCI’s management, Latham and Citi present, the WCI board considered Lennar’s most recent revised proposal. Citi discussed with the WCI board, among other things, various market and financial matters relating to WCI and its share price, the homebuilding sector, analyst consensus estimates relative to WCI management’s plan, certain preliminary financial analyses and the potential pro forma financial impact of a transaction on Lennar based on publicly available information relating to Lennar. The WCI board considered, among other things, Citi’s preliminary financial analyses and WCI’s prospects as a standalone company under, and WCI’s ability to execute, the Five-Year Plan as compared to a sale of the Company. The WCI board also discussed potential deal terms and various strategy and timing considerations pertaining to a transaction with Lennar. The WCI board also expressed its growing impatience resulting from the apparent impasse on price and its desire for either WCI and Lennar to rapidly finalize key financial terms or for WCI to focus its efforts on executing the Five-Year Plan. Following discussion, the WCI board instructed Mr. Bass to make a best and final counterproposal to Lennar of $23.50 per share of WCI common stock, to indicate that there was no consensus of the WCI board at a price below $23.50 per share and to set a response deadline of August 26, 2016. Mr. Bass conveyed the counterproposal to Lennar later that day. The closing price of WCI common stock on that day was $17.13 per share.

On August 24, 2016, Mr. Bass met in person with a representative of Party A. During this meeting, the parties discussed the homebuilding industry generally, consolidation and growth. The representative of Party A indicated that he was open to a potential strategic transaction involving WCI and Party A, but that issues pertaining to Party A’s capital structure could complicate and make expensive any transaction between the parties. Party A and Mr. Bass agreed that a consolidation of the two companies may not be a good strategic fit for either side.

 

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On August 24, 2016, Mr. Beckwitt informed Mr. Bass during a telephone conversation that Lennar would increase the price it would pay to $23.25 per share. Mr. Bass again emphasized to Mr. Beckwitt that there was no consensus of the WCI board at a price below $23.50 per share. Mr. Beckwitt subsequently called Mr. Bass again and verbally accepted WCI’s counterproposal of $23.50 per share, subject to confirmatory due diligence, and on substantially the same terms as Lennar’s prior proposals. The closing price of WCI common stock on that day was $17.51 per share.

During a special telephonic meeting of the WCI board on August 25, 2016, with representatives of WCI’s management, Latham and Citi present, Mr. Bass reported to the WCI board that Lennar had accepted WCI’s counterproposal of $23.50 per share, payable 50% in cash and 50% in Lennar Class A stock. The WCI board then discussed the status of negotiations pertaining to other key deal terms, including go-shop provisions, exchange ratios and other mechanics to enhance the value of a potential transaction to WCI stockholders. The WCI board requested that WCI’s advisors review and provide the WCI board with certain information regarding precedent transactions with post-signing market checks, corresponding terms in transaction agreements, including termination fees, and a list of other potential strategic acquirors that might be contacted. Mr. Bass also provided an update to the WCI board on his meeting with Party A.

Following the closing of trading on August 25, 2016, it was announced that WCI would be added to the S&P SmallCap 600 after the close of trading on Friday, September 2, 2016. The closing price of WCI common stock on August 25, 2016 was $17.33 per share and the opening price of WCI common stock on August 26, 2016 was $18.25 per share.

On August 26, 2016, Mr. Beckwitt submitted to Citi a due diligence request from Lennar.

On August 29, 2016, Lennar and its outside counsel, Goodwin Proctor LLP, which we refer to as “Goodwin” in this proxy statement/prospectus, circulated an initial draft of the merger agreement to Latham and WCI.

Throughout September 2016, WCI’s management and Latham, at the direction and with the input of the WCI board, negotiated the terms of a definitive merger agreement with Lennar’s management and Goodwin. Latham and Goodwin exchanged multiple drafts of the proposed merger agreement. During the course of negotiations, representatives of Latham discussed the merger agreement with the WCI board and the WCI board reviewed various drafts of the proposed merger agreement and provided input to Latham and WCI’s management regarding key deal terms. The key deal terms negotiated included (i) the elimination of a walk-away right in favor of Lennar and the elimination of certain closing conditions, in each case to ensure certainty of closing, (ii) the value of the merger consideration and method of calculating the exchange ratio to maximize certainty of value for WCI stockholders, (iii) go-shop mechanics designed to allow interested parties to make competitive offers while remaining anonymous to Lennar until the WCI board decided to pursue them, and (iv) the termination fees that would be payable both during and after the go-shop period.

While the terms of the merger agreement were being negotiated, there were frequent conversations between Mr. Bass and Mr. Beckwitt regarding the progress of the negotiations and due diligence issues. In addition, beginning on September 15, 2016, Messrs. Bass and Beckwitt had several discussions regarding matters related to compensation of WCI executives, including retention agreements, benefit plans and increased severance benefits. The compensation discussions included proposed granting of retention bonus payments and increases in change of control related severance payments that WCI presented to Lennar on September 18, 2016. At Lennar’s request, retention bonus payments were granted to certain WCI executive officers, including Mr. Bass, but no increases in change of control related severance payments were implemented. The discussions also resulted in a decision on or about September 20, 2016 that Keith Bass would be eligible for a transaction bonus of up to $3.22 million (depending on the extent to which he is required to pay excise tax with regard to payments he receives), which together with his retention bonus of $930,000, resulted in a total aggregate bonus eligibility for Mr. Bass of up to $4.15 million. There were no suggestions that any WCI employees or directors would become officers or directors of Lennar after consummation of the mergers.

During a special telephonic meeting of the WCI board on September 1, 2016, with representatives of WCI’s management, Latham and Citi present, Latham and Citi discussed certain information previously requested by the WCI board, including information relating to the terms of post-signing market checks in selected precedent transactions. The WCI board and Latham also discussed matters relating to the process of conducting a pre-signing market check. Citi also discussed potential strategic alternatives, including other potential strategic acquirors’ respective abilities to consummate a transaction, an illustrative process timeline and the potential timing and level of diligence that might be required by such acquirors. WCI’s management and advisors also reviewed certain other considerations with respect to conducting a pre-signing market check as compared to conducting a go-shop process, including the risk of market rumors and disruption to WCI’s business prior to signing, the likelihood based on Lennar’s stated position that it would retract its proposal if WCI conducted a pre-signing market check, the likelihood that discussions with other potential acquirors would result in a higher proposal and go-shop terms that could best facilitate post-signing offers. Citi also reviewed with the WCI board certain go-shop provisions from selected precedent transactions, including termination fees during and after the go-shop period.

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ratios in selected precedent transactions and the prevalence of these structures in such transactions and the potential impact on Lennar’s proposal of a floating or fixed exchange ratio, both with and without collars. The WCI board engaged in further discussion regarding these alternatives and their relative benefits and detriments, including the potential impact on the assurance of value at closing, and the go-shop process.

Representatives from Latham discussed certain other issues related to the proposed merger agreement, including issues that would affect certainty of closing, economic value and tax-free treatment for WCI stockholders. Representatives of Latham summarized the go-shop provisions that should be revised in order to facilitate alternative proposals and also discussed certain provisions in the draft that Latham described as atypical, including Lennar’s definition of “Material Adverse Effect,” a closing condition that no more than a certain percentage of holders of WCI shares exercise appraisal rights, a closing condition regarding the absence of any stockholder litigation presenting a reasonable likelihood of resulting in an award of material damages, certain representations and warranties and covenants, and Lennar’s ability to walk away from the transaction at any time upon the payment of a $27 million termination fee. The WCI board instructed Latham to negotiate these key provisions to an acceptable position, including the exchange ratio mechanics, before responding with a full mark-up of the draft merger agreement. The WCI board also instructed WCI’s management not to grant Lennar access to additional due diligence materials until the key issues in the merger agreement were resolved.

On September 2, 2016, Latham spoke with Goodwin regarding various deal terms, and on September 3, 2016, Messrs. Bass and Beckwitt participated in various telephone calls with Latham and Goodwin to discuss certain key issues in the merger agreement. Based upon the concessions made on these calls by Lennar on various key points, WCI’s management instructed Latham to grant Lennar access to additional due diligence materials in a virtual data room that day.

In September 2016, Lennar provided business, financial, accounting, tax, legal and other due diligence information as requested by WCI, and WCI’s management and advisors conducted reverse due diligence on Lennar.

During a special telephonic meeting of the WCI board on September 7, 2016, with representatives of WCI’s management, Latham and Citi present, the WCI board discussed with WCI’s management and advisors the status of the reverse due diligence review on Lennar and timing expectations in the event a merger agreement was signed with Lennar. Representatives of Latham updated the WCI board on the status of negotiations regarding the merger agreement with Goodwin, including the satisfactory resolution of certain key issues and the key issues that remained open, including: (i) the mechanics of the exchange ratio, (ii) a price adjustment provision that would require Lennar, if it did not elect to pay the full merger consideration in cash, to pay additional cash consideration if the closing price of Lennar Class A common stock on the trading day before closing was less than the ten day VWAP, (iii) the bring down standard for representations and warranties at closing that impacted closing certainty, and (iv) certain key go-shop provisions.

In discussing the mechanics of a post-signing go-shop process, the WCI board inquired of Citi whether, given Citi’s previously disclosed relationships and prior dealings with Lennar and its relationships with potential parties that Citi would likely contact in a go-shop process, Citi believed it could effectively advise WCI in the proposed transaction with Lennar and conduct a go-shop process on behalf of WCI. The WCI board also inquired whether Citi’s fee structure would provide appropriate incentives in a go-shop process and whether it would be appropriate to engage a second financial advisor to assist in the go-shop process. The representatives of Citi noted that, given Citi’s substantial work in the homebuilding industry, Citi had relationships with, and access to, many industry participants that Citi would likely contact in a go-shop process. The representatives of Citi confirmed their belief that Citi could effectively advise WCI in respect of the proposed transaction with Lennar and in a go-shop process and that its fee structure provided adequate incentive in a go-shop process.

Following discussion, representatives of Citi were excused from the meeting, and representatives of Latham reviewed the WCI board’s fiduciary duties. The WCI board discussed its prior conversations with Citi and process considerations pertaining to the proposed transaction and the go-shop process and various means to assure that such process would maximize the value potential for WCI’s stockholders, including an appropriate process for investigating, monitoring and overseeing potential conflicts issues, the possibility of an additional financial advisor assisting with the go-shop process, continued management oversight and whether Citi should have a different fee structure. The WCI board discussed its level of comfort with Citi’s work to date, Citi’s familiarity with WCI, the fact that Mr. Bass, under the supervision of the WCI board, had led the key negotiations with Lennar and Citi’s relationships with other potential buyers that could be utilized for the benefit of WCI in the go-shop process. The

 

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WCI board also discussed the downside of obtaining an additional financial advisor, including additional fees, the potential delay to the process and the lack of any apparent value that another financial advisor would provide. After discussion, the WCI board determined, based upon the information available to the WCI board at that time, that proceeding with Citi as WCI’s sole financial advisor was the best course of action and that Citi’s fee structure properly incentivized Citi to obtain increased value for WCI in a go-shop process.

During a special telephonic meeting of the WCI board on September 13, 2016, with representatives of WCI’s management, Latham and Citi present, representatives of Latham provided the WCI board an update on the status of the merger negotiations, Mr. Bass updated the WCI board on his discussions with Lennar and representatives of Latham and Citi responded to questions on deal economics and go-shop mechanics. A WCI board member, Mr. Nevin, also disclosed to the WCI board that he shares an office with one of the two managing partners of Krillion Ventures, an early stage venture capital firm. Jeff Miller, the brother of Lennar’s Chief Executive Officer, Stuart Miller, is the other managing partner and the only investor in the fund. Mr. Nevin disclosed that he, through G3 Investment Holdings, LLC has coinvested in business ventures with Krillion Ventures. Mr. Nevin also disclosed that he is the chairman of the board of a non-profit organization to which an affiliate of Krillion Ventures had made charitable donations and that Jeff Miller has served as the chairman of the board of another organization to which Mr. Nevin has contributed. Mr. Nevin also noted that G3 Investment Holdings, LLC and Krillion Ventures are coinvestors in a private health technology company that invited Mr. Nevin to join its board of directors. Mr. Nevin noted that he had never discussed any information pertaining to Lennar with Mr. Jeff Miller, that he had never received compensation from Krillion Ventures or from any entity related to Jeff Miller, that G3 Investment Holdings, LLC and Krillion Ventures each paid rent for the office space they shared and Mr. Nevin stated his belief that these relationships did not impair his independence in any manner. Following discussion, the WCI board determined that it had no concerns regarding Mr. Nevin’s independence.

During a special telephonic meeting of the WCI board on September 14, 2016, with representatives of WCI’s management, Latham and Citi present, representatives of Latham provided updates regarding the status of due diligence and negotiations on the key terms of the merger agreement, and WCI’s management discussed the Five-Year Plan and underlying assumptions, including certain updates regarding the impact on the Five-Year Plan and assumptions of WCI’s updated budget for 2016 and an expectation for a potential reduction in revenue and earnings for 2017 with respect to WCI’s residential tower and homebuilding businesses, which updated the Five-Year Plan to the WCI board. We refer to the Five-Year Plan, together with such updates based on information and guidance provided by WCI management, as the “September 14, 2016 projections” in this proxy statement/prospectus. The WCI board then authorized Citi to use and rely upon the September 14, 2016 projections for purposes of its financial analyses and opinion.

On September 14, 2016, representatives of Latham, Goodwin, Gibson Dunn & Crutcher LLP, which was advising Lennar regarding tax matters, and Lennar’s in-house legal counsel participated in a telephone conference to discuss the remaining merger agreement issues, including the amount of the termination fee during the go-shop period.

Also on September 14, 2016 and on September 15, 2016, WCI’s management participated in telephone conferences with representatives of Lennar regarding reverse due diligence questions and responses in key areas of concern, including business, financial, legal, environmental, regulatory, audit and tax matters. Representatives of Latham, Citi and Goodwin also attended these telephone conferences.

Also on September 15, 2016, Zelman & Associates issued a report downgrading WCI from a buy to a hold rating and reduced its $20.50 per share stock price target for WCI to $18.75 per share.

During a special telephonic meeting of the WCI board on September 15, 2016, with representatives of WCI’s management, Latham and Citi present, Latham and Mr. Bass provided an update on the on-going negotiations with Lennar, including the status of the merger agreement terms relating to the go-shop mechanics and termination fee, the calculation of the merger consideration and certain employee benefits matters. The WCI board and representatives of Latham discussed the timing of the proposed merger and such matters, and representatives of Citi updated the WCI board on the status of WCI’s go-shop materials that could be used should the parties enter into the proposed merger agreement. The WCI board instructed Latham and WCI’s management to continue to negotiate the key terms of the merger agreement.

The WCI board held two special telephonic meetings on September 16, 2016. In the first meeting, with representatives of WCI’s management, Latham and Citi present, Latham updated the WCI board on the status of

 

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negotiations concerning the proposed merger agreement. Latham and Citi described the scope and satisfactory conclusion of the reverse due diligence review of Lennar. The WCI board also discussed a proposed transaction timeline to finalize and execute a definitive merger agreement on September 18, 2016. Representatives of Latham next presented on certain employee benefits revisions and new policies for the WCI board’s consideration, including retention and severance programs for non-executives, revisions to the WCI vacation and vacation accrual policies, revisions to an executive officer severance policy and retention bonuses for executive officers, and the key considerations for approving these benefits changes. Citi discussed with the WCI board WCI management’s financial projections, including certain updates made by WCI’s management to such projections since August 22, 2016. Citi discussed its preliminary financial analyses regarding WCI, Lennar and the proposed transaction, and indicated that, subject to the absence of material changes in the information it considered, Citi anticipated that it would be in a position to render an opinion to the WCI board in connection with the execution of a definitive agreement then contemplated for September 18, 2016.

Shortly before the first special telephonic meeting on September 16, 2016, Citi provided Latham with supplemental disclosure to the May 2016 Citi Relationship Disclosure for distribution to the WCI board, which we refer to as the “September 16 Citi Relationship Disclosure” in this proxy statement/prospectus. This disclosure further described the interactions of certain Citi deal team members with Lennar as previously disclosed in the May 2016 Citi Relationship Disclosure, including that Citi had provided certain discussion materials in April and May 2016 to Lennar regarding a possible business combination with WCI based on publicly available information, which included indicative analyses of the potential impact of a transaction at illustrative price levels ranging from $23.00 to $27.00 per share and $20.00 to $25.00 per share, respectively, reflecting then-current market and business conditions. Latham also was provided with copies of these discussion materials. Included in the discussion materials dated April 7, 2016, based on publicly available information, were a business and financial overview of WCI, certain market statistics, relative contributions to various market and financial measures, and implied premia and financial metrics and illustrative transaction overview and potential pro forma financial impact on Lennar at various prices ranging from $23.00 to $27.00 per share of WCI common stock reflecting then-current market and business conditions. The discussion materials dated May 5, 2016 contained similar information as had been provided in the discussion materials dated April 7, 2016, but with the illustrative price range adjusted downward to $20.00 to $25.00 per share of WCI common stock reflecting then-current market and business conditions, including updated market data following WCI’s first quarter earnings announcement and the related decrease in WCI’s stock price.

After having an opportunity to review the September 16 Citi Relationship Disclosure, the Chairman of the WCI board and Latham convened a second telephonic meeting of the WCI board, with representatives of WCI’s management and Latham present, to discuss the September 16 Citi Relationship Disclosure and related discussion materials. The WCI board expressed concern about (i) the appearance of certain Citi deal team members for WCI having provided these discussion materials to Lennar shortly before the negotiations between Lennar and WCI began, (ii) the appearance of the illustrative price range reflected in the May 5, 2016 discussion materials being lower than the range reflected in the April 7, 2016 discussion materials and that the price ranges at which the negotiations with Lennar had occurred were within the illustrative price ranges reflected in the discussion materials, (iii) the perception that Lennar, which had not engaged a financial advisor for the transaction, may have arrived at its valuation perspectives in part based on these discussion materials, (iv) the fact that WCI had engaged in exclusive negotiations with Lennar based in part on the input of Citi regarding the effectiveness of a go-shop process, (v) the timing of Citi’s supplemental disclosures given the WCI board’s previous discussions with Citi and (vi) whether Citi would be in a position to render, and whether the WCI board could reasonably rely on, an opinion from Citi under the circumstances.

The WCI board discussed the options available to it, including terminating discussions regarding a proposed transaction with Lennar, commencing a full auction or continuing to pursue a transaction with Lennar on the existing proposed schedule. Believing that the price of $23.50 per share was in the best interests of WCI’s stockholders, the WCI board focused on ways to proceed with the transaction with Lennar. The WCI board also discussed various alternatives for financial advice, including retaining another financial advisor in lieu of or in addition to Citi. The WCI board then discussed the possibility of engaging Credit Suisse to serve as an additional financial advisor given, among other things, Credit Suisse’s knowledge of and familiarity with the homebuilding industry and substantial knowledge of and experience with respect to WCI and its business, having, among other things, previously been engaged as a financial advisor to WCI in connection with its consideration of certain strategic alternatives, having acted as an underwriter in connection with the initial public offering of WCI common stock in July 2013, being a participant in WCI’s credit facility and having acted as a broker, initial purchaser or

 

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underwriter in connection with certain sales of WCI common stock by Stonehill and Monarch. The WCI board believed Credit Suisse’s knowledge and familiarity with WCI and the homebuilding industry would enable Credit Suisse to quickly get up to speed regarding WCI and the proposed transaction. Mr. Bass informed the WCI board that his son had been an intern at Credit Suisse the prior two summers and had signed an offer letter to begin employment with Credit Suisse following his graduation in eight months. The WCI board discussed this relationship and unanimously determined that it did not pose a conflict that would prevent the WCI board from reasonably relying on financial advice provided by Credit Suisse, but also directed that members of WCI’s management other than Mr. Bass negotiate the terms of Credit Suisse’s engagement including the fees that would be payable to Credit Suisse as a financial advisor to WCI and authorized such other members of WCI’s management to commence those negotiations with Credit Suisse.

During the evening of September 16, 2016, Latham held several conference calls with WCI’s management and Citi’s counsel to discuss the September 16 Citi Relationship Disclosure and related discussion materials and to obtain additional information regarding those disclosures. Representatives of WCI’s management also contacted Credit Suisse to discuss the possibility of engaging Credit Suisse as an additional financial advisor to WCI in connection with the proposed transaction.

Later on September 16, 2016, representatives of Latham and Goodwin discussed matters pertaining to the September 16 Citi Relationship Disclosure and related discussion materials and the potential impact of the matters that were disclosed on the proposed transaction. Goodwin and Latham discussed delaying the proposed signing timeline to ensure that the WCI board had as much time as needed to consider the updated disclosure and properly address the impact, if any, on the transaction process. The WCI board and Latham also sought the counsel of Richards Layton & Finger, which we refer to as “RLF” in this proxy statement/prospectus, WCI’s Delaware counsel, regarding the September 16 Citi Relationship Disclosure.

On September 17, 2016, the WCI board held a special telephonic meeting, with representatives of WCI’s management and Latham present. Representatives of Latham reviewed the WCI board’s fiduciary duties and responsibilities in considering the proposed transaction in light of the September 16 Citi Relationship Disclosure.

The WCI board then discussed with Latham the potential engagement of Credit Suisse, during which representatives of Latham summarized their discussions with Goodwin and RLF and provided legal advice. Following that discussion, representatives of Credit Suisse were invited to join the meeting. The representatives of Credit Suisse presented their qualifications to be engaged as an additional financial advisor to WCI in connection with a potential sale or other business combination involving WCI, including information regarding Credit Suisse’s knowledge and familiarity with WCI and the homebuilding industry in which it operates. In response to questions by the WCI board and its counsel, the representatives of Credit Suisse confirmed that, based on Credit Suisse’s investment banking relationships with Lennar, they did not believe that Credit Suisse had any material relationships with Lennar that would impair Credit Suisse’s ability to provide WCI with objective advice regarding the proposed transaction with Lennar. Specifically, the representatives of Credit Suisse confirmed that, to their knowledge, including the knowledge of certain of such representatives with investment banking coverage responsibilities for Lennar in addition to their investment banking coverage responsibilities for WCI, Credit Suisse had no current engagements with Lennar and had not been engaged by Lennar to provide financial advisory services during the last three years. The representatives of Credit Suisse further informed the WCI board that they had not met with Lennar to discuss potential acquisition opportunities, including a potential acquisition of WCI, since March 2015. Representatives of Credit Suisse also disclosed that Credit Suisse was a counterparty to Lennar subsidiaries with respect to two warehouse credit facilities and a counterparty to Lennar with respect to a $55 million credit default swap backed letter of credit facility.

The WCI board informed Credit Suisse that, if engaged, Credit Suisse would be instructed to perform its own independent analysis in connection with rendering financial advice to the WCI board and not to rely upon any analyses performed by Citi. Although Credit Suisse informed the WCI board that it believed that it would quickly be able to get up to speed with respect to WCI and the proposed transaction, the WCI board and Credit Suisse agreed that Credit Suisse should take as much time as it needed to perform its analysis. At the request of the WCI board, Credit Suisse confirmed that in its view, based on its experience and professional judgment as a financial advisor, a properly structured go-shop process, particularly with respect to a company in the home building industry, would provide other potential buyers with a sufficient opportunity to evaluate WCI and submit alternative transaction proposals. Credit Suisse confirmed that, if requested by the WCI board, it would be able to commence soliciting

 

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alternative transaction proposals immediately following the execution of a definitive merger agreement. The WCI board instructed Credit Suisse to review the proposed go-shop provisions of the merger agreement and be prepared to advise the WCI board whether it could be an effective means for obtaining a potentially higher offer for WCI.

Representatives of Credit Suisse then left the meeting, and the WCI board discussed whether it should proceed with considering a proposed transaction with Lennar. The WCI board acknowledged that Citi previously had disclosed a preexisting relationship with Lennar and expressed its belief that Citi had performed its services as WCI’s financial advisor effectively to date, but the WCI board also expressed concern regarding the appearance of a potential conflict as a result of Citi’s discussions with Lennar prior to being retained by WCI. The WCI board noted that Mr. Bass, not Citi, had been the primary party involved in pricing negotiations with Lennar. The WCI board also considered its belief that Lennar’s proposed price reflected a compelling offer for WCI based on the WCI board’s independent review. The WCI board also considered the fact that both Citi and Credit Suisse independently had indicated that a properly structured go-shop process could be an effective means for obtaining a potentially higher offer for WCI, if there were one. The WCI board then discussed whether to engage Credit Suisse as an additional financial advisor to WCI in connection with the proposed transaction. Following discussion, the WCI board determined to proceed with negotiations regarding the proposed transaction with Lennar subject to the WCI board’s receipt of Credit Suisse’s financial analyses and opinion as to the fairness, from a financial point of view, to the holders of WCI common stock of the consideration to be received by such holders of WCI common stock in the merger pursuant to the merger agreement. Subject to a final review of a summary of Credit Suisse’s material relationships with Lennar to be provided by Credit Suisse and a review of the terms of, and subsequent execution of, an engagement letter with Credit Suisse, the WCI board also approved the retention of Credit Suisse as an additional financial advisor to WCI in connection with the proposed transaction and, if requested by the WCI board, to assist WCI in soliciting proposals from third parties regarding an alternative transaction following the signing of a definitive agreement with Lennar. The WCI board also directed Latham and WCI’s management to finalize the Credit Suisse engagement letter as well as an amendment to Citi’s engagement letter to provide for an offset of any fees payable to Credit Suisse against fees otherwise payable to Citi. Latham was instructed to inform Goodwin that there would be a delay in the timing of the process sufficient to allow Credit Suisse to get up to speed and provide financial advice to the WCI board with respect to the proposed transaction.

The WCI board also discussed with representatives of Latham the current status of the negotiations pertaining to the merger agreement. Among other updates, Latham discussed the go-shop termination fee and terms of the go-shop process. The WCI board directed Latham and WCI’s management to continue to push for a lower go-shop termination fee to facilitate alternative bids during the go-shop period. The WCI board also directed Latham to review the terms of the go-shop provisions in the draft merger agreement with Credit Suisse and to continue to negotiate go-shop terms intended to maximize the effectiveness of the go-shop process.

Later on September 17, 2016, Citi affirmed to Latham that Citi was prepared to render an opinion to the WCI board in connection with the transaction and believed that the matters disclosed in the September 16 Citi Relationship Disclosure did not impact its independence as WCI’s financial advisor.

On September 19, 2016, during a special telephonic meeting of the WCI board, with representatives of WCI’s management, Latham and Credit Suisse present, at the request of the WCI board, representatives of Credit Suisse confirmed that Credit Suisse did not have any material relationships with Lennar that Credit Suisse believed would impair Credit Suisse’s ability to provide WCI with objective advice regarding the proposed transaction with Lennar and that a post-signing go-shop process like the one contemplated by the proposed form of merger agreement could be an effective means for obtaining a potentially higher offer for WCI. The WCI board discussed the terms of the engagement letter with Credit Suisse and an amendment to the Citi engagement letter, including that they were structured to provide financial incentives to each financial advisor without increasing the total banking fees by including an offset of Credit Suisse’s fees against the fees payable to Citi. The WCI board also discussed with Credit Suisse and Latham key go-shop terms and the other remaining open issues in the merger agreement, including the formulation of the stock consideration calculation.

From September 19, 2016 to September 21, 2016, representatives of Latham and Goodwin had several telephone conferences to discuss the remaining key issues in the proposed merger agreement, including the calculation of the merger consideration, the pre-closing adjustment to the merger consideration, and key terms pertaining to the go-shop. Latham and Goodwin also exchanged multiple drafts of the proposed merger agreement.

 

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During this period, WCI’s management reviewed and adjusted its financial model to reflect updated estimates for 2016 and 2017 earnings and associated WCI management guidance previously discussed with the WCI board. Further, as a result of discussions with Credit Suisse, WCI’s management made certain further adjustments to its financial model, resulting in the projections which we refer to as the “September 21, 2016 projections” in this proxy statement/prospectus, which WCI management authorized Credit Suisse to use and rely on for purposes of its financial analyses.

On September 20, 2016, WCI’s management, at the direction of the WCI board, entered into the Credit Suisse engagement letter, effective as of September 17, 2016.

Also on September 20, 2016, Messrs. Bass and Beckwitt engaged in several telephone calls to negotiate the outstanding business deal points and key terms.

Later on September 20, 2016, the WCI board held a special telephonic meeting, with representatives of WCI’s management, Latham and Credit Suisse present, to discuss the status of negotiations on the proposed merger agreement, key open issues in the proposed merger agreement and the respective roles of Credit Suisse and Citi as financial advisors to WCI. Mr. Bass updated the WCI board on his earlier conversations with Mr. Beckwitt, including that Lennar was continuing to hold firm on a 2.1% go-shop termination fee. The WCI board reviewed the ranges of go-shop termination fees in precedent transactions. The WCI board directed management and Latham to reject Lennar’s proposed go-shop termination fee and negotiate for a lower fee to encourage alternative bids during the go-shop period.

On September 21, 2016, Citi provided Latham with a supplemental disclosure for distribution to the WCI board, which we refer to as the “September 21 Citi Relationship Disclosure” in this proxy statement/prospectus, containing, among other things, further details relating to the interactions, prior to Citi’s engagement by WCI, of certain Citi deal team members with Lennar and other industry participants and related discussion materials prepared in early 2016 through May 2016 based on publicly available information. The September 21 Citi Relationship Disclosure indicated that, as part of ordinary course discussions, Citi discussed with Lennar certain considerations concerning a potential transaction with WCI, including certain change-of-control payments to WCI executives and bondholders and, following WCI’s first quarter earnings announcement, discussed approaching WCI, and also held discussions during this period with Stonehill concerning the homebuilding industry and possible transactions involving WCI and other industry participants, including Lennar.

Also on September 21, 2016, the WCI board held two separate special telephonic meetings. During the first meeting, with representatives of WCI’s management, Latham and Credit Suisse present, representatives of Latham updated the WCI board that Lennar had proposed, in a best and final offer, a go-shop termination fee of $11.25 million (1.75% of equity value), which representatives of Latham noted was lower than both the average and median go-shop fees in precedent transactions. The WCI board directed WCI’s management and Latham to continue to work toward finalizing the transaction terms. Representatives of Latham reviewed with the WCI board the information contained in the September 21 Citi Relationship Disclosure. The WCI board determined that following the signing of a definitive agreement with Lennar, Credit Suisse would assist WCI in soliciting alternative transaction proposals from third parties approved by the WCI board and that Citi would only be utilized to the extent beneficial to the go-shop process and with supervision by WCI. The WCI board, after consultation with Latham, determined that Credit Suisse and Citi should both be requested to provide opinions to the WCI board with respect to the fairness, from a financial point of view, to the holders of WCI common stock of the consideration to be received by such holders of WCI common stock pursuant to the merger agreement.

Following the first board meeting on September 21, 2016, Credit Suisse sent Latham a three-page summary containing certain line items from WCI management’s September 21, 2016 projections, which Latham forwarded to senior members of the Citi deal team. This summary included, among other things, WCI management’s updated projected revenue, gross margin, net income and EBITDA for 2016 through 2020 included in WCI management’s September 21, 2016 projections. The underlying calculations used to determine such material line items were not provided to Citi, nor did Citi believe it had been instructed to utilize these projections.

During the second board meeting on September 21, 2016, with representatives of WCI’s management, Latham and Credit Suisse present, representatives of Latham again reviewed the WCI board’s fiduciary duties and responsibilities in considering the proposed transaction. Latham reported that, despite an additional attempt to further negotiate a lower go-shop termination fee, Lennar was maintaining its take-it-or-leave-it approach. Representatives of Latham noted that WCI had successfully negotiated maintaining the anonymity of bidders during

 

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the go-shop period until the WCI board had an opportunity to determine whether particular proposals might result in transactions that could be superior to those contemplated by the merger agreement, and other go-shop terms. Credit Suisse expressed its view that, based on its experience and professional judgment as a financial advisor, the terms of the proposed go-shop should provide potential alternative acquirors of WCI with an adequate opportunity to evaluate WCI and submit alternative transaction proposals. Management and Latham provided updates on their negotiations with Lennar regarding certain benefits and compensation matters. The WCI board directed WCI’s management and Latham to continue to work toward finalizing the transaction terms.

Next, WCI’s management reviewed the current state of the business, the risks and benefits of a WCI sale and other potential strategic alternatives available to WCI. WCI’s management again discussed with the WCI board the September 21, 2016 projections, including that certain adjustments, which had been discussed with the WCI board in prior meetings, had been made to WCI management’s financial model to reflect WCI’s updated earnings projections for 2016 and changed earnings expectations for 2017 regarding WCI’s residential tower and homebuilding businesses. Following discussion pertaining to this updated financial information, the WCI board authorized the September 21, 2016 projections for use by Citi and Credit Suisse for purposes of providing their respective financial advice and preparing their respective analyses (although, as described below, Citi did not believe it had been instructed to use and rely upon such updated information in connection with its analyses and opinion, and therefore continued to rely upon the September 14, 2016 projections for purposes of its financial analyses and opinion). At the request of the WCI board, Credit Suisse reviewed and discussed Credit Suisse’s preliminary financial analyses with respect to WCI and the proposed transaction. Thereafter, Credit Suisse discussed the proposed go-shop process, including potential strategic and financial acquirors that, subject to WCI board approval, could be contacted to solicit alternative transaction proposals. Following the meeting, WCI’s management, at the direction of the WCI board, entered into the amendment to Citi’s engagement letter to reduce the amount of fees payable by WCI to Citi by the amount paid to Credit Suisse in connection with the proposed transaction, subject to a cap in the reduction of Citi’s fees such that they would not be reduced by more than $5 million.

Through the evening of September 21, 2016, and early morning of September 22, 2016, representatives of Latham and Goodwin finalized the merger agreement.

On the morning of September 22, 2016, the WCI board held a special telephonic meeting, with representatives of WCI’s management, Latham, Citi and Credit Suisse present, to discuss the final terms of the merger agreement and to consider approval of the proposed merger agreement with Lennar. Also at this meeting:

 

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representatives of Latham again reviewed with the WCI board its fiduciary duties when considering the proposed transaction;

 

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management and representatives of Latham reviewed with the WCI board the outcome of the negotiations with Lennar and the revised terms and conditions of the proposed merger agreement;

 

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management reiterated the potential risks and benefits of a transaction with Lennar and recommended that the WCI board accept the offer from Lennar to acquire WCI under the terms of the merger agreement;

 

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Credit Suisse reviewed and discussed Credit Suisse’s financial analyses with respect to WCI and the proposed merger with the WCI board. Thereafter, at the request of the WCI board, Credit Suisse rendered its oral opinion to the WCI board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion to the WCI board dated the same date) as to, as of September 22, 2016, the fairness, from a financial point of view, to the holders of WCI common stock of the merger consideration to be received by such holders in the merger pursuant to the merger agreement; and

 

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Citi reviewed with the WCI board its financial analysis of the merger consideration and rendered an oral opinion, confirmed by delivery of a written opinion dated September 22, 2016, to the WCI board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken described in such opinion, the merger consideration to be received by holders of WCI common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The WCI board then discussed a number of considerations in deciding whether to approve the merger agreement, including the current state of the business, the strategic alternatives available to WCI, including pursuing its stand-alone business plan, potentially acquiring other businesses, potentially monetizing certain assets, potentially undertaking a stock repurchase program and seeking other potential acquirors, and countervailing factors associated with a sale transaction, including that WCI stockholders would have a smaller ongoing equity participation in Lennar than in WCI, potential negative effects if the mergers were not consummated, the effects on WCI of a public announcement regarding the merger agreement, that the receipt of some or all of the merger consideration would be taxable to WCI stockholders for U.S. federal income tax purposes, the interim restrictions imposed by the merger agreement on the conduct of WCI’s business prior to the consummation of the mergers, that the WCI board would not be permitted to solicit alternative transaction proposals regarding a business combination following the completion of the transaction solicitation period and the potential effects of the matching rights in favor of Lennar, the fact that WCI might have been required to pay to Lennar a

 

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termination fee under certain circumstances and the possibility that the executive officers and directors of WCI could have interests in the transactions contemplated by the merger agreement that would be different from, or in addition to, those of the WCI stockholders generally. For a detailed description of the various reasons considered by the WCI board, see “The Mergers—WCI Board Recommendation and Its Reasons for the Mergers” beginning on page 45 of this proxy statement/prospectus.

After discussion of the foregoing and consideration of its fiduciary duties, the WCI board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the mergers, are fair to and in the best interests of WCI and its stockholders; (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the mergers, on the terms and subject to the conditions set forth in the merger agreement; (iii) recommended that WCI’s stockholders adopt the merger agreement; and (iv) directed that the merger agreement be submitted to WCI’s stockholders for adoption at a special meeting of WCI’s stockholders.

Following the approvals described above, representatives of Credit Suisse discussed the go-shop process with the WCI board and confirmed that upon the commencement of the go-shop period, representatives of Credit Suisse would contact specified potential financial and strategic acquirors approved by the WCI board to solicit alternative transaction proposals with respect to WCI. The WCI board, following a review and discussion of the proposed go-shop process with the assistance of Credit Suisse and Latham, authorized Credit Suisse to begin soliciting alternative transaction proposals from the third parties following the execution of the merger agreement.

On the morning of September 22, 2016, Lennar, Corporate Sub, LLC Sub and WCI executed and delivered the merger agreement. Lennar and WCI each issued a press release announcing the execution of the merger agreement before the U.S. stock markets opened on the morning of September 22, 2016.

Beginning on September 22, 2016, as directed by the WCI board, representatives of Credit Suisse began contacting third parties to solicit alternative transaction proposals, ultimately contacting 44 parties approved by the WCI board, including 27 potential strategic acquirors (including Party A, Party B and Party C) and 17 potential financial acquirors, to solicit alternative transaction proposals that the WCI board might find to be superior to the proposed transaction with Lennar. As authorized by the WCI board, Mr. Bass also contacted key decision makers at many of the potential strategic acquirors. Eight parties ultimately executed nondisclosure agreements with customary provisions, which did not have standstill provisions, and six parties were granted access to the WCI virtual data room to conduct due diligence on WCI.

In late September and throughout October 2016, the WCI board frequently held special telephonic meetings, with representatives of WCI’s management, Latham and Credit Suisse present, to receive updates on the go-shop process.

On October 3, 2016, a representative of Lennar called a representative of Credit Suisse and noted that Credit Suisse was a participant in the WCI credit facility and that Lennar had previously suggested that Credit Suisse consider the possibility of participating in Lennar’s general corporate credit facility. The representative of Credit Suisse noted that, given Credit Suisse’s role as financial advisor to WCI, such discussions might not be appropriate and the representatives of Lennar and Credit Suisse agreed that Credit Suisse would discuss with its counsel before having any further discussions regarding Credit Suisse joining the Lennar credit facility. Subsequently, the representative of Credit Suisse informed Lennar that, as expected, he had been told that it would not be appropriate at this time to discuss participating in Lennar’s general corporate credit facility in view of Credit Suisse’s role as a financial advisor to WCI. Prior thereto, representatives of Lennar who were not involved in the WCI transaction separately approached representatives of Credit Suisse’s debt capital markets group regarding increasing the amount of Lennar’s existing $55 million credit default swap backed credit facility, which request was also deemed inappropriate at that time. Credit Suisse informed representatives of Latham and WCI management of those communications with Lennar.

During a special telephonic meeting of the WCI board on October 5, 2016, with representatives of WCI’s management, Latham and Credit Suisse present, Credit Suisse updated the WCI board on the status of the go-shop process. In addition, the WCI board was informed about the communications between Credit Suisse and Lennar regarding participating in Lennar’s general corporate credit facility and increasing its commitment under a credit default swap backed credit facility, that such requests had promptly been communicated to representatives of Latham and WCI’s management and Credit Suisse’s responses to such requests. Following discussion, the WCI board and Credit Suisse agreed that Credit Suisse should not have any further discussions with Lennar regarding its participation in Lennar’s general corporate credit facility or increasing the amount available under its credit default swap backed letter of credit facility at that time.

 

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On October 14, 2016, the WCI board held a special telephonic meeting, with representatives of WCI’s management, Latham, Citi and Credit Suisse present. At that meeting, Credit Suisse provided the WCI board with a further update regarding the go-shop process. WCI’s management also discussed the September 21, 2016 projections that had been approved by the WCI board. WCI’s management reported to the WCI board that a computational error had been discovered in WCI management’s estimates related to customer deposits that, when corrected, resulted in a change to the 2017 cash flow forecast of WCI. WCI management prepared an updated financial model taking into account the cumulative net effect of the correction and other adjustments, which we refer to as the “October 2016 corrected projections” in this proxy statement/prospectus. Citi and Credit Suisse were each requested to confirm whether or not, if taken into account as of September 22, 2016, the net result of the correction (including clarifications received from WCI management) would have prevented them from rendering their respective opinions to the WCI board on September 22, 2016. Each of Citi and Credit Suisse tentatively informed the WCI board that, while it did not appear that such a correction would have had a material impact on the financial analyses performed in connection with the rendering of their respective opinions on September 22, 2016, they would each have to review and discuss the October 2016 corrected projections and revert to the WCI board with a confirmation regarding the impact of such correction. Following discovery of the computational error and WCI management’s preparation of the October 2016 corrected projections, through conversations with Citi, WCI’s management was informed that Citi had not believed it had been instructed to use and rely upon the September 21, 2016 projections and thus had continued to use and rely upon the September 14, 2016 projections for purposes of its financial analyses and opinion provided to the WCI board on September 22, 2016.

On October 17, 2016, following confirmation from WCI’s management that the October 2016 corrected projections reflected WCI management’s best estimates as of September 22, 2016 as to the future financial performance of WCI, the October 2016 corrected projections were posted in the online data room and, at the direction of the WCI board, Credit Suisse informed each of the parties in the go-shop process that had accessed the online data room that the October 2016 corrected projections had been posted to the data room.

On October 19, 2016, in an email to members of the WCI board and representatives of Latham, representatives of Credit Suisse confirmed that if, in connection with the rendering of Credit Suisse’s opinion to the WCI board on September 22, 2016, WCI’s management had advised Credit Suisse that the projections in the October 2016 corrected projections prepared and provided to Credit Suisse by WCI’s management reflected WCI management’s best estimates and judgments as to the future financial performance of WCI as of September 22, 2016, Credit Suisse would still have been able to render its opinion on September 22, 2016 to the effect that, as of September 22, 2016 and subject to the same assumptions, limitations, qualifications and other matters considered in connection with its opinion rendered to the WCI board on September 22, 2016, the merger consideration to be received by the holders of WCI common stock in the proposed merger pursuant to the merger agreement was fair, from a financial point of view, to the holders of WCI common stock. In providing such confirmation, Credit Suisse took into account the cumulative net effect of the correction including clarifications received from WCI management.

On October 20, 2016, the WCI board held a special telephonic meeting, with representatives of WCI’s management, Latham and Credit Suisse present, to discuss the October 2016 corrected projections of WCI’s management. Credit Suisse reviewed and discussed the written confirmation provided to WCI and Latham the previous day, noting that the discounted cash flow analyses performed by Credit Suisse in connection with the rendering of its opinion on September 22, 2016 indicated an implied reference range per share of WCI common stock of $18.99 to $28.15, but that if, in connection the rendering of Credit Suisse’s September 22, 2016 opinion the same analyses had been performed using the October 2016 corrected projections, the implied reference range per share of WCI common stock would have been $19.11 to $28.25, in each case as compared to the implied value of the merger consideration of $23.50 per share of WCI common stock. Latham then reported to the WCI board that it had received an email from Citi on October 19, 2016 prepared for the WCI board in which Citi noted that the cumulative net effect of the change made by WCI’s management to, and updated direction and clarifications from management regarding, certain aspects of WCI’s free cash flow projections resulted in generally lower unlevered free cash flow projections for WCI than Citi used and relied upon for purposes of its analyses and opinion provided to the WCI board on September 22, 2016 and that the overall implied per share equity value reference ranges derived for WCI from Citi’s discounted cash flow analysis would have been approximately $20.10 to $24.40 (before taking into account the utilization of WCI’s estimated tax attributes per WCI’s management) and approximately $22.30 to $26.80 (after taking into account such tax attributes), as compared to the overall implied per share equity value reference ranges derived for WCI from Citi’s discounted cash flow analysis as performed in connection with its opinion of approximately $21.00 to $25.30 (before taking into account such tax attributes) and approximately $23.20 to $27.70

 

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(after taking into account such tax attributes). In such email, Citi confirmed that, based on and subject to the matters considered and the assumptions, limitations and qualifications set forth in Citi’s opinion dated September 22, 2016 (modified solely to reflect the revisions to management’s cash flow information described in such email), the results of Citi’s discounted cash flow analysis recalculated to reflect such revisions would not have changed the conclusion reached in Citi’s opinion as of the date it was rendered.

WCI did not receive any alternative transaction proposals during the go-shop period, which ended at 11:59 p.m. (Eastern Time) on October 26, 2016. Starting at 12:00 a.m. (Eastern Time) on October 27, 2016, WCI became subject to customary no-shop provisions that limit its ability to solicit alternative transaction proposals from third parties or to provide confidential information to third parties, subject to customary fiduciary out provisions including a termination fee of $22.50 million (3.5% of equity value).

Lennar’s Reasons for the Mergers

WCI owns a land portfolio of very attractive locations in some of the highest growth and largest Florida markets. WCI’s portfolio fits well with Lennar’s footprint, and further diversifies Lennar into move-up, second-home and active adult product offerings. The WCI brand has earned a premier reputation in coastal Florida, which Lennar plans to utilize, alongside Lennar’s own brand, creating dual-marketing opportunities. In addition, WCI’s real estate brokerage business will enhance the value proposition for Lennar’s existing mortgage and title insurance operations. Lennar’s economies of scale, extensive systems, processes and technological focus can be implemented in WCI’s operations to create stronger and more efficient operations overall, and to create additional value for Lennar stockholders. Lennar did not use a financial advisor in connection with its negotiation of the merger agreement because Lennar has substantial experience negotiating acquisitions of homebuilding companies and residential properties and Lennar’s management felt a potential acquisition of WCI was not a large enough transaction to require Lennar to use an outside financial advisor.

WCI Board Recommendation and Its Reasons for the Mergers

In evaluating the mergers, the WCI board consulted with WCI senior management, WCI’s outside counsel, Latham & Watkins LLP, and WCI’s financial advisors and, in the course of reaching its determination to approve the merger agreement and to recommend that WCI stockholders vote to adopt the merger agreement, the WCI board considered a wide and complex range of factors, including the following:

 

•

Financial and Business Position. WCI’s historical, current and projected business, operations, financial condition, prospects, strategy, and competitive position in the homebuilding industry generally. Specifically, the WCI board considered the financial forecast for the last quarter of fiscal year 2016 and for the fiscal years ending 2017 through 2020 prepared by WCI management and the risk-adjusted probabilities associated with achieving WCI’s long-term strategic plan as a stand-alone company as compared to the opportunity available to WCI stockholders to receive consideration at a premium price.

 

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Stand-Alone Operational Risks. The advantages of entering into the merger agreement and consummating the mergers in comparison to the risks associated with remaining independent as a stand-alone company and pursuing WCI’s strategic plan, including (i) the fact that WCI’s business is cyclical and significantly affected by changes in general and local economic conditions and any slowing or reversal of the present ongoing housing recovery may materially and adversely affect WCI’s business and results of operations, (ii) potential future competition, including from larger and better funded companies which might have competitive advantages from their broader commercial scope and economies of scale, (iii) the risks inherent in the homebuilding sector for WCI, (iv) the challenges and risks associated with growing WCI through either organic growth or strategic acquisitions, (v) WCI’s particular geographic concentration, (vi) the risk that WCI’s residential tower business is subject to significant swings in delivery volume given the extended construction time for towers, levels of pre-sale activity and relatively short delivery time for pre-sold units once a building is completed, (vii) the risk that WCI’s ability to utilize its net operating loss carryforwards is limited as a result of previous “ownership changes” as defined in Section 382 of the Internal Revenue Code of 1986, as amended, (viii) the competitiveness of the real estate brokerage business and (ix) the various additional risk factors pertaining to WCI that are listed in Item 1A of Part I of its most recent Annual Report filed on Form 10-K.

 

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Compelling Value. The certainty of value and liquidity represented by the merger consideration compared against the long-term and recent historical trading prices of WCI common stock and the performance of the homebuilding sector generally; and the fact that the merger consideration represents a significant premium over the market prices at which shares of WCI common stock traded prior to the announcement of the execution of the merger agreement, including the fact that the merger consideration represented a premium of approximately:

 

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•

37.5% to the closing price per share of WCI common stock on September 20, 2016;

 

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28.5% to the volume weighted average price per share of WCI common stock for the one-month period ended on September 20, 2016;

 

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33.1% to the volume weighted average price per share of WCI common stock for the three-month period ended on September 20, 2016;

 

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34.3% to the volume weighted average price per share of WCI common stock for the six-month period ended on September 20, 2016; and

 

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20.8% to the volume weighted average price per share of WCI common stock for the one-year period ended on September 20, 2016.

 

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Ability to Share in Future Value of Lennar. 50% of the merger consideration is expected to consist of Lennar common stock, which stock appeared to the WCI board to be reasonably likely to increase in value based on the WCI board’s consideration of results of WCI’s due diligence investigation of Lennar and the reputation, business practices and experience of Lennar and its management. The stock component of the merger consideration, if any, may allow WCI stockholders to participate in the benefits of the anticipated synergies from the transaction following the closing of the mergers.

 

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Potential Tax Benefits of Stock Portion of Merger Consideration. The fact that the stock portion of the merger consideration received by WCI stockholders, if any, will qualify for deferred tax treatment.

 

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Certainty of Value of Stock Portion of Merger Consideration. The fact that the exchange ratio for Lennar common stock to be received in the initial merger provides a substantial measure of price certainty by utilizing a floating exchange ratio based on Lennar’s volume weighted average trading prices on each of the 10 trading days prior to the closing date of the initial merger.

 

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Significant Portion of Merger Consideration in Cash. The fact that a large portion of the merger consideration will be paid in cash, giving WCI stockholders the opportunity to immediately realize value for a significant portion of their investment and providing certainty of value; and the fact that WCI stockholders would be able to reinvest the cash consideration received in the initial merger in Lennar common stock if they desired to do so.

 

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Strategic Alternatives. The other strategic alternatives reasonably available to WCI, including pursuing its stand-alone business plan, potentially making acquisitions of other businesses, potentially monetizing certain assets, potentially undertaking a stock repurchase program and seeking other potential acquirors; the WCI board determined that the mergers are superior to those other strategic alternatives.

 

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Negotiations with Lennar. The course of negotiations between WCI and Lennar, which eventually resulted in an increase of $3.50 from the $20.00 price per share of WCI common stock initially proposed Lennar; the WCI board believed based on these negotiations that this was the highest price per WCI common share that Lennar was willing to pay and that the terms of the merger agreement were the most favorable terms to WCI to which Lennar was then willing to agree.

 

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Likelihood of Completion. The likelihood that the initial merger will be consummated, based on, among other things, the likelihood of receiving WCI stockholder approval necessary to complete the transaction in a timely manner, the limited number of conditions to the initial merger, including that there are no governmental approvals of the mergers that are conditions to the closing of the initial merger, and the remedies available to WCI under the merger agreement in the event of

 

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various breaches of the merger agreement by Lennar, Corporate Sub or LLC Sub, as well as, after separate discussions with each of Citi and Credit Suisse, Lennar’s ability to finance the initial merger within the time frame contemplated by the merger agreement.

 

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Opinion of Citi. The opinion of Citi, dated September 22, 2016, to the WCI board as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by holders of WCI common stock pursuant to the merger agreement, which opinion was based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as discussed in the section titled “—Opinions of WCI’s Financial Advisors—Opinion of Citigroup Global Markets Inc.”

 

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Opinion of Credit Suisse. The financial analyses reviewed and discussed with the WCI board by representatives of Credit Suisse as well as the oral opinion of Credit Suisse rendered to the WCI board on September 22, 2016 (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion to the WCI board dated the same date) as to, as of September 22, 2016, the fairness, from a financial point of view, to WCI stockholders of the merger consideration to be received by such holders in the initial merger pursuant to the merger agreement as discussed in the section titled “—Opinions of WCI’s Financial Advisors—Opinion of Credit Suisse Securities (USA) LLC”.

 

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Terms of the Merger Agreement. The terms and conditions of the merger agreement, including:

 

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the transaction solicitation period during which WCI could actively solicit additional acquisition proposals from third parties, providing WCI with an opportunity to determine if a third party was willing to make a superior proposal relative to the transaction with Lennar;

 

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the merger agreement provides certain matching rights to Lennar, which the WCI board believes, following consultation with Latham and Credit Suisse, will not materially deter an interested third party from making an alternative transaction proposal;

 

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the WCI board’s ability under certain circumstances to change its recommendation;

 

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WCI’s ability, after the transaction solicitation period, to respond to unsolicited acquisition or business combination proposals from third parties and to provide such third parties with confidential information;

 

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the WCI board’s right, after complying with the terms of the merger agreement, to terminate the merger agreement in order to enter into an agreement with respect to a superior proposal upon payment of an $11.25 million termination fee (with regard to a transaction proposed during the transaction solicitation period) or the $22.50 million termination fee (with regard to a transaction proposed after the transaction solicitation period), which the WCI board was advised were within the customary range of termination fees payable in similar transactions;

 

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that the merger agreement contains terms that, taken as a whole, the WCI board believed provided a significant degree of certainty that the mergers will be completed as quickly as possible; and

 

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the availability of appraisal rights under Section 262 of the DGCL to holders of WCI common stock who comply with all of the required procedures under the DGCL, which allows such holders to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery.

 

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Regulatory Commitments. The level of commitment of Lennar to obtain applicable antitrust approvals was negotiated to the satisfaction of the WCI board, and the WCI board’s belief that such commitment provides a level of certainty and were the most favorable terms to which Lennar was willing to agree.

 

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Stockholder Vote. The fact that the adoption of the merger agreement will be subject to approval by the holders of a majority of the outstanding shares of WCI common stock and the absence of any stock voting commitments by management or other stockholders. The WCI board also considered the fact that, except in the situation of the termination fee, there would not be any fee payable or penalty as a result of an unsuccessful vote by WCI stockholders to approve the merger proposal.

The WCI board also considered a variety of risks and other potentially negative factors concerning the mergers and the merger agreement, including the following:

 

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Smaller Ongoing Equity Participation in Lennar by WCI Stockholders. The fact that because only half of the merger consideration will be in the form of Lennar common stock, WCI stockholders will have a smaller ongoing equity participation in Lennar (and, as a result, a smaller opportunity to participate in any future earnings or growth of Lennar and future appreciation in the value of Lennar common stock following the initial merger) than they have in WCI. The WCI board considered, however, that WCI stockholders would be able to reinvest the cash received in the initial merger in Lennar common stock if they desired to do so.

 

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Effect of Failure to Complete Transactions. While WCI expects that the mergers will be consummated, there can be no assurance that all of the conditions to the consummation of the mergers will be satisfied, and, as a result, it is possible that the mergers may not be completed in a timely manner or at all, even if the merger proposal is approved by WCI stockholders. The WCI board also considered potential negative effects if the mergers are not consummated, including:

 

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the trading price of the WCI common stock could be adversely affected;

 

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WCI would have incurred significant transaction and opportunity costs attempting to consummate the mergers without compensation;

 

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WCI could lose customers, suppliers, business partners and employees, including key sales and other personnel, after the announcement of the entry into the merger agreement;

 

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WCI’s business may be subject to significant disruption and decline;

 

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the market’s perceptions of WCI’s prospects could be adversely affected; and

 

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WCI directors, officers and other employees would have expended considerable time and effort to negotiate, implement and consummate the mergers, and their time may have been diverted from other important business opportunities and operational matters while working to implement the mergers.

 

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Effect of Public Announcement. The effect of a public announcement of the merger agreement on WCI’s operations, stock price and employees, WCI’s ability to retain key management, WCI’s ability to effectively recruit replacement personnel if key personnel were to depart while the mergers are pending and the potential adverse effects on the financial results of WCI as a result of any related disruption in WCI’s business.

 

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Taxable Consideration. The fact that the receipt of some or all of the merger consideration would be taxable to WCI stockholders for U.S. federal income tax purposes.

 

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Interim Restrictions on Business. The restrictions imposed by the merger agreement on the conduct of WCI’s business prior to the consummation of the mergers, which could delay or prevent WCI from undertaking timely business enhancement opportunities that may arise prior to the consummation of the mergers and that may have an adverse effect on WCI’s ability to respond to changing market and business conditions in a timely manner or at all.

 

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•

No Solicitation. The fact that the WCI board would not be permitted to solicit alternative transaction proposals regarding a business combination following the completion of the transaction solicitation period and the potential effects of the matching rights in favor of Lennar.

 

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Termination Fee. The fact that, under certain circumstances, WCI might have been required to pay to Lennar a termination fee of $11.25 million to enter into a transaction proposed during the transaction solicitation period and may be required to pay Lennar a termination fee of $22.50 million to enter into a transaction proposed after the transaction solicitation period, including the potential effect of such termination fees to deter other potential acquirors from making a competing offer for WCI.

 

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Interests of the WCI Board and Management. The possibility that the executive officers and directors of WCI could have interests in the transactions contemplated by the merger agreement that would be different from, or in addition to, those of WCI stockholders. See “The Mergers—Interests of WCI Directors and Executive Officers in the Initial Merger” beginning on page 71 of this proxy statement/prospectus.

The members of the WCI board did not assign particular weights to particular positive or negative factors. Instead, each director assigned to each factor the weight the director deemed appropriate and voted in accordance with the director’s overall judgment regarding the mergers.

Based upon the directors’ individual views of the mergers and related matters, the WCI board unanimously voted to recommend that WCI stockholders vote “FOR” the adoption of the merger agreement and “FOR” the adjournment of the WCI special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the WCI special meeting.

Opinions of WCI’s Financial Advisors

Opinion of Citigroup Global Markets Inc.

WCI has engaged Citi as a financial advisor in connection with the mergers. In connection with this engagement, WCI requested that Citi evaluate the fairness, from a financial point of view, of the merger consideration to be received by holders of WCI common stock pursuant to the merger agreement. On September 22, 2016, at a meeting of the WCI board held to evaluate the mergers, Citi rendered an oral opinion, confirmed by delivery of a written opinion dated September 22, 2016, to the WCI board to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications described in its opinion, the merger consideration to be received by holders of WCI common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Citi’s written opinion, dated September 22, 2016, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. The description of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the WCI board (in its capacity as such) in connection with its evaluation of the merger consideration from a financial point of view and did not address any other terms, aspects or implications of the mergers. Citi expressed no view as to, and its opinion did not address, the underlying business decision of WCI to effect or enter into the mergers, the relative merits of the mergers as compared to any alternative business strategies that might exist for WCI or the effect of any other transaction in which WCI might engage or consider. 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 mergers or otherwise.

In arriving at its opinion, Citi:

 

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reviewed an execution copy, provided to Citi on September 22, 2016, of the merger agreement;

 

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held discussions with certain senior officers, directors and other representatives and advisors of WCI and certain senior officers and other representatives and advisors of Lennar concerning the businesses, operations and prospects of WCI and Lennar;

 

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reviewed certain publicly available and other business and financial information relating to WCI and Lennar provided to or discussed with Citi by the managements of WCI and Lennar;

 

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reviewed certain financial forecasts and other information and data relating to WCI prepared by WCI management, including financial forecasts and other information and data relating to WCI under a “base case,” which we refer to in this section as the “Forecasts,” and alternative financial forecast scenarios reflecting both higher and lower potential future financial performance for WCI than the Forecasts, which alternative financial forecast scenarios we refer to in this section as the “Alternative Forecast Scenarios;”

 

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reviewed the financial terms of the mergers as set forth in the merger agreement in relation to, among other things, current and historical market prices of WCI common stock, the historical and projected earnings and other operating data of WCI and the capitalization and financial condition of WCI;

 

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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 WCI;

 

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considered, to the extent publicly available, the financial terms of certain other transactions which Citi considered relevant in evaluating the mergers;

 

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reviewed publicly available research analysts’ estimates relating to Lennar, current and historical market prices of Lennar Class A stock and 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 Lennar; 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 and other representatives of WCI and Lennar that they were not aware of any relevant information that was omitted or that remained undisclosed to Citi. As the WCI board was aware, based on the assessments of the management of WCI regarding the likelihood of realizing the future financial results reflected in the Forecasts, at the WCI board’s direction, Citi utilized and relied upon the Forecasts in its analyses for purposes of its opinion and, at the WCI board’s direction, Citi did not utilize or rely upon the Alternative Forecast Scenarios in its analyses for purposes of its opinion. With respect to the Forecasts (including, without limitation, with respect to net operating loss carryforwards and other tax attributes) that Citi was directed to utilize in its analyses, Citi was advised by the management of WCI and assumed, at the WCI board’s direction, that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of WCI management as to the future financial performance of WCI and the other matters covered thereby. With respect to the publicly available research analysts’ estimates relating to Lennar that Citi utilized in its analyses, Citi assumed, with WCI’s consent, that such estimates were a reasonable basis upon which to evaluate Lennar. Citi relied, at the WCI board’s direction, upon the assessments of WCI management as to, among other things, (i) the potential impact on WCI of certain market, cyclical, competitive and other trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the homebuilding and real estate industries and related credit and financial markets, including with respect to the Florida housing market and development of luxury high-rise towers, and (ii) the land and lot inventory of, and capital and other requirements for land development by, WCI. Citi assumed, with WCI’s consent, that there would be no developments with respect to any such matters or any adjustments to the merger consideration that would be meaningful in any respect to Citi’s analyses or opinion.

 

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Citi did not make, and it was not provided with, an independent evaluation or appraisal of the assets or liabilities (contingent, derivative, off-balance sheet or otherwise) of WCI, Lennar or any other entity and Citi did not make any physical inspection of the properties or assets of WCI, Lennar or any other entity. Citi also did not make any analysis of, nor did Citi express any view or opinion as to, the adequacy or sufficiency of allowances or reserves for loan losses, doubtful accounts or warranty or other claims, and Citi assumed, with WCI’s consent, that any such allowances and reserves were, and on a pro forma basis would be, in the aggregate appropriate to cover such losses, accounts and warranty and other claims. Citi assumed, with WCI’s consent, that the initial merger and, if applicable, the subsequent merger would be consummated in accordance with their respective terms and in compliance with all applicable laws, documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and agreements for the initial merger and, if applicable, the subsequent merger, no delay, limitation, restriction or condition, including any divestiture or other requirements, amendments or modifications, would be imposed or occur that would have an adverse effect on WCI, Lennar, the initial merger or, if applicable, the subsequent merger or that otherwise would be meaningful in any respect to Citi’s analyses or opinion. Citi further assumed, with WCI’s consent, that, unless the merger consideration consisted solely of cash consideration, the mergers would qualify as a reorganization within the meaning of Section 368(a) of the Code. Representatives of WCI advised Citi, and Citi assumed, that the final terms of the merger agreement would not vary materially from those set forth in the execution copy that Citi reviewed. Citi did not express any view or opinion as to the actual value of Lennar Class A stock when issued in the initial merger or the prices at which Lennar Class A stock (or any other securities of Lennar or any of its affiliates) or WCI common stock (or any other securities of WCI or any of its affiliates) may trade or otherwise be transferable at any time, including following the announcement or consummation of the mergers. Citi also did not express any view or opinion with respect to accounting, tax, regulatory, legal or similar matters and Citi relied, with WCI’s consent, upon the assessments of representatives of WCI as to such matters. In connection with its engagement, Citi was not requested to, and it did not, solicit on behalf of WCI third-party indications of interest in the acquisition of all or a portion of WCI; however, it was contemplated that, following public announcement of the mergers, Citi would assist, as directed by WCI, in a “go-shop” process to solicit third-party indications of interest in the acquisition of WCI as contemplated by the provisions of the merger agreement.

Citi’s opinion addressed only the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration (to the extent expressly specified in the opinion), without regard to individual circumstances of specific holders of, or any rights, preferences, restrictions or limitations that may be attributable to, shares of WCI common stock or other securities of WCI or its affiliates. Citi’s opinion did not address any other terms, aspects or implications of the mergers, including, without limitation, the form or structure of the mergers or any agreement, arrangement or understanding to be entered into in connection with or contemplated by the mergers 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 or other payments to any officers, directors or employees of any parties to the mergers, or any class of such persons, relative to the merger consideration or otherwise. Citi’s opinion was necessarily based upon information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Citi as of the date of its opinion. Although subsequent developments may affect its opinion, Citi is not obligated to update, revise or reaffirm its opinion. As the WCI board was aware, the credit, financial and stock markets, and the regional housing markets and industries in which WCI and Lennar operate, have experienced and continue to experience volatility and Citi expressed no view or opinion as to any potential effects of such volatility on WCI, Lennar or the mergers. The issuance of Citi’s opinion was authorized by Citi’s fairness opinion committee.

In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. The summary of the analyses below and certain informational factors is not a complete description of Citi’s opinion or the analyses underlying, and factors considered in connection with, Citi’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citi arrived at its ultimate opinion based on the results of all analyses undertaken by it and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one method of analysis or factor. Accordingly, Citi believes that the 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 such analyses and its opinion.

 

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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 WCI and Lennar. No company, business segment or transaction reviewed is identical or directly comparable to WCI or Lennar or the mergers and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning business, financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies, business segments or transactions reviewed or views regarding the comparability of such companies, business segments or transactions. Accordingly, such analyses may not necessarily include all companies, business segments or transactions that could be deemed relevant.

The estimates contained in Citi’s analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi’s analyses are inherently subject to substantial uncertainty.

Citi was not requested to, and it did not, recommend or determine the specific consideration payable in the initial merger. The type and amount of consideration payable in the initial merger were determined through negotiations between WCI and Lennar and the decision to enter into the merger agreement was solely that of the WCI board. Citi’s opinion was only one of many factors considered by the WCI board in its evaluation of the mergers and should not be viewed as determinative of the views of the WCI board or WCI management with respect to the mergers or the merger consideration.

Financial Analyses

The following is a summary of the material financial analyses presented to the WCI board in connection with Citi’s opinion, dated September 22, 2016. The summary set forth below does not purport to be a complete description of the financial analyses performed by, and underlying the opinion of, Citi, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Citi. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of such financial analyses. None of WCI, Lennar, Citi or any other person assumes responsibility if future results are different from those described, whether or not any such difference is material. Implied per share equity value reference ranges reflected in the summaries of the financial analyses described below were rounded to the nearest $0.10 and the implied value of the merger consideration, as of the date of Citi’s opinion, was calculated as $23.50 per share.

Selected Public Companies Analysis. Citi reviewed publicly available financial and stock market information of WCI and the following 10 selected companies that Citi in its professional judgment considered generally relevant as publicly traded companies in the U.S. homebuilding industry with business profiles, financial and operating characteristics and scale generally similar to WCI, consisting of the following five selected publicly traded mid cap companies (companies with market capitalizations of between $1.0 billion and less than $2.5 billion), which we refer to in this section as the “selected mid cap companies,” and the following five selected publicly traded small cap companies (companies with market capitalizations of less than $1.0 billion), which we refer to in this section as the “selected small cap companies” and which, together with the selected mid cap companies, we refer to in this section as the “selected companies:”

 

Selected Mid Cap Companies		Selected Small Cap Companies
•       KB Home		•       AV Homes, Inc.
•       M.D.C. Holdings, Inc.		•       Century Communities, Inc.
•       Meritage Homes Corporation		•       M/I Homes, Inc.
•       Taylor Morrison Home Corporation		•       The New Home Company Inc.
•       TRI Pointe Group, Inc.		•       William Lyon Homes

 

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Citi reviewed, among other information, fully diluted equity values, based on closing stock prices on September 20, 2016, as multiples of calendar year 2016 estimated earnings per share, which we refer to in this section as “EPS,” calendar year 2017 estimated EPS and book value as of the most recent publicly available balance sheet date, which we refer to in this section as “latest book value.” Financial data of the selected companies were based on research analysts’ estimates and publicly available information. Financial data of WCI was based on public filings and the Forecasts.

The overall low to high calendar year 2016 estimated EPS, calendar year 2017 estimated EPS and latest book value multiples observed for the selected companies were 7.9x to 13.0x (with a mean of 10.1x and a median of 9.8x), 6.0x to 11.3x (with a mean of 8.1x and a median of 8.2x) and 0.9x to 1.1x (with a mean of 1.1x and a median of 1.0x), respectively. The overall low to high calendar year 2016 estimated EPS, calendar year 2017 estimated EPS and latest book value multiples observed for the selected mid cap companies were 9.0x to 11.5x (with a mean of 10.2x and a median of 9.8x), 7.9x to 9.6x (with a mean of 8.8x and a median of 8.8x) and 0.9x to 1.1x (with a mean of 1.0x and a median of 1.0x), respectively. The overall low to high calendar year 2016 estimated EPS, calendar year 2017 estimated EPS and latest book value multiples observed for the selected small cap companies were 7.9x to 13.0x (with a mean of 9.7x and a median of 9.1x), 6.0x to 11.3x (with a mean of 7.7x and a median of 6.8x) and 0.9x to 1.0x (with a mean of 0.9x and a median of 0.9x), respectively.

Citi then applied selected ranges of calendar year 2016 estimated EPS, calendar year 2017 estimated EPS and latest book value multiples of 9.1x to 9.8x, 6.8x to 8.8x and 0.9x to 1.0x derived from the selected companies to WCI’s calendar year 2016 estimated EPS, calendar year 2017 estimated EPS and latest book value (as of June 30, 2016), respectively. This analysis indicated the following approximate implied per share equity value reference ranges for WCI, as compared to the per share merger consideration:

 

Approximate Implied Per Share Equity Value Reference Ranges Based on:						Per Share Merger         Consideration
CY 2016E EPS		CY 2017E EPS		Latest Book Value
$13.70 - $14.80		$14.40 - $18.50		$16.80 - $17.70		$23.50

Selected Precedent Transactions Analysis. Using publicly available information, Citi reviewed financial data relating to the following 17 selected transactions that Citi in its professional judgment considered generally relevant involving target companies with operations in the U.S. homebuilding industry for which sufficient data was publicly available and representative of the cyclicality of such industry, which we collectively refer to in this section as the “selected transactions:”

 

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Announcement Date		Acquiror		Target
December 2015		PulteGroup, Inc.		John Wieland Homes and Neighborhoods
June 2015		Standard Pacific Corp.		The Ryland Group, Inc.
October 2014		Brookfield Asset Management Inc.		Brookfield Residential Properties Inc.
June 2014		William Lyon Homes, Inc.		Polygon Northwest Company L.L.C. (residential homebuilding business)
November 2013		TRI Pointe Homes, Inc.		Weyerhaeuser Real Estate Company
March 2011		TPG Capital / Oaktree Capital Management LP / JH Investments Inc.		Taylor Morrison Home Corp.
April 2009		Pulte Homes, Inc.		Centex Corporation
March 2006		General William H. Lyon		William Lyon Homes, Inc.
April 2002		Newmark Homes Corp.		Engle Holdings Corp.
January 2002		Beazer Homes USA, Inc.		Crossmann Communities, Inc.
December 2001		Hovnanian Enterprises, Inc.		The Forecast Group, L.P.
October 2001		D.R. Horton, Inc.		Schuler Homes, Inc.
May 2001		Pulte Homes, Inc.		Del Webb Corporation
October 2000		Technical Olympic USA, Inc.		Engle Homes, Inc.
September 2000		Western Pacific Housing		Schuler Homes, Inc.
February 2000		Lennar Corporation		U.S. Home Corporation
October 1999		Technical Olympic USA, Inc.		Newmark Homes Corp.

Citi reviewed, among other information, transaction values of the selected transactions, calculated as the purchase prices paid for the fully diluted equity values of the target companies, based on closing stock prices as of the announcement dates of the relevant transactions, as a multiple of such target companies’ latest book values as of such announcement dates. Financial data of the selected transactions were based on public filings and other publicly available information. Financial data of WCI was based on public filings.

The overall low to high latest book value multiples observed for the selected transactions were 0.7x to 2.1x (with a mean of 1.4x and a median of 1.4x). Citi then applied a selected range of latest book value multiples of 1.2x to 1.6x derived from the selected transactions to WCI’s book value (as of June 30, 2016). This analysis indicated the following approximate implied per share equity value reference range for WCI, as compared to the per share merger consideration:

 

Approximate Implied Per Share   Equity Value Reference Range		Per Share   Merger Consideration
$21.50 - $28.70		$23.50

Discounted Cash Flow Analysis. Citi performed a discounted cash flow analysis of WCI by calculating the estimated present value (as of June 30, 2016) of the unlevered, after-tax free cash flows that WCI was forecasted to generate during the second half of the fiscal year ending December 31, 2016 through the full fiscal year ending December 31, 2020, both before and after taking into account the estimated present value (as of June 30, 2016) of the net operating loss carryforwards and other tax attributes of WCI expected by WCI management to be utilized by WCI during such period on a stand-alone basis, which we collectively refer to in this section as “tax attributes,” based on the Forecasts and WCI’s public filings. For purposes of this analysis, stock-based compensation was treated as a cash expense. Citi calculated the implied terminal value of WCI by applying to WCI’s fiscal year ending December 31, 2020 estimated real estate inventory less capitalized interest, which we refer to in this section as “adjusted inventory,” a selected range of adjusted inventory multiples of 1.0x to 1.1x based on Citi’s professional judgment and after taking into account, among other things, observed implied inventory multiples of the selected companies. The present values (as of June 30, 2016) of WCI’s cash flows and terminal values were then calculated using a selected range of discount rates of 8.4% to 9.6% derived from a calculation of WCI’s weighted average cost of capital. In calculating the estimated present value of WCI’s tax attributes, Citi utilized a selected range of discount rates of 8.4% (reflecting the low-end of the selected discount rate range derived from a calculation of WCI’s weighted average cost of capital) to 11.8% (reflecting the high-end of WCI’s estimated cost of equity). This analysis indicated the following approximate implied per share equity value reference ranges for WCI, both before and after taking into account the estimated present value (as of June 30, 2016) of WCI’s tax attributes, as compared to the per share merger consideration:

 

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Approximate Implied Per Share Equity Value Reference Range:				Per Share Merger Consideration
Before Tax Attributes		After Tax Attributes
$21.00 - $25.30		$23.20 - $27.70		$23.50

Citi also calculated the illustrative estimated present value (as of June 30, 2016) of the unlevered, after-tax free cash flows attributable to WCI’s luxury high-rise tower business based on the portion of the Forecasts for that business. The present values (as of June 30, 2016) of WCI’s luxury high-rise tower business cash flows were calculated using a selected range of discount rates of 8.4% to 9.6% derived from a calculation of WCI’s weighted average cost of capital, which indicated, before taking into account WCI’s estimated tax attributes, an approximate implied per share equity value reference range for WCI’s luxury high-rise tower business of $3.00 to $3.20 per share and an approximate implied per share equity value reference range for WCI without WCI’s luxury high-rise tower business of $17.90 to $22.10 per share.

Certain Informational Factors

Citi observed certain factors that were not considered part of its financial analyses for its opinion but were referenced for informational purposes, including the following:

 

•

historical trading prices of WCI common stock during the 52-week period ending on September 20, 2016, which indicated low to high intraday prices for WCI common stock during such period of approximately $15.41 to $25.15 per share;

 

•

one-year forward stock price targets for WCI common stock as reflected in selected publicly available research analysts’ reports released following WCI’s earnings announcement on July 27, 2016, which indicated an overall low to high range of stock price targets for WCI common stock of $18.00 to $24.00 per share (with a mean of $20.64 per share and a median of $21.00 per share) on an undiscounted basis and approximately $16.20 to $21.60 per share on a discounted basis (discounted one year to present value using a discount rate of 11.1% based on the midpoint of WCI’s estimated cost of equity);

 

•

utilizing public filings and other publicly available information, the implied premiums paid in 213 selected precedent transactions announced since January 2010 with transaction values of $400 million to $1.2 billion involving U.S.-listed target companies, which indicated median implied premiums in such transactions based on the closing stock prices of the target companies involved in such transactions one trading day prior to announcement of such transactions of approximately 31%; applying a selected range of premiums of 20% to 40% derived from these transactions to the closing price of WCI common stock on September 20, 2016 indicated an approximate implied per share equity value reference range for WCI of $20.50 to $23.90 per share;

 

•

one-year forward stock price targets for Lennar Class A stock as reflected in selected publicly available research analysts’ reports released following Lennar’s earnings announcement on June 21, 2016, which indicated an overall low to high range of stock price targets for Lennar Class A stock of $48.00 to $64.00 per share (with a mean of $54.39 per share and a median of $53.50 per share); and

 

•

based on public filings and other publicly available information, the implied calendar year 2016 estimated EPS, calendar year 2017 estimated EPS and latest book value multiples of Lennar (in the case of EPS multiples, prior to Lennar’s earnings announcement on September 20, 2016) and five selected large cap companies in the homebuilding industry (CalAtlantic Group, Inc., D.R. Horton, Inc., NVR, Inc., PulteGroup, Inc. and Toll Brothers, Inc.), which indicated overall low to high calendar year 2016 estimated EPS, calendar year 2017 estimated EPS and latest book value multiples of 9.6x to 16.0x, 8.0x to 13.3x and 1.2x to 4.7x, respectively, as compared to the calendar year 2016 estimated EPS, calendar year 2017 estimated EPS and latest book value multiples of Lennar of 11.0x, 10.0x and 1.5x, respectively.

 

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Miscellaneous

WCI has agreed to pay Citi for its services in connection with the proposed mergers an aggregate fee currently estimated to be up to approximately $7 million, a portion of which was payable upon delivery of Citi’s opinion and approximately $5 million of which is payable contingent upon consummation of the initial merger. In addition, WCI has agreed to reimburse Citi for Citi’s expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against certain liabilities, including liabilities under federal securities laws, arising out of Citi’s engagement.

As the WCI board was aware, Citi and its affiliates in the past have provided, currently are providing and in the future may provide investment banking, commercial banking and other similar financial services to WCI, Lennar and certain of their respective affiliates, for which services Citi and its affiliates received and expect to receive compensation, including, during the two-year period prior to the date of its opinion, having acted or acting as (i) sole or joint bookrunning manager for certain offerings of equity and debt securities of WCI, as joint bookrunning manager for certain debt offerings of Lennar and as a proposed lead underwriter for a possible initial public offering of an entity in which Lennar holds the largest equity interest and (ii) joint lead arranger, joint bookrunning manager and administrative agent for, and as a lender and issuing bank under, a revolving credit facility of WCI and as a lead arranger and syndication agent for, and as a lender under, a revolving credit facility of, and as a provider of a synthetic letter of credit facility to, Lennar, for which services described in clauses (i) and (ii) above Citi and its affiliates received during such two-year period aggregate fees of approximately $3 million from WCI (inclusive of approximately $1.6 million related to two follow-on offerings of WCI common stock undertaken on behalf of Stonehill, Monarch and certain related entities) and approximately $10 million from Lennar. In the ordinary course of business, Citi and its affiliates may actively trade or hold the securities of WCI, Lennar and their respective affiliates for their own account or for the account of their customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) maintain relationships with WCI, Lennar and their respective affiliates.

WCI selected Citi as a financial advisor in connection with the mergers based on Citi’s reputation, experience and familiarity with WCI and its business. Citi is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.

Opinion of Credit Suisse Securities (USA) LLC

On September 22, 2016, Credit Suisse rendered its oral opinion to the WCI board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion to the WCI board dated the same date) as to, as of September 22, 2016, the fairness, from a financial point of view, to WCI stockholders of the merger consideration to be received by such holders in the initial merger pursuant to the merger agreement.

Credit Suisse’s opinion was directed to the WCI board (in its capacity as such), and only addressed the fairness, from a financial point of view, to WCI stockholders of the merger consideration to be received by such WCI stockholders in the initial merger pursuant to the merger agreement and did not address any other aspect or implication of the mergers. The summary of Credit Suisse’s opinion in this proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex C to this proxy statement/prospectus and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in preparing its opinion. However, neither Credit Suisse’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement/prospectus is intended to be, and they do not constitute, advice or a recommendation to any WCI stockholder as to how such holder should vote or act on any matter relating to the proposed mergers.

In arriving at its opinion, Credit Suisse:

 

•

reviewed an execution copy, dated September 22, 2016, of the merger agreement;

 

•

reviewed certain publicly available business and financial information relating to WCI and Lennar;

 

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•

reviewed certain other information relating to WCI and Lennar, including financial forecasts relating to WCI for the fiscal years ending December 31, 2016 through December 31, 2020 prepared by and provided to Credit Suisse by the management of WCI, which we refer to in this section as the “WCI Communities Projections”, and estimates prepared and provided to Credit Suisse by the management of WCI of WCI’s net operating loss tax carryforwards and other tax assets, which we refer to in this section as the “Estimated Tax Assets”, and WCI’s ability to utilize those Estimated Tax Assets to achieve future tax savings on a standalone basis, which we refer to in this section as the “Estimated Tax Savings”;

 

•

spoke with the managements of WCI and Lennar and certain of their representatives regarding the business and prospects of WCI and Lennar, respectively;

 

•

considered certain financial and stock market data of WCI and Lennar, and compared that data with similar data for other companies with publicly traded equity securities in businesses Credit Suisse deemed similar to those of WCI and Lennar, respectively; and

 

•

considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which Credit Suisse deemed relevant.

In connection with its review, Credit Suisse did not independently verify any of the foregoing information, and Credit Suisse assumed and relied upon such information being complete and accurate in all respects material to its analyses and opinion. With respect to the WCI Communities Projections, management of WCI advised Credit Suisse, and Credit Suisse assumed, that such financial forecasts were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of WCI as to the future financial performance of WCI. With respect to the Estimated Tax Assets and Estimated Tax Savings, management of WCI advised Credit Suisse, and Credit Suisse assumed, that the Estimated Tax Assets and Estimated Tax Savings were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of WCI as to the amount of such Estimated Tax Assets and Estimated Tax Savings. Although Credit Suisse had discussions with WCI management, Credit Suisse expressed no opinion with respect to the WCI Communities Projections, the Estimated Tax Assets, the Estimated Tax Savings or the assumptions upon which they were based and, at the direction of the management of WCI, Credit Suisse assumed that the WCI Communities Projections, the Estimated Tax Assets and Estimated Tax Savings were a reasonable basis on which to evaluate WCI and the initial merger and used and relied upon such information for purposes of its analyses and opinion.

For purposes of its analyses and opinion Credit Suisse at WCI’s direction assumed that, so long as the merger consideration included the share consideration, for U.S. federal income tax purposes, the mergers would qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Credit Suisse also assumed, with WCI’s consent, that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the mergers, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on WCI, Lennar or the contemplated benefits of the mergers, that the mergers would be consummated in accordance with all applicable federal, state and local laws, and that the mergers would be consummated in accordance with the terms of the merger agreement, without waiver, modification or amendment of any term, condition or agreement thereof material to Credit Suisse’s analyses or opinion. In addition, Credit Suisse was not requested to make, and did not make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of WCI or Lennar, nor was Credit Suisse furnished with any such evaluations or appraisals. With WCI’s consent Credit Suisse also assumed that the final form of the merger agreement, when executed by the parties thereto, would conform to the draft reviewed by Credit Suisse in all respects material to its analyses.

Credit Suisse’s opinion addressed only the fairness, from a financial point of view, to WCI stockholders of the merger consideration to be received by such holders in the initial merger pursuant to the merger agreement and did not address any other aspect or implication of the mergers or any agreement, arrangement or understanding entered into in connection therewith or otherwise, including, without limitation, the subsequent merger, the form and structure of the initial merger, the subsequent merger or the merger consideration, or the fairness of the amount or nature of, or any other aspect relating to, any compensation or consideration to be received or otherwise payable to any officers, directors, employees, securityholders or affiliates of any party to the mergers, or class of such persons, relative to the merger consideration or otherwise. Furthermore, Credit Suisse did not express any advice or opinion

 

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regarding matters that required legal, regulatory, accounting, insurance, tax, environmental, executive compensation or other similar professional advice. Credit Suisse assumed that WCI had or would obtain such advice or opinions from the appropriate professional sources. The issuance of Credit Suisse’s opinion was approved by its authorized internal committee.

Credit Suisse’s opinion was necessarily based upon information made available to Credit Suisse as of the date of its opinion and financial, economic, market and other conditions as they existed and could be evaluated on the date of its opinion. Credit Suisse did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion. Credit Suisse’s opinion did not address the relative merits of the mergers as compared to alternative transactions or strategies that might have been available to WCI, nor did it address the underlying business decision of the WCI board or WCI to proceed with or effect the mergers. Credit Suisse did not express any opinion as to what the value of shares of Lennar Class A stock actually would be when issued pursuant to the initial merger or the prices or ranges of prices at which WCI common stock or Lennar Class A stock could be purchased or sold at any time. Credit Suisse assumed that the shares of Lennar Class A stock to be issued to WCI stockholders in the initial merger would be approved for listing on the NYSE prior to the consummation of the initial merger. As of the date of its opinion, Credit Suisse was not requested to, and did not, solicit third party indications of interest in acquiring all or any part of WCI though it was contemplated that Credit Suisse would be requested to solicit indications of interest in acquiring WCI following the execution of the merger agreement.

Credit Suisse’s opinion was for the information of the WCI board in connection with its consideration of the mergers and did not constitute a recommendation to the WCI board with respect to the proposed mergers or advice or a recommendation to any WCI stockholder as to how such WCI stockholder should vote or act on any matter relating to the proposed mergers.

In preparing its opinion to the WCI board, Credit Suisse performed a variety of analyses, including those described below. The summary of Credit Suisse’s financial analyses is not a complete description of the analyses underlying Credit Suisse’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaptation and application of those methods to the unique facts and circumstances presented. As a consequence, neither Credit Suisse’s opinion nor the analyses underlying its opinion are readily susceptible to partial analysis or summary description. Credit Suisse arrived at its 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 individual analysis, analytic method or factor. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, 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 performing its analyses, Credit Suisse considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company or business used in Credit Suisse’s analyses for comparative purposes is identical to WCI or Lennar. While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, Credit Suisse did not make separate or quantifiable judgments regarding individual analyses. The reference ranges indicated by Credit Suisse’s financial analyses are illustrative and not necessarily indicative of actual values nor predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond WCI’s control and the control of Credit Suisse. Much of the information used in, and accordingly the results of, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

Credit Suisse’s opinion and analyses were provided to the WCI board in connection with its consideration of the mergers and were among many factors considered by the WCI board in evaluating the proposed mergers. Neither Credit Suisse’s opinion nor its analyses were determinative of the merger consideration or of the views of the WCI board with respect to the proposed mergers.

 

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Financial Analyses

The following is a summary of the material financial analyses reviewed by Credit Suisse with the WCI board in connection with the rendering of its opinion to the WCI board on September 22, 2016. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of Credit Suisse’s analyses.

Based on the merger consideration per share of WCI common stock of $11.75 in cash plus a number of shares of Lennar Class A stock equal to $11.75 divided by the average of the volume weighted average price of a share of Lennar Class A stock for each of the ten NYSE trading days immediately prior to the closing date of the initial merger, Credit Suisse calculated an implied value of the merger consideration of $23.50 per share of WCI common stock.

Selected Companies Analysis

Credit Suisse considered certain financial data for WCI and selected companies with publicly traded equity securities Credit Suisse deemed relevant. The selected companies were selected because they were deemed to be similar to WCI in one or more respects, including the nature of their business, size, products, geography and financial performance. Credit Suisse identified a sufficient number of companies for purposes of its analysis but may not have included all companies that might be deemed comparable to WCI. The share prices for the selected companies used in the selected companies analysis described below were as of September 20, 2016. Aggregate book values of WCI and the selected companies used in the selected companies analysis described below were based on publicly available data as of the end of the most recently completed fiscal quarter for which information was publicly available as of September 20, 2016. Estimates of future financial performance for the selected companies listed below were based on publicly available research analyst estimates for those companies.

The financial data reviewed included:

 

•

Equity value as a multiple of aggregate book value; and

 

•

Stock price as a multiple of estimated earnings per share for the year ended December 31, 2017, which we refer to in this section as “2017E EPS.”

The selected companies and median, mean, low and high data were:

 

•

AV Homes, Inc.

 

•

William Lyon Homes

 

•

Meritage Homes Corporation

 

•

TRI Pointe Group, Inc.

 

•

Toll Brothers, Inc.

 

		Equity Value / Aggregate Book Value				Stock Price / 2017E EPS
Median			0.98				8.7
Mean			1.01				8.7
Low			0.84				6.1
High			1.16				11.3

 

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Taking into account the results of the selected companies analysis, Credit Suisse applied multiple ranges of 0.9x to 1.1x to WCI’s book value and 8.5x to 9.5x to WCI’s estimated 2017E EPS based on the WCI Communities Projections. The selected companies analysis indicated implied reference ranges per share of WCI common stock of $16.14 to $19.73 based on book value and $17.85 to $19.95 based on estimated 2017E EPS, as compared to the implied value of the merger consideration of $23.50 per share of WCI common stock.

Discounted Cash Flow Analysis

Credit Suisse performed a discounted cash flow analysis of WCI based on the WCI Communities Projections and the Estimated Tax Savings. For purposes of this analysis stock-based compensation was treated as a cash expense. Based on its experience and professional judgment, taking into account, among other things, the enterprise value to inventory multiples and the equity value to aggregate book value multiples of the selected companies, Credit Suisse applied a range of terminal value multiples of 0.90x to 1.10x to WCI’s estimated inventory net of capitalized interest as of December 31, 2020 of $1.142 million based on the WCI management projections. The estimated net present value of the projected future unlevered free cash flow (i.e., adjusted revenue (adjusted for amenity sales and other items), minus operating expenses, minus the change in net working capital and investment activities) and terminal values were then calculated using discount rates ranging from 7.00% to 9.50% based on its calculation of WCI’s weighted average cost of capital. The discounted cash flow analysis indicated an implied reference range per share of WCI common stock of $18.99 to $28.15, as compared to the implied value of the merger consideration of $23.50 per share of WCI common stock.

Other Matters

WCI retained Credit Suisse as its financial advisor in connection with the proposed mergers. WCI selected Credit Suisse based on Credit Suisse’s experience and reputation and Credit Suisse’s knowledge of WCI and its industry. Credit Suisse is an internationally recognized investment banking firm and is regularly engaged in the evaluation of businesses and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In addition to having become entitled to a fee of $1,000,000 upon its engagement, Credit Suisse became entitled to receive an opinion fee of $2,000,000 upon the rendering of its opinion to the WCI board. At WCI’s request, during the transaction solicitation period following the public announcement of the proposed mergers, Credit Suisse assisted WCI in soliciting proposals from third parties regarding a potential sale, merger, business combination or other similar transaction with another party. Credit Suisse will also become entitled to receive an additional opinion fee to be mutually agreed for each opinion Credit Suisse renders with respect to the fairness, from a financial point of view, to WCI stockholders of the consideration to be received by such WCI stockholders in any subsequently proposed sale, merger, business combination or other similar transaction with another party or a revised transaction with Lennar, which we refer to in this section as an “Alternate Transaction”, and will become entitled to a transaction fee if WCI engages in an Alternate Transaction equal to 3% of the difference between the equity value of WCI implied by such Alternate Transaction and the equity value of WCI implied by the proposed mergers with Lennar. In addition, WCI may pay Credit Suisse an additional fee in its sole discretion based on WCI’s view of Credit Suisse’s performance pursuant to its engagement, regardless of whether the proposed mergers with Lennar or an Alternate Transaction are consummated. WCI has also agreed to reimburse Credit Suisse for certain of its expenses and to indemnify Credit Suisse and certain related parties for certain liabilities and other items arising out of or related to its engagement.

Credit Suisse and its affiliates have provided other financial advice and services, and may in the future provide financial advice and services, to WCI, Lennar and their respective affiliates for which Credit Suisse and its affiliates have received, and would expect to receive, compensation including, during the past two years (i) with respect to WCI, having previously been engaged as financial advisor to WCI in connection with its consideration of certain strategic alternatives for which Credit Suisse and its affiliates did not receive a fee, (ii) with respect to certain significant WCI stockholders, Stonehill Capital Management LLC and Monarch Alternative Capital LP and certain of their respective affiliates, having acted as broker, initial purchaser or underwriter in connection with certain sales of WCI common stock by such WCI stockholders for which Credit Suisse and its affiliates received aggregate fees of approximately $3,000,000 and (iii) with respect to Lennar, having acted as counterparty in connection with a letter of credit facility and two warehouse facilities for which Credit Suisse and its affiliates received aggregate fees of less than $1,000,000. Credit Suisse and/or its affiliates are also participants in and lenders to WCI under WCI’s credit facility. Credit Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, Credit Suisse and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of WCI, Lennar and any other company that may be involved in the mergers, as well as provide investment banking and other financial services to such companies and their affiliates.

 

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Certain Unaudited Financial and Operating Forecasts Prepared by the Management of WCI

WCI does not, as a matter of course, publicly disclose long-term projections or internal projections of its future financial performance revenues, earnings, EBITDA, financial condition or other results given, among other reasons, the uncertainty of the underlying assumptions and estimates. However, WCI management prepares the Five-Year Plan for internal use, which it typically updates annually.

In connection with WCI’s evaluation of a possible transaction, WCI management prepared certain non-public, unaudited, stand-alone financial projections for the fiscal years 2016 through 2020. Specifically, WCI management prepared the following financial projections, which we refer to collectively as the “WCI management projections” in this section of the proxy statement/prospectus: (i) the Five-Year Plan provided to the WCI board and Citi in June 2016 and, following its engagement by WCI in September 2016, Credit Suisse, (ii) the September 14, 2016 projections, which were relied upon by Citi for purposes of its financial analyses and opinion as summarized in the section “—Opinions of WCI’s Financial Advisors—Opinion of Citigroup Global Markets Inc.” beginning on page 49, (iii) the September 21, 2016 projections, which were relied upon by Credit Suisse for purposes of its financial analyses and opinion as summarized in the section “—Opinions of WCI’s Financial Advisors—Opinion of Credit Suisse Securities (USA) LLC” beginning on page 56 and (iv) the October 2016 corrected projections provided to the WCI board, Citi and Credit Suisse on October 17, 2016 as summarized in the section “—Background of the Mergers” beginning on page 28. The Five-Year Plan was also provided to Lennar in connection with its due diligence review of a possible transaction. In addition, WCI management discussed revised estimates to 2016 and 2017 earnings and associated management guidance with Lennar management and subsequently included them in the September 21, 2016 projections and October 2016 corrected projections, which were made available to Lennar following the execution of the merger agreement. During the transaction solicitation period, the Five-Year Plan, the September 21, 2016 projections and the October 2016 corrected projections were available to those parties that entered into an acceptable confidentiality agreement with WCI and accessed the online data room.

The following tables summarize the WCI management projections as described above. For additional information on the WCI management projections see “—Background of the Mergers” beginning on page 28.

WCI Management Projections

Five-Year Plan

 

		Year Ending December 31,
		2016E				2017E				2018E				2019E				2020E
		($ in thousands)
Revenues		$	677,972			$	880,239			$	1,042,433			$	1,234,325			$	1,278,002
Net cash provided by (used in) operating activities			(47,734	)			(21,476	)			(2,785	)			87,236				18,651
EBITDA(1)			74,945				119,601				140,852				216,289				186,286
Net income			36,851				61,312				75,025				117,637				100,043

September 14, 2016 Projections

 

		Year Ending December 31,
		2016E				2017E				2018E				2019E				2020E
		($ in thousands)
Revenues		$	682,257			$	844,592			$	1,042,433			$	1,234,325			$	1,278,002
Net cash provided by (used in) operating activities			(32,261	)			(41,749	)			(2,785	)			87,236				18,651
EBITDA(1)			82,635				112,231				140,852				216,289				186,286
Net income			40,247				56,771				75,025				117,637				100,043

September 21, 2016 Projections

 

		Year Ending December 31,
		2016E				2017E				2018E				2019E				2020E
		($ in thousands)
Revenues		$	682,257			$	844,592			$	1,042,433			$	1,234,325			$	1,278,002
Net cash provided by (used in) operating activities			(47,734	)			(68,375	)			(1,856	)			87,973				15,411
EBITDA(1)			79,292				112,231				140,852				216,289				186,286
Net income (loss)			40,247				56,763				75,025				117,637				100,043

 

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October 2016 Corrected Projections

 

		Year Ending December 31,
		2016E				2017E				2018E				2019E				2020E
		($ in thousands)
Revenues		$	682,257			$	844,592			$	1,042,433			$	1,234,325			$	1,278,002
Net cash provided by (used in) operating activities			(47,734	)			(49,961	)			(1,856	)			87,973				15,411
EBITDA(1)			79,292				112,231				140,852				216,289				186,286
Net income (loss)			40,247				56,763				75,025				117,637				100,043

Reconciliation of Non-GAAP Financial Measures

Five-Year Plan

The following table presents a reconciliation of net income to EBITDA for each of the periods indicated above in the Five-Year Plan:

 

		Year Ending December 31,
		2016E				2017E				2018E				2019E				2020E
		($ in thousands)
Net income		$	36,851			$	61,312			$	75,025			$	117,637			$	100,043
Interest expense			30				—				—				—				—
Capitalized interest in cost of sales			11,112				17,438				16,358				22,472				21,041
Income tax expense			23,101				38,007				46,591				73,267				62,253
Depreciation			3,851				2,844				2,878				2,913				2,949
EBITDA (1)		$	74,945			$	119,601			$	140,852			$	216,289			$	186,286

September 14, 2016 Projections

The following table presents a reconciliation of net income to EBITDA for each of the periods indicated above in the September 14, 2016 projections:

 

		Year Ending December 31,
		2016E				2017E				2018E				2019E				2020E
		($ in thousands)
Net income		$	40,247			$	56,771			$	75,025			$	117,637			$	100,043
Interest expense			1,085				—				—				—				—
Capitalized interest in cost of sales			14,656				17,438				16,358				22,472				21,041
Income tax expense			24,045				35,179				46,591				73,267				62,253
Depreciation			2,602				2,844				2,878				2,914				2,950
EBITDA(1)		$	82,635			$	112,231			$	140,852			$	216,289			$	186,286

September 21, 2016 Projections

The following table presents a reconciliation of net income to EBITDA for each of the periods indicated above in the September 21, 2016 projections:

 

		Year Ending December 31,
		2016E				2017E				2018E				2019E				2020E
		($ in thousands)
Net income		$	40,247			$	56,763			$	75,025			$	117,637			$	100,043
Interest expense			1,085				—				—				—				—
Capitalized interest in cost of sales			11,112				17,438				16,358				22,472				21,041
Income tax expense			24,045				35,187				46,591				73,267				62,253
Depreciation			2,803				2,843				2,878				2,913				2,949
EBITDA (1)		$	79,292			$	112,231			$	140,852			$	216,289			$	186,286

 

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October 2016 Corrected Projections

The following table presents a reconciliation of net income to EBITDA for each of the periods indicated above in the October 2016 corrected projections:

 

		Year Ending December 31,
		2016E				2017E				2018E				2019E				2020E
		($ in thousands)
Net income		$	40,247			$	56,763			$	75,025			$	117,637			$	100,043
Interest expense			1,085				—				—				—				—
Capitalized interest in cost of sales			11,112				17,438				16,358				22,472				21,041
Income tax expense			24,045				35,187				46,591				73,267				62,253
Depreciation			2,803				2,843				2,878				2,913				2,949
EBITDA (1)		$	79,292			$	112,231			$	140,852			$	216,289			$	186,286

 

(1)	WCI management defined EBITDA as net income (loss) before interest expense, net income taxes and depreciation and amortization. EBITDA is not a defined term under GAAP and should not be used as an alternative to net income or net loss as a measure of operating performance.

September 14, 2016 Projections – Projected Unlevered Free Cash Flows Utilized by Citi

WCI management approved the following projected unlevered free cash flows for WCI calculated by Citi based on the September 14, 2016 projections for purposes of Citi’s discounted cash flow analysis in connection with its opinion delivered to the WCI board on September 22, 2016 as summarized in the section “—Background of the Mergers” beginning on page 28 and in the section “—Opinions of WCI’s Financial Advisors—Opinion of Citigroup Global Markets Inc.” beginning on page 49. These estimates of projected unlevered free cash flows were not provided to Lennar or any other potential buyer.

 

		Year Ending December 31,
		July -Dec 2016E				2017E				2018E				2019E				2020E
		($ in millions)
Unlevered Free Cash Flow (1)			($  3	)		($	68	)		($	25	)		$	48			$	27

 

(1)	Defined as EBITDA less depreciation and amortization and other non-cash items and income tax expense, plus depreciation and amortization and other non-cash items, less changes in net working capital and investing and other cash flows.

September 21, 2016 Projections – Projected Unlevered Free Cash Flows Utilized by Credit Suisse

WCI management approved the following projected unlevered free cash flows for WCI calculated by Credit Suisse based on the September 21, 2016 projections for use by Credit Suisse in the discounted cash flow analysis performed in connection with the rendering of its opinion to the WCI board on September 22, 2016 as summarized in the section “—Opinions of WCI’s Financial Advisors—Credit Suisse Securities (USA) LLC” beginning on page 56. These estimates of projected unlevered free cash flows were not provided to Lennar or any other potential buyer.

 

		Year Ending December 31,
		July -Dec 2016E				2017E				2018E				2019E				2020E
		($ in millions)
Unlevered Free Cash Flow			($  22	)		($	69	)		($	3	)		$	69			$	35

October 2016 Corrected Projections – Projected Unlevered Free Cash Flows Utilized by Citi

WCI management approved the following projected unlevered free cash flows for WCI (and related reconciliations) calculated by Citi based on the October 2016 corrected projections for purposes of Citi’s discounted cash flow analysis in connection with its confirmation, dated October 19, 2016, to the WCI board as summarized in the section “—Background of the Mergers” beginning on page 28. In performing its discounted cash flow analysis in connection with such confirmation, Citi updated in its unlevered free cash flow calculation its application of stock-based compensation and cash flow methodology for the second half of 2016 at the direction of WCI management. These estimates of projected unlevered free cash flows were not provided to Lennar or any other potential buyer.

 

		Year Ending December 31,
		July -Dec 2016E				2017E				2018E				2019E				2020E
		($ in millions)
Unlevered Free Cash Flow			($ 32	)		($	71	)		($	23	)		$	53			$	27

 

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October 2016 Corrected Projections – Projected Unlevered Free Cash Flows Utilized by Credit Suisse

The following projected unlevered free cash flows for WCI were based on the October 2016 corrected projections and were calculated by Credit Suisse for use by Credit Suisse in the discounted cash flow analysis performed in connection with the confirmation provided to the WCI board on October 20, 2016 as summarized in the section “—Background of the Mergers” beginning on page 28. These estimates of projected unlevered free cash flows were not provided to Lennar or any other potential buyer.

 

		Year Ending December 31,
		July -Dec 2016E				2017E				2018E				2019E				2020E
		($ in millions)
Unlevered Free Cash Flow			($22	)		($	53	)		($	8	)		$	60			$	34

In performing the financial analyses underlying its confirmation summarized in the section “—Background of the Mergers” beginning on page 28, based on clarifications provided by WCI management, Credit Suisse updated its application of investment activities used in the projected unlevered free cash flow estimates utilized by Credit Suisse. The projected unlevered free cash flow estimates utilized by Credit Suisse included the tax benefits from WCI’s deferred tax assets. WCI management reviewed and approved a reconciliation of the projected unlevered free cash flows calculated by Credit Suisse based on the October 2016 corrected projections to the WCI management approved projected unlevered free cash flows calculated by Credit Suisse based on the September 21, 2016 projections.

In preparing the WCI management projections, WCI management necessarily made certain assumptions about future financial factors affecting WCI’s business, which primarily include, regarding WCI’s existing and future communities: absorption pace remains consistent with current and/or stabilized market conditions for each neighborhood, 3% annual price appreciation beginning in 2017, build cycles remain consistent with current build cycles, community-level selling, general and administrative expenses remain consistent with current levels, land development occurs based on current land development plans and tower developments deliver according to the current schedule. Additionally, corporate-level selling, general and administrative costs continue steady growth and trend down as a percentage of homebuilding revenue to 11% through 2020. It was also assumed that no additional financing beyond the existing long-term debt and revolving credit facility, which remains undrawn at the end of each fiscal year, would be necessary. With regard to real estate services, the following assumptions were made: approximate annual revenue growth of 6% beginning in 2017, selling, general and administrative cost increases of 6% in 2017 and 4% to 5% in subsequent years, slight increases in annual brokerage commission splits, and no increase in title capture rate. With regard to the amenities business, the following assumptions were made: an annual 5% increase in revenues, a 2% increase in costs and the sale of certain amenity assets during the forecast period.

The WCI management projections were not prepared with a view to public disclosure and are included in this proxy statement/prospectus only because such information was made available as described above. The WCI management projections were not prepared with a view to compliance with GAAP, the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Furthermore, Ernst & Young LLP, WCI’s independent auditor, has not examined, reviewed, compiled or otherwise applied procedures to, the WCI management projections and, accordingly, assumes no responsibility for, and expresses no opinion on, them. The WCI management projections included in this proxy statement/prospectus have been prepared by, and are the responsibility of, WCI management. The WCI management projections are subjective in many respects.

Although the summary of the WCI management projections is presented with numerical specificity, the WCI management projections reflect numerous variables, assumptions and estimates as to future events made by WCI management that WCI management believed were reasonable at the time the WCI management projections were prepared, taking into account the relevant information available to WCI management at the time the WCI management projections were prepared. Such assumptions and estimates are inherently uncertain and beyond the control of WCI management. However, this information is not fact and should not be relied upon as necessarily indicative of actual future results. Important factors that may affect actual results and cause the WCI management projections not to be achieved include: general economic conditions; results or financial condition; industry performance; performance of the Florida housing market; development of luxury high-rise towers; accuracy of certain accounting assumptions; changes in actual or projected cash flows; competitive pressures; current expansion efforts adversely impacting WCI’s business or results; pricing pressures from WCI’s customers adversely affecting WCI’s profitability; technological changes and competition adversely affecting WCI’s sales; profitability or financial condition; any disruption in WCI’s information technology systems adversely impacting WCI’s business and operations; strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations impacting WCI’s results; WCI’s contingent liabilities and tax matters causing us to incur losses or costs; any inability to protect WCI’s intellectual property rights adversely affecting WCI’s business or WCI’s competitive position; costs or adverse effects on WCI’s business; reputation or results from governmental regulations; changes in government regulation or other policies adversely affecting WCI’s revenue and profitability; work stoppages or other labor issues at WCI’s facilities or those of WCI’s vendors adversely affecting WCI’s business; results or financial condition; and changes in tax laws. In addition, the WCI management projections do not take into account any circumstances or events occurring after the date on which prepared (except with respect to the October 2016 corrected projections only to the extent set forth above) and do not give effect to the mergers. As a result, there can be no assurance that the results anticipated by the WCI management projections will necessarily be realized, and actual results may be materially better or worse than those reflected in the WCI management projections. Since the WCI management projections cover multiple years, that information by its nature becomes less predictive with each successive year. The inclusion of this information should not be regarded as an indication that the WCI board, WCI, Lennar, or their respective affiliates, advisors or other representatives or any other recipient of this information considered, or now considers, the WCI management projections to be material information of WCI or that actual future results will necessarily be as anticipated by the WCI management projections, and the WCI management projections should not be relied upon as such. The summary of the WCI management projections is not included in this proxy statement/prospectus in order to induce any WCI stockholder to vote for or against the merger proposal or the other proposal to be voted on at the WCI special meeting or to influence any WCI stockholder to make any investment decision with respect to the mergers, including whether or not to seek appraisal rights with respect to shares of WCI common stock.

 

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The WCI management projections should be evaluated, if at all, in conjunction with the historical financial statements, risk factors and other information regarding WCI contained in WCI’s public filings with the SEC. See “Where You Can Find More Information” beginning on page 122.

The WCI management projections are forward-looking statements. For information on factors that may cause WCI’s future results to materially vary from what is anticipated by forward-looking statements, see “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 26.

By including in this proxy statement/prospectus a summary of the WCI management projections, none of WCI, Lennar nor any of their respective affiliates, advisors or other representatives makes any representation to any WCI stockholder regarding the ultimate performance of WCI or the surviving company compared to the information contained in such financial projections and should not be read to do so.

In light of the foregoing factors and the uncertainties inherent in the WCI management projections, stockholders are cautioned not to unduly rely on the WCI management projections included in this proxy statement/prospectus.

Certain of the measures included in the WCI management projections may be considered non-GAAP financial measures, as noted above. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by WCI may not be comparable to similarly titled amounts used by other companies.

 

Board of Directors and Executive Officers After Completion of the Mergers

Lennar does not expect there to be any change in its directors or its executive officers as a result of the mergers. Information about Lennar directors and executive officers is contained in Lennar’s Report on Form 10-K for the year ended November 30, 2015 and the proxy statement dated March 2, 2016 relating to Lennar’s 2016 Annual Meeting of stockholders, both of which are incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 122.

Accounting Treatment of the Mergers

In accordance with GAAP, Lennar will account for the mergers using the acquisition method of accounting, with Lennar being considered the acquirer of WCI for accounting purposes. This means that Lennar will allocate the purchase price to the fair value of WCI’s tangible and intangible assets and liabilities at the acquisition date, with the excess purchase price, if any, being recorded as goodwill. Under the acquisition method of accounting, goodwill is not amortized but is tested for impairment at least annually.

Regulatory Approvals Required for the Mergers

Lennar and WCI have determined that the mergers are not subject to requirements of the HSR Act, and no other governmental consents to the mergers are required. The mergers may require that notifications be given to governmental agencies that have issued licenses that are held by WCI and its subsidiaries and other governmental agencies. The shares of Lennar Class A stock that will be issued to WCI stockholders as a result of the initial merger must be approved for listing on the NYSE, subject to official notice of issuance.

Restrictions on Sales of Shares of Lennar Class A Stock Received in the Initial Merger

All shares of Lennar Class A stock received by WCI stockholders as a result of the initial merger will be freely tradable for purposes of the Securities Act and the Exchange Act unless WCI stockholders to whom shares are issued are “affiliates” of Lennar, which Lennar does not believe will be the case. If any WCI stockholder is an affiliate of Lennar, this proxy statement/prospectus does not cover resales of shares received as a result of the initial merger.

 

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Appraisal Rights

The following discussion is not a full summary of the provisions of Delaware law pertaining to appraisal rights and is qualified in its entirety by the full text of Section 262 of the DGCL, which is attached to this proxy statement/prospectus as Annex D. The following summary does not constitute legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262 of the DGCL. Unless the context requires otherwise, all references in Section 262 of the DGCL and in this summary to a “stockholder” are to a record holder of WCI common stock.

Under Section 262 of the DGCL, stockholders of a Delaware corporation are entitled to appraisal rights if they are required to accept cash (other than cash in lieu of fractional shares) as some or all of the consideration for their shares in a merger.

Stockholders who have neither voted in favor of, nor consented in writing to, the merger proposal, who continuously hold such shares through the effective date of the initial merger and who otherwise comply with Section 262 of the DGCL are entitled to appraisal rights. Appraisal rights entitle the holders to have the “fair value” of their shares of WCI common stock appraised by the Court, and to receive payment in cash of the “fair value” of the shares, exclusive of any element of value arising from the accomplishment or expectation of the mergers, as determined by the Court, together with interest, if any, to be paid upon the amount determined to be the fair value (or a portion of that amount), in lieu of receiving the merger consideration. Record holders of WCI common stock who elect to exercise appraisal rights must comply with all the procedures set forth in Section 262 of the DGCL in order to preserve those rights.

 

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Under Section 262 of the DGCL, where a merger agreement for a proposed merger is to be submitted for adoption at a meeting of stockholders, as in the case of the WCI special meeting, the corporation submitting the matter to a vote of stockholders must, not less than 20 days prior to the meeting, notify each of its stockholders that appraisal rights are available, and must include in each such notice a copy of Section 262 of the DGCL. This proxy statement/prospectus constitutes such notice by WCI to the WCI stockholders and a copy of the full text of Section 262 of the DGCL as in effect with respect to this transaction is attached to this proxy statement/prospectus as Annex D.

ANY HOLDER OF WCI’S COMMON STOCK WHO WISHES TO EXERCISE APPRAISAL RIGHTS, OR WHO WISHES TO PRESERVE SUCH STOCKHOLDER’S RIGHT TO DO SO, SHOULD CAREFULLY REVIEW THE FOLLOWING DISCUSSION AND ANNEX D BECAUSE FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED MAY RESULT IN THE LOSS OF APPRAISAL RIGHTS. MOREOVER, BECAUSE OF THE COMPLEXITY OF THE PROCEDURES FOR EXERCISING THE RIGHT TO DEMAND APPRAISAL OF SHARES OF WCI’S COMMON STOCK, WCI BELIEVES THAT, IF A STOCKHOLDER CONSIDERS EXERCISING SUCH RIGHTS, SUCH STOCKHOLDER SHOULD SEEK THE ADVICE OF LEGAL COUNSEL.

How to Exercise and Perfect Appraisal Rights

WCI stockholders wishing to exercise the right to demand appraisal of their shares of WCI common stock under Section 262 of the DGCL must do each of the following:

 

•

Not vote in favor of the merger proposal at the WCI special meeting (voting against, abstaining from voting or not voting at all will satisfy this requirement);

 

•

Deliver to WCI a written demand for appraisal of their shares before the vote on the merger proposal at the WCI special meeting;

 

•

Continue to hold their shares of WCI common stock from the date of making the demand through the effective date of the initial merger; and

 

•

File a petition in the Court, requesting a determination of the fair value of their shares, within 120 days after the effective date of the initial merger. The surviving company is under no obligation to and has no present intention to file a petition and holders should not assume that the surviving corporation will file a petition. Accordingly, it is the obligation of the WCI stockholders to initiate all necessary action to perfect their appraisal rights in respect of shares of WCI’s common stock within the time prescribed in Section 262 of the DGCL.

Notwithstanding a stockholder’s compliance with the foregoing requirements, the Court shall dismiss the appraisal proceedings as to all stockholders who are otherwise entitled to appraisal rights, and such stockholders will effectively lose their appraisal rights, unless (1) the total number of shares of WCI common stock entitled to appraisal rights exceeds 1% of the outstanding shares of WCI common stock immediately prior to the initial merger or (2) the value of the consideration provided in the initial merger for such total number of shares of WCI common stock entitled to appraisal rights exceeds $1 million.

A vote in favor of the merger proposal, in person or by proxy, or the return of a signed proxy that does not contain voting instructions will, unless revoked, constitute a waiver of the stockholder’s appraisal rights and will nullify any previously filed written demand for appraisal. If you sign and return a proxy card that does not contain voting instructions or submit a proxy by telephone or through the Internet that does not contain voting instructions, you will effectively waive your appraisal rights because such shares represented by the proxy will, unless the proxy is revoked, be voted for the merger proposal. However, neither voting against the merger proposal, nor abstaining from voting or failing to vote on the merger proposal, will in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262 of the DGCL.

 

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Filing Written Demand

WCI stockholders who decide to exercise their appraisal rights must make a demand, in writing, for appraisal of their shares of common stock prior to the taking of the vote on the merger proposal at the WCI special meeting. A demand for appraisal will be sufficient if it reasonably informs WCI of the identity of the stockholder and that such stockholder intends thereby to demand appraisal of such stockholder’s shares of WCI common stock. If you wish to exercise your appraisal rights you must be the record holder of such shares of WCI common stock on the date the written demand for appraisal is made and you must continue to hold such shares through the effective date of the initial merger. Accordingly, a stockholder who is the record holder of shares of common stock on the date the written demand for appraisal is made, but who thereafter transfers such shares prior to the effective date of the initial merger, will lose any right to appraisal in respect of such shares. A stockholder’s failure to make the written demand prior to the taking of the vote on the merger proposal will constitute a waiver of appraisal rights.

Only a holder of record of shares of WCI common stock is entitled to demand an appraisal of the shares registered in that holder’s name. A demand for appraisal in respect of shares of WCI common stock should be executed by or on behalf of the holder of record, fully and correctly, as the holder’s name appears in the WCI common stock registry or on the stock certificates (as applicable), should specify the holder’s name and mailing address and the number of shares registered in the holder’s name and must state that the person intends thereby to demand appraisal of the holder’s shares in connection with the mergers. As noted above, this written demand for appraisal must be separate from any proxy or vote abstaining from or voting against the merger proposal.

If the shares are owned of record in a fiduciary capacity, such as by a trustee, a bank trust company, guardian or custodian, or other nominee, execution of the demand should be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners. If the shares are held in “street name” by a broker, bank or nominee, the broker, bank or nominee may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising appraisal rights with respect to the shares held for other beneficial owners; in such case, however, the written demand should set forth the number of shares as to which appraisal is sought and where no number of shares is expressly mentioned the demand will be presumed to cover all shares of common stock held in the name of the record owner. Beneficial owners who do not also hold their WCI shares of record may not directly make appraisal demands to WCI. The beneficial owner must, in such cases, have the owner of record, such as a broker, bank or other nominee, submit the required demand in respect of those shares of WCI common stock. If a stockholder holds shares of WCI’s common stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as record holder. Stockholders who hold their shares in brokerage accounts or other nominee forms and who wish to exercise appraisal rights should consult with their brokers or other nominees promptly to determine and follow in a timely manner the appropriate procedures for the making of a demand for appraisal by such a nominee.

All written demands for appraisal pursuant to Section 262 of the DGCL should be sent or delivered to WCI at:

WCI Communities, Inc.

24301 Walden Center Drive

Bonita Springs, Florida 34134

Attention: General Counsel

From and after the effective date of the initial merger, any stockholder who has duly demanded appraisal in compliance with Section 262 of the DGCL will not be entitled to vote for any purpose the shares of WCI’s common stock subject to appraisal or to receive payment of dividends or other distributions on such shares except for dividends or distributions payable to stockholders of record at a date prior to the effective date of the initial merger.

 

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Notice by the Surviving Company

Within 10 days after the effective date of the initial merger, LLC Sub, as the surviving company in the subsequent merger, (or, if there is no subsequent merger, WCI, as the surviving company in the initial merger) must provide written notice to each holder of WCI’s common stock, who properly asserted appraisal rights under Section 262 of the DGCL and has not voted for the merger proposal, that the initial merger has become effective.

Withdrawing a Demand for Appraisal

At any time within 60 days after the effective date of the initial merger, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the merger consideration offered pursuant to the merger agreement by delivering to LLC Sub (or to WCI if there is no subsequent merger), as the surviving company, a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the effective date of the initial merger will require written approval of LLC Sub (or WCI if there is no subsequent merger), as the surviving company. No appraisal proceeding in the Court will be dismissed as to any stockholder who does not so withdraw his, her or its demand for appraisal and accept the merger consideration offered pursuant to the merger agreement without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. If the surviving company does not approve a request to withdraw a demand for appraisal when such approval is required, or, except with respect to any stockholder who withdraws such stockholder’s demand within 60 days after the effective date of the initial merger, if the Court does not approve the dismissal of an appraisal proceeding with respect to a stockholder, such stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the merger consideration being offered pursuant to the merger agreement.

Filing a Petition for Appraisal

Within 120 days after the effective date of the initial merger, but not thereafter, LLC Sub (or WCI if there is no subsequent merger), as the surviving company, or any holder of WCI’s common stock who has complied with Section 262 of the DGCL and is entitled to appraisal rights under Section 262 of the DGCL, may commence an appraisal proceeding by filing a petition in the Court demanding a determination of the fair value of the shares held by all dissenting stockholders. Upon the filing of the petition by a stockholder, service of a copy of such petition shall be made upon the surviving company. As noted above, the surviving company is under no obligation to and has no present intention to file a petition and holders should not assume that the surviving company will file a petition. Accordingly, it is the obligation of the stockholders to initiate all necessary action to perfect their appraisal rights in respect of shares of common stock within the time prescribed in Section 262 of the DGCL. Within 120 days after the effective date of the initial merger, any holder of common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving company a statement setting forth the aggregate number of shares not voted in favor of the merger proposal and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within 10 days after a written request therefor has been received by the surviving company or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. Notwithstanding the above requirement limiting demands for appraisal to record owners, a person who is the beneficial owner of shares of common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal in the Court as described in this paragraph or request to receive from the surviving company the statement described in this paragraph.

If a petition for an appraisal is timely filed by a WCI stockholder and a copy thereof is served upon the surviving company, the surviving company will then be obligated within 20 days after being served with a copy of the petition to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares of WCI common stock and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the Court, the Court is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court may require the stockholders who demanded appraisal of their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with the direction, the Court may dismiss the proceedings as to the stockholder.

 

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Determination of Fair Value

After the Court determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Court, including any rules specifically governing appraisal proceedings. Through such proceeding, the Court will determine the fair value of the shares of WCI common stock, exclusive of any element of value arising from the accomplishment or expectation of the mergers, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court in its discretion determines otherwise for good cause shown, interest from the date of the initial merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the initial merger and the date of payment of the judgment. Notwithstanding the foregoing, at any time before the entry of judgment in the proceedings, LLC Sub (or WCI if there is no subsequent merger), as the surviving company, may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided in the immediately preceding sentence only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares of WCI common stock as determined by the Court, and (2) interest theretofore accrued, unless paid at that time. WCI and Lennar have made no determination as to whether such a payment will be made if the initial merger is consummated, and WCI reserves the right to make such a payment upon the consummation of the initial merger.

In determining the fair value of the shares of WCI common stock, and, if applicable, interest, the Court will take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined could be more than, the same as or less than the consideration they would receive pursuant to the initial merger if they did not demand appraisal of their shares and that an opinion of an investment banking firm as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the initial merger, is not an opinion as to, and does not otherwise address, fair value under Section 262 of the DGCL. Neither WCI, Lennar, Corporate Sub nor LLC Sub makes any representation as to the outcome of the appraisal of fair value as determined by the Court, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the merger consideration. Neither WCI, Lennar, Corporate Sub nor LLC Sub anticipates offering more than the merger consideration to any stockholder of WCI exercising appraisal rights, and each of them reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262 of the DGCL, the “fair value” of a share of common stock is less than the merger consideration. In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder’s exclusive remedy.

If a petition for appraisal is not timely filed, or if neither (1) the total number of shares of WCI common stock entitled to appraisal rights exceeds 1% of the outstanding shares of WCI common stock immediately prior to the initial merger or (2) the value of the consideration provided in the initial merger for such total number of shares of WCI common stock entitled to appraisal rights exceeds $1 million, then the right to an appraisal will cease. The costs of the action (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court and taxed upon the parties as the Court deems equitable under the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts

 

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utilized in the appraisal proceeding, to be charged pro rata against the value of all the shares entitled to be appraised. In the absence of such determination or assessment, each party bears its own expenses.

If any stockholder who demands appraisal of shares of WCI common stock under Section 262 of the DGCL fails to perfect, successfully withdraws or loses such holder’s right to appraisal, such stockholder’s shares of WCI common stock will be deemed to have been converted at the time of the initial merger into the right to receive the consideration payable in connection with the initial merger (which is equal to the merger consideration, without interest). A stockholder will fail to perfect, or effectively lose, the stockholder’s right to appraisal if no petition for appraisal is filed within 120 days after the time of the initial merger.

As noted above, failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL will result in the loss of a stockholder’s statutory appraisal rights. In light of the complexity of Section 262 of the DGCL, WCI stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors.

NYSE Listing of Lennar Class A Stock; Delisting and Deregistration of WCI Common Stock

It is a condition to the obligations of each party to complete the initial merger that the shares of Lennar Class A stock to be issued in the initial merger shall have been approved for listing on the NYSE, subject to notice of issuance, unless Lennar elects to pay the entire merger consideration in cash. Lennar is required to use its reasonable best efforts to cause all the conditions to the parties’ obligations (which includes the condition regarding approval for listing on the NYSE) to be fulfilled.

If the initial merger is completed, WCI’s common stock will cease to be listed on the NYSE and its registration under the Exchange Act will be terminated.

Interests of WCI Directors and Executive Officers in the Initial Merger

In considering the recommendation of the WCI board that WCI stockholders vote “FOR” the merger proposal, WCI stockholders should be aware that some of the WCI directors and executive officers have financial interests in the initial merger that may be different from, or in addition to, those of WCI stockholders generally. The WCI board was aware of these interests and considered them, among other matters, in approving the merger agreement and making its recommendation that WCI stockholders approve the merger proposal. For purposes of all of the WCI agreements and plans described below, the completion of the mergers will constitute a change in control.

Equity Compensation Awards

Pursuant to the merger agreement, equity compensation awards held by WCI directors and executive officers as of the effective time of the initial merger will be treated at the effective time of the initial merger as follows:

LTIP Awards. Upon completion of the initial merger, each outstanding LTIP Award, whether or not it is vested or subject to possible forfeiture, will become the right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) $11.75 plus any additional increases to the cash consideration plus (y) the market value, based on the ten day VWAP, of the total share consideration multiplied by (ii) the number of shares of WCI common stock that would have been issuable upon settlement of such LTIP Award.

The following table sets forth the number of LTIP Awards held by each WCI director and executive officer, as of January 4, 2017, and the number of shares of WCI common stock that would be issuable in respect of such LTIP Awards upon settlement.

 

Name		Number of WCI LTIP Awards				Number of WCI Common Shares Subject To WCI LTIP Awards
Executive Officers
Keith E. Bass			450				490,764
Russell Devendorf			120				130,870
Paul J. Erhardt			120				130,870
Vivien N. Hastings			80				87,247
Non-Employee Directors
Stephen Plavin			48				52,348
Michelle MacKay			32				34,898

 

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Restricted Shares. Upon completion of the initial merger, each WCI restricted share that is outstanding and unvested or otherwise subject to possible forfeiture will become vested immediately prior to the completion of the initial merger and become a right to receive an amount in cash equal to the greater of (A) $23.50 and (B)(x) $11.75 plus any additional increases to the cash consideration plus (y) the market value, based on the ten day VWAP, of the total share consideration, provided that, to the extent, if any, that paying cash to any person listed in the merger agreement or ancillary documents with regard to that person’s unvested restricted shares would require (or contribute to a requirement) that the share consideration be increased, that person will receive with regard to those unvested restricted shares the combination of share consideration and cash consideration constituting the merger consideration.

The following table sets forth the number of WCI restricted shares held by each WCI executive officer and director as of January 4, 2017.

 

Name		Number of WCI Restricted Shares
Executive Officers
Keith E. Bass			121,000
Russell Devendorf			45,500
Paul J. Erhardt			25,500
Vivien N. Hastings			22,050
David T. Ivin			45,000
John B. McGoldrick			18,800
Reinaldo L. Mesa			26,150
Jonathan F. Rapaport			25,500
Non-Employee Directors
Stephen Plavin			5,306
Michelle MacKay			5,306
Darius Nevin			5,306
Charles Reardon			5,306

Performance Share Units. Upon completion of the initial merger, the WCI performance share unit awards that are outstanding, even though unvested or otherwise subject to possible forfeiture, will be terminated in exchange for a right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) $11.75 plus any additional increases to the cash consideration plus (y) the market value, based on the ten day VWAP, of the total share consideration, multiplied by (ii) the number shares of WCI common stock that would otherwise have become issuable thereafter pursuant to the terms of the applicable performance share unit award agreement had such award vested and been settled in shares.

The following table sets forth the number of WCI performance share units held by each WCI executive officer, as of January 4, 2017, and the number of shares of WCI common stock expected to be received assuming attainment of maximum performance goals. WCI’s non-employee directors do not hold any performance share units.

 

Name		Number of WCI Performance Share Units				Number of WCI Common Shares Expected to Be Received (1)
Executive Officers
Keith E. Bass			55,866				83,799

 

(1)	Represents the maximum number (equal to 150% of the award) of WCI common shares to be received by Mr. Bass, depending upon total stockholder return as measured in the relevant award agreement.

 

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Restricted Share Units. Upon completion of the initial merger, the WCI restricted share unit awards that are outstanding, even though unvested or otherwise subject to possible forfeiture, will be terminated at the effective time of the initial merger in exchange for a right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) $11.75 plus any additional increases to the cash consideration plus (y) the market value based on the ten day VWAP, of the total share consideration, multiplied by (ii) the number of restricted share units subject to such award.

The following table sets forth the number of WCI restricted share units held by each WCI director as of January 4, 2017. WCI’s executive officers do not hold any restricted share units.

 

Name		Number of WCI Restricted Share Units (1)
Non-Employee Directors
Patrick J. Bartels, Jr.			5,306
Christopher E. Wilson			5,306

 

(1)	Represents the number of restricted share units held by Monarch Alternative Capital LP (in respect of Mr. Bartels’ services) and Stonehill Capital Management LLC (in respect of Mr. Wilson’s services).

Executive Transaction and Retention Bonuses

In connection with the initial merger, each of Messrs. Bass, Russell Devendorf, Senior Vice President and Chief Financial Officer, Paul J. Erhardt, Senior Vice President of Homebuilding and Development; President, South Region, David T. Ivin, Senior Vice President of Homebuilding and Development; President, North Region, Jonathan F. Rapaport, Senior Vice President of Homebuilding and Development; President, East Region, John B. McGoldrick, Senior Vice President of Human Resources, and Vivien N. Hastings, Senior Vice President and General Counsel entered into letter agreements with WCI on September 22, 2016 regarding retention bonuses and, in the case of Mr. Bass only, a transaction bonus. To the extent the initial merger is not consummated, the letter agreements will be of no force and effect.

The letter agreement entered into with Mr. Bass provides for eligibility to receive transaction and retention bonuses in an aggregate amount of up to $4,150,000. Under the letter agreement, Mr. Bass is eligible to receive a transaction bonus of up to $3,220,000 payable in a lump sum on the closing date of the initial merger, subject to Mr. Bass’ continued employment through such date. The amount payable as a transaction bonus may not exceed the amount necessary to make Mr. Bass whole for any excise taxes payable by Mr. Bass pursuant to Sections 280G and 4999 of the Code in connection with the initial merger. Further, the letter agreement provides for eligibility to receive a retention bonus of $930,000 payable in a lump sum on the earlier of (i) the 120th day following the closing date of the initial merger, subject to Mr. Bass’ continued employment through such date, and (ii) Mr. Bass’ termination (a) by WCI without cause (as described below in the section titled “—Executive Employment Agreements”), (b) by Mr. Bass for good reason (as described below in the section titled “—Executive Employment Agreements”) or (c) due to Mr. Bass’ death or disability. However, because the Company has made an initial payment to Mr. Bass in respect of his 2016 annual bonus equal to 100% of target bonus opportunity, or $1,600,000, on December 30, 2016, Mr. Bass may be subject to less or no excise taxes pursuant to Sections 280G and 4999 of the Code, in which case he will receive less or no transaction bonus. In addition, Mr. Bass has, pursuant to the letter agreement, waived his right to payment of any prorated bonus that he would have otherwise been entitled to receive pursuant to his employment agreement in connection with a termination of his employment (provided that any unpaid annual bonus in respect of 2016 will be deemed earned and accrued for purposes of any termination of his employment by WCI without cause, by Mr. Bass for good reason or due to Mr. Bass’ death or disability).

The letter agreements entered into with each of Messrs. Devendorf, Erhardt, Ivin, Rapaport and McGoldrick and Ms. Hastings provide for eligibility to receive a retention bonus of $506,250, $450,000, $412,500, $450,000, $335,000 and $373,125, respectively, payable in lump sum on the earlier of (i) the 120th day following the closing date of the initial merger, subject to continued employment through such date, and (ii) the respective executive officer’s termination (a) by WCI without cause (which, for all executive officers, is defined as described below in the section titled “—Executive Employment Agreements”), (b) by the respective executive officer for good reason (which, for all executive officers, is defined as described below in the section titled “—Executive Employment Agreements”) and (c) due to the respective executive officer’s death or disability. In addition, each of Messrs. Devendorf, Erhardt, Ivin and Rapaport and Ms. Hastings has, pursuant to their respective letter agreements, waived his or her respective right to payment of any prorated bonus that he or she would have otherwise been entitled to receive pursuant to his or her employment agreement in connection with a termination of his or her employment (provided that any unpaid annual bonus in respect of 2016 will be deemed earned and accrued for purposes of any termination of his or her employment by WCI without cause, by him or her for good reason or due to death or disability).

Executive Employment Agreements

WCI currently is party to employment agreements with Messrs. Bass, Devendorf, Ivin, Erhardt and Rapaport, Ms. Hastings and Reinaldo L. Mesa, Senior Vice President of Real Estate Services; President and Chief Executive Officer, Watermark Realty, Inc., each of which provides for, among other things, severance upon a termination by WCI without cause or by the executive officer for good reason, for which (1) “cause” is defined generally as the executive officer’s termination of employment by WCI after the executive

 

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officer’s (a) commission of any felony or other act involving fraud, theft, misappropriation, dishonesty, or embezzlement, (b) commission of intentional acts that materially impair the goodwill of the business of WCI or cause material damage to its property, goodwill or business, (c) refusal to, or willful failure to, perform his or her material duties under the employment agreement, which refusal or failure continues for a period of fourteen (14) days following notice thereof by WCI to the executive officer, or (d) violation of any written WCI policies or procedures, which violation is not cured, to the extent susceptible to cure, within fourteen (14) days after WCI has given written notice to the executive officer describing such violation; and (2) “good reason” is defined generally as the executive officer’s voluntary termination of employment after the occurrence, without the executive officer’s consent and after applicable notice and cure periods, of (w) a material reduction in the executive officer’s base salary, excluding any such reduction that affects WCI’s employees generally, or WCI’s intentional failure to pay such base salary when due; (x) an action by WCI that results in a material adverse change in the executive officer’s title, duties or responsibilities; (y) a requirement by WCI that the executive officer change his or her principal place of employment to a location outside of a fifty (50)-mile radius of (i) with respect to Messrs. Bass, Devendorf, Ivin and Erhardt and Ms. Hastings, Bonita Springs, Florida, (ii) with respect to Mr. Mesa, Sunrise, Florida or (iii) with respect to Mr. Rapaport, Palm Beach Gardens, Florida; or (z) upon a change in control, a material reduction in the executive officer’s opportunity to earn a bonus pursuant to WCI’s annual cash incentive bonus plan in place immediately prior to the change in control.

If Mr. Bass’ employment is terminated by WCI without cause or by reason of his resignation for good reason within six (6) months prior to or two (2) years following the initial merger, Mr. Bass is entitled to severance consisting of (i) a lump sum payment of eighteen (18) months’ base salary (based on the greater of the salary in place at either the date of termination or the date of the initial merger), (ii) any accrued, but unpaid bonus for any prior performance period (which will include the annual bonus in respect of 2016 in connection with any termination on or following the initial merger), (iii) a lump sum payment of 150% his target bonus (based on the greater of the target bonus for the year of termination or the immediately prior year), (iv) if termination occurs prior to the initial merger, a pro-rated bonus based on actual results for the year of termination (but based on target if actual results are not calculable upon consummation of the initial merger) and (v) continued COBRA coverage at WCI’s expense for up to eighteen (18) months. The Company made an initial payment to Mr. Bass in respect of his 2016 annual bonus equal to 100% of target bonus opportunity, or $1,600,000, on December 30, 2016. The amount of such payment will reduce any future payments of accrued, but unpaid bonus described above.

If any of Messrs. Devendorf’s, Ivin’s, Erhardt’s, Mesa’s or Rapaport’s employment is terminated by WCI without cause or by reason of his resignation for good reason within six (6) months prior to or two (2) years following the initial merger, Messrs. Devendorf, Ivin, Erhardt, Mesa or Rapaport, as applicable, is entitled to severance consisting of (i) a lump sum payment of nine (9) months’ base salary (based on the greater of the salary in place at either the date of termination or the date of the initial merger), (ii) any accrued, but unpaid bonus for any prior performance period (which will include the annual bonus in respect of 2016 in connection with any termination on or following the initial merger), (iii) a lump sum payment of 75% of his target bonus (based on the greater of the target bonus for the year of termination or the immediately prior year) (provided that such lump sum payment of 75% of target bonus does not apply to Mr. Mesa), (iv) a pro-rated bonus based on actual results for the year of termination (but based on target if actual results are not calculable upon consummation of the initial merger) (provided that such pro-rated bonus will not apply to Messrs. Devendorf, Ivin, Erhardt or Rapaport if his termination occurs on or after the initial merger) and (v) continued COBRA coverage at WCI’s expense for up to nine (9) months.

If Ms. Hastings’ employment is terminated by WCI without cause or by reason of her resignation for good reason within six (6) months prior to or two (2) years following the initial merger, Ms. Hastings is entitled to severance consisting of (i) a lump sum payment of thirteen and one-half (13.5) months’ base salary (based on the greater of the salary in place at either the date of termination or the date of the initial merger), (ii) any accrued, but unpaid bonus for any prior performance period (which will include the annual bonus in respect of 2016 in connection with any termination on or following the initial merger), (iii) a lump sum payment of 112.5% of her target bonus (based on the greater of the target bonus for the year of termination or the immediately prior year), (iv) if the termination occurs prior to the initial merger, a pro-rated bonus based on actual results for the year of termination (but based on target if actual results are not calculable upon consummation of the initial merger) and (v) continued COBRA coverage at WCI’s expense for up to fourteen (14) months.

Any severance payment payable to Messrs. Bass, Devendorf, Ivin, Erhardt, Mesa or Rapaport or Ms. Hastings pursuant to his or her respective employment agreement will be subject to the executive officer’s execution of a release of claims in favor of WCI. Further,

 

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each executive officer (other than Mr. Bass) is subject to a 280G “best net” provision, whereby all parties have agreed that, should any payment or benefit due to the executive officer pursuant to his or her respective employment agreement be deemed an excess parachute payment for purposes of Section 280G of the Code, such amounts will either be (a) delivered in full or (b) limited to the minimum extent necessary to ensure that no portion thereof will fail to be tax-deductible to WCI by reason of Section 280G of the Code, whichever of the foregoing amounts results in the receipt by the executive officer of the greatest amount of payments and benefits. Pursuant to the letter agreement Mr. Bass entered into with WCI on September 22, 2016, the 280G “best net” provision with respect to Mr. Bass will no longer be applicable and be of no force and effect.

The foregoing descriptions of certain severance provisions of the executive employment agreements do not purport to be complete and are qualified in their entirety by reference to such agreements and any amendments thereto. Please also see the description of certain severance payments and benefits below in the section titled “—Quantification of Payments and Benefits to WCI Executive Officers.”

Non-Executive Change in Control Severance Plan

WCI currently sponsors the Non-Executive Change in Control Severance Plan, which provides Mr. McGoldrick with eligibility to receive severance upon a termination by WCI without cause or by Mr. McGoldrick for good reason, for which (1) “cause” is defined generally as Mr. McGoldrick’s termination of employment by WCI after his (a) commission of any felony or other act involving fraud, theft, misappropriation, dishonesty, or embezzlement, (b) commission of intentional acts that materially impair the goodwill or the business of WCI or cause material damage to its property, goodwill or business, (c) refusal to, or willful failure to, perform his material duties to WCI or (d) material violation of any written WCI policies or procedures; and (2) “good reason” is defined generally as Mr. McGoldrick’s voluntary termination of employment after the occurrence of (x) a material reduction in his base salary; or (y) a requirement by WCI that Mr. McGoldrick change his principal place of employment to a location outside of a fifty (50)-mile radius of Bonita Springs, Florida.

If Mr. McGoldrick’s employment is terminated by WCI without cause or by reason of his resignation for good reason within twelve (12) months following the initial merger, Mr. McGoldrick is entitled to severance consisting of (i) a lump sum payment of six (6)-months’ base salary (without regard to any reductions that occur on or following the initial merger), and (ii) continued COBRA coverage at WCI’s expense for up to six (6) months.

Any severance payment payable to Mr. McGoldrick pursuant to the Non-Executive Change in Control Plan will be subject to his execution of a release of claims in favor of WCI. Further, Mr. McGoldrick is subject to a 280G “best net” provision, whereby all parties have agreed that, should any payment or benefit due to Mr. McGoldrick pursuant to Non-Executive Change in Control Severance Plan be deemed an excess parachute payment for purposes of Section 280G of the Code, such amounts will either be (a) delivered in full or (b) limited to the minimum extent necessary to ensure that no portion thereof will fail to be tax-deductible to WCI by reason of Section 280G of the Code, whichever of the foregoing amounts results in the receipt by Mr. McGoldrick of the greatest amount of payments and benefits.

The foregoing descriptions of certain provisions of the Non-Executive Change in Control Severance Plan do not purport to be complete and are qualified in their entirety by reference to the plan itself. Please also see the description of certain severance payments and benefits below in the section titled “—Quantification of Payments and Benefits to WCI Executive Officers.”

2016 Management Incentive Compensation Plan

WCI currently sponsors the 2016 Management Incentive Compensation Plan, which we refer to as the “2016 MICP” in this proxy statement/prospectus, which provides Mr. McGoldrick with eligibility to receive his annual bonus in respect of 2016 to the extent it remains unpaid upon a termination by WCI without cause (as defined above). If Mr. McGoldrick is terminated by WCI without cause, he will be entitled to receive an amount equal to his unpaid bonus under the 2016 MICP based on actual performance. The amount of Mr. McGoldrick’s bonus under the 2016 MICP is not yet determinable. However, Mr. McGoldrick’s target and maximum bonus eligibility under the 2016 MICP is currently $100,000 and $150,000, respectively.

 

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The executive officers other than Mr. McGoldrick also participate in the 2016 MICP (or, for Mr. Mesa, the 2016 Real Estate Services Incentive Compensation Plan (the “2016 RES ICP”)) and are eligible to receive certain payments in relation to their bonuses under such plan upon certain terminations of employment. For a description of such payments, see the section titled “—Executive Employment Agreements” above.

In addition, on December 22, 2016, the Company and Mr. Bass entered into a letter agreement pursuant to which an initial payment in respect of Mr. Bass’ bonus under the 2016 MICP equal to 100% of target bonus opportunity, or $1,600,000 (the “Initial MICP Bonus Amount”), was paid to Mr. Bass on December 30, 2016. If, based upon the final determination of WCI and individual performance, the amount of Mr. Bass’ bonus under the 2016 MICP (the “Actual MICP Bonus Amount”) is determined to be less than the Initial MICP Bonus Amount, Mr. Bass will be obligated to repay the Company the excess of the Initial MICP Bonus Amount over the Actual MICP Bonus Amount, less all tax withholdings paid by Mr. Bass with respect to such excess. If, based upon the final determination of Company and individual performance, the Actual MICP Bonus Amount exceeds the Initial MICP Bonus Amount, subject to Mr. Bass’ maximum bonus opportunity of $2,400,000, the Company will pay Mr. Bass such excess, less applicable tax withholdings, at the same time bonuses are paid to other participants in the 2016 MICP.

The foregoing descriptions of the payments due under the 2016 MICP do not purport to be complete and are qualified in their entirety by reference to such plan and the letter agreement by and between WCI and Mr. Bass, dated as of December 22, 2016. Please also see the description of payments below in the section titled “—Quantification of Payments and Benefits to WCI Executive Officers.”

Indemnification; Directors’ and Officers’ Insurance

Pursuant to the merger agreement, Lennar, LLC Sub and Corporate Sub agreed that all rights of indemnification, advancement of expenses, exculpation and limitation of liabilities existing in favor of the current or former directors, officers and employees of WCI and its subsidiaries and each such person who served at the request of WCI or any of its subsidiaries as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise, which persons we refer to as the “indemnified parties” in this proxy statement/prospectus, as provided in WCI’s certificate of incorporation and bylaws or similar organizational documents of any subsidiary of WCI or under any indemnification, employment or other similar agreements between any indemnified party and WCI or any subsidiary of WCI, in each case as in effect on the date of the merger agreement with respect to matters occurring prior to the effective time of the initial merger, shall survive the mergers and continue in full force and effect in accordance with their respective terms.

Pursuant to the merger agreement, Lennar also guaranteed the indemnification and expense advancement obligations of the surviving company of the mergers and its subsidiaries under those provisions of WCI’s certificate of incorporation or bylaws. Lennar will, or will cause the surviving company of the mergers to, maintain in effect for not less than six years after the effective time of the initial merger, with respect to occurrences prior to the effective time of the initial merger, WCI’s policies of directors’ and officers’ liability insurance which are in effect on the date of the merger agreement and are set forth in WCI’s disclosure letter (notwithstanding any provisions of those policies that they will terminate as a result of the mergers), or substantially similar insurance, to the extent that insurance is available at an annual cost not exceeding 300% of the annual cost of the policies of directors and officers liability insurance which are in effect at the date of the merger agreement. To the extent that insurance is not available at an annual cost that will not exceed that amount, Lennar will, or will cause the surviving company of the mergers to, maintain in effect for that period the maximum amount of such insurance coverage that can be obtained for that maximum annual cost.

Quantification of Payments and Benefits to WCI Executive Officers

The following table sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation that is based on or otherwise relates to the initial merger and that may be paid or become payable to WCI’s named executive officers. WCI qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, and the disclosure included in this proxy statement/prospectus is intended to comply with the requirements applicable to emerging growth companies. The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of information about certain compensation for each of WCI’s named executive officers that is based on or otherwise relates to the initial merger. The table below also sets forth similar compensation information for WCI’s other executive officers, Ms. Vivien N. Hastings, Paul J. Erhardt, Jonathan F. Rapaport, Reinaldo L. Mesa and John B. McGoldrick.

Please note that the amounts indicated below are estimates based on the material assumptions described in the notes to the table below, which may or may not actually occur. Some of these assumptions are based on information not currently available and, as a result, the actual amounts, if any, that may be paid or become payable to a named executive officer may differ materially from the amounts set forth below. Furthermore, WCI has assumed the following (knowing that the actual facts are likely to be different):

 

•

pursuant to the merger agreement, the payments received in connection with outstanding equity awards may vary depending on the market value, based on the ten day VWAP, of the share consideration paid to WCI stockholders. As a result, for the purpose of making the calculations on the table below, the relevant price per share of WCI common stock utilized for purposes of calculating the below amounts is $23.75, which is the average closing market price per share of WCI common stock as quoted on the NYSE over the first five business days following the first public announcement of the mergers on September 22, 2016;

 

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•

for the purpose of making the calculations on the table below, the initial merger is assumed to close on January 4, 2017, which is the last practicable date prior to the distribution of this proxy statement/prospectus; and

 

•

for the purpose of making the calculations on the table below, each of the named executive officers will experience a termination of employment without cause immediately following the initial merger, which for the purpose of the calculations is assumed to close on January 4, 2017, the last practicable date prior to the distribution of this proxy statement/prospectus.

 

Name		Cash ($)(1)				Equity ($)												Perquisites/ Benefits ($)(5)				Total ($)
						(2)				(3)				(4)
Named Executive Officers
Keith E. Bass			10,300,000				3,496,688				2,873,750				1,990,226				31,818				18,692,482
Russell Devendorf			1,425,000				932,449				1,080,625				—				15,909				3,453,983
David T. Ivin			1,237,500				—				1,068,750				—				6,494				2,312,744
Executive Officer
Vivien N. Hastings			1,396,875				621,633				523,688				—				10,102				2,552,298
Paul J. Erhardt			1,350,000				932,449				605,625				—				15,951				2,904,025
Jonathan F. Rapaport			1,350,000				—				605,625				—				—				1,955,625
Reinaldo L. Mesa			537,740				—				621,063				—				16,033				1,174,836
John B. McGoldrick			602,500				—				446,500				—				10,606				1,059,606

 

(1)

Amounts reported consist of (a) (i) cash severance payments upon termination of employment with cause or for good reason within two years following the initial merger pursuant to the Executive Employment Agreements for all persons (other than Mr. McGoldrick) and (ii) cash severance payments upon termination of employment with cause or for good reason within one year following the initial merger pursuant to the Non-Executive Change in Control Severance Plan and 2016 MICP for Mr. McGoldrick, each of which constitute “double trigger” payments because they would be paid in the event the executive officer’s employment is terminated following the initial merger, and (b) certain transaction and retention bonuses payable on or prior to the 120th day following the closing of the initial merger, which are “single trigger” payments because they would be paid on or prior to the 120th day following the closing of the initial merger, without regard to whether the executive officer experiences a termination of employment. The following table quantifies the base salary and bonus components of severance and any retention and/or transaction bonuses included in the aggregate total reported in the column:

 

Name		Severance												Retention / Transaction Bonuses ($)(C)
		Multiple of Base Salary ($)(A)				Multiple of Annual Bonus ($)(B)				Annual Bonus ($)
Named Executive Officers
Keith E. Bass			1,350,000				2,400,000				2,400,000	(D)			4,150,000
Russell Devendorf			300,000				206,250				412,500	(D)			506,250
David T. Ivin			206,250				206,250				412,500	(D)			412,500
Executive Officer
Vivien N. Hastings			433,125				253,125				337,500	(D)			373,125
Paul J. Erhardt			225,000				225,000				450,000	(D)			450,000
Jonathan F. Rapaport			225,000				225,000				450,000	(D)			450,000
Reinaldo L. Mesa			285,000				—				252,740	(E)			—
John B. McGoldrick			117,500				—				150,000	(F)			335,000

 

(A)

Represents a multiple of each executive officer’s respective annual base salary equal to (i) 150% for Mr. Bass, (ii) 112.5% for Ms. Hastings, (iii) 75% for Messrs. Devendorf, Ivin, Erhardt, Rapaport and Mesa and (iv) 50% for Mr. McGoldrick.

(B)

Represents a multiple of each executive officer’s 2016 target annual bonus equal to (i) 150% for Mr. Bass, (ii) 112.5% for Ms. Hastings and (iii) 75% for Messrs. Devendorf, Ivin, Erhardt and Rapaport. Except as otherwise set forth in the “Annual Bonus” column, Messrs. Mesa and McGoldrick are not entitled to a multiple of target annual bonus as a severance payment.

 

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(C)

See the section above titled “—Interests of WCI Directors and Executive Officers in the Initial Merger—Executive Transaction and Retention Bonuses” for more information.

(D)

Amounts reported represent the maximum amount to which such executive officer could be entitled under the 2016 MICP. Upon termination of any such WCI executive officer’s employment without cause, for good reason or due to death or disability, following the initial merger, he or she will be entitled to an amount equal to his or her unpaid bonus under the 2016 MICP based on actual performance. Actual performance under the 2016 MICP is not yet determinable. The Company made an initial payment to Mr. Bass in respect of his 2016 annual bonus equal to 100% of target bonus opportunity, or $1,600,000, on December 30, 2016 and the amount of such payment will reduce any future payment of unpaid bonus described above with respect to Mr. Bass. See the section above titled “—2016 Management Incentive Compensation Plan” for more information.

(E)

Amount reported represents the sum of (i) the target amount to which Mr. Mesa could be entitled under the 2016 RES ICP, or $250,000, and (ii) an estimate of the pro-rated portion of Mr. Mesa’s bonus under any successor plan to the 2016 RES ICP with respect to fiscal 2017, or $2,740 (calculated as described below). Upon termination of Mr. Mesa’s employment without cause or for good reason at any time, he will be entitled to a bonus under the 2016 RES ICP based on actual results. Actual performance under the 2016 RES ICP is not yet determinable. In addition, upon termination of Mr. Mesa’s employment without cause or for good reason at any time, Mr. Mesa will also be entitled to a pro-rated bonus under any successor plan to the 2016 RES ICP with respect to the year of termination based on actual Company financial results and prorated based on employment through termination. No such successor plan has been adopted to date and thus the amount of any such pro-rated bonus is not yet determinable. The estimated amount of any such pro-rated bonus included herein is calculated based on Mr. Mesa’s target bonus under the 2016 RES ICP and his employment through the assumed termination date, January 4, 2017. The actual amount of any such pro-rated bonus upon termination may vary based on the terms and conditions of the applicable successor plan to the 2016 RES ICP, which shall be determined at a later date.

(F)

Amount reported represents the maximum amount to which Mr. McGoldrick could be entitled under the 2016 MICP. Upon termination of Mr. McGoldrick’s employment without cause, he will be entitled to an amount equal to his unpaid bonus under the 2016 MICP based on actual performance. Actual performance under the 2016 MICP is not yet determinable.

 

(2)

Amounts reported represent the value of the payment in connection with termination of all outstanding LTIP Awards held by the named executive officers and other executive officers. Amounts included in this column are “single trigger” payments because they would be paid at the closing date of the initial merger, without regard to whether the named executive officer or other executive officer experiences a termination of employment.

(3)

Amounts reported represent the value of the payment in connection with termination of all outstanding time-based WCI restricted shares held by the named executive officers and the other executive officers. Amounts included in this column are “single trigger” payments because they would be paid at the closing date of the initial merger, without regard to whether the named executive officer or other executive officer experiences a termination of employment.

(4)

Amounts reported represent the value of the payment in connection with the termination of all outstanding WCI performance share units held by Mr. Bass. Pursuant to the applicable award agreement, and based on the assumptions set forth above, immediately prior to the effective time of the initial merger, the outstanding WCI performance share units will be deemed earned at the maximum level and will be converted into a right to receive payment based on the maximum number of shares eligible to be received thereunder. Amounts included in this column are “single trigger” payments because they would be paid at the closing date of the initial merger, without regard to whether the named executive officer or other executive officer experiences a termination of employment.

(5)

Amounts reported consist of reimbursements for healthcare continuation pursuant to COBRA. Pursuant to the Executive Employment Agreements or the Non-Executive Change in Control Severance Plan, as applicable, these double-trigger health care reimbursements are payable in the event the executive officer’s employment is terminated following the initial merger. See the section above titled “—Executive Employment Agreements” and “—Non-Executive Change in Control Severance Plan” for more information.

Litigation Relating to the Mergers

Since the announcement of the proposed mergers, WCI, Lennar and the WCI directors have been named as defendants in two class action complaints, one filed on November 23, 2016, by plaintiff Paul Parshall, in the U.S. District Court for the Middle District of Florida, and the other filed on November 29, 2016, by plaintiff Stephen Bushansky, in the Court of Chancery of the State of Delaware. The first complaint alleges that the registration statement on Form S-4 filed by WCI on November 10, 2016 omits material information with respect to the proposed transaction, which renders the registration statement false and misleading. The second complaint alleges that the WCI board breached its fiduciary duties in connection with the merger agreement, including with respect to the process by which the merger agreement was negotiated and approved and with respect to omissions of information that allegedly cause the registration statement to be false and misleading. Both complaints seek an injunction preventing the consummation of the initial merger, compensatory damages and attorneys’ fees and costs. WCI and Lennar believe that these lawsuits are without merit and intend to defend against them vigorously. It is possible that additional lawsuits will be commenced.

 

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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a general discussion of certain material U.S. federal income tax considerations relating to the mergers to U.S. holders (as defined below) of WCI common stock that as a result of the initial merger receive merger consideration in exchange for their shares of WCI common. The following discussion is based upon the Code, the U.S. Treasury regulations promulgated thereunder and judicial and administrative authorities, rulings and decisions, all as in effect as of the date of this proxy statement/prospectus. These authorities may change, possibly with retroactive effect, and any such change could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion assumes that the mergers will be completed in accordance with the merger agreement and as further described in this proxy statement/prospectus. This discussion is not a complete description of all of the tax consequences of the mergers and, in particular, does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax.

The following discussion applies only to U.S. WCI stockholders who hold such shares as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to U.S. holders in light of their particular circumstances and does not apply to U.S. holders subject to special treatment under the U.S. federal income tax laws (such as, for example, dealers or brokers in securities, commodities or foreign currencies, traders in securities that elect to apply a mark-to-market method of accounting, banks and certain other financial institutions, insurance companies, mutual funds, tax-exempt organizations, holders subject to the alternative minimum tax provisions of the Code, partnerships, S corporations or other pass-through entities or investors in partnerships, regulated investment companies, real estate investment trusts, controlled foreign corporations, passive foreign investment companies, former citizens or residents of the United States, U.S. expatriates, holders whose functional currency is not the U.S. dollar, holders who hold shares of WCI common stock as part of a hedge, straddle, constructive sale or conversion transaction or other integrated investment, holders who acquired WCI common stock pursuant to the exercise of employee stock options, through a tax qualified retirement plan or otherwise as compensation, holders who exercise appraisal rights, or holders who actually or constructively own more than 5% of WCI common stock). The following discussion is applicable only to U.S. holders. It does not address the tax considerations of a person that is not a U.S. holder. Non-U.S. holders should consult their own independent tax advisor as to the specific tax consequences of the mergers and the payment of merger consideration with respect to their particular circumstances, including with respect to the potential applicability of the Foreign Investment in Real Property Tax Act to their situations.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of WCI 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 an entity treated as a corporation for U.S. federal income tax purposes, organized in or under the laws of the United States or any state thereof or the District of Columbia, (3) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes or (4) an estate, the income of which is includible in gross income for U.S. federal income tax purposes, regardless of its source.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds WCI common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Any entity treated as a partnership for U.S. federal income tax purposes that holds WCI common stock, and any partners in such partnership, should consult their own independent tax advisors regarding the tax consequences of the mergers to their specific circumstances.

Determining the actual tax consequences of the mergers to you may be complex and will depend on your specific situation and on factors that are not within our control. You should consult your own independent tax advisor as to the specific tax consequences of the mergers and the payment of the merger consideration in your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, foreign and other tax laws and of changes in those laws.

 

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Consequences of the Mergers

All statements as to matters of federal income tax law and legal conclusions with respect thereto, but not as to factual matters, contained in this section are the opinion of Latham & Watkins LLP and are based in part on the accuracy of the factual representations made to it.

Unless Lennar elects to pay the merger consideration entirely in cash, it is a condition, which we refer to as the “Tax Opinion Condition” in this proxy statement/prospectus, to the obligation of WCI to complete the initial merger that WCI receive an opinion from Latham & Watkins LLP, special counsel to WCI, dated the closing date of the initial merger, to the effect that, on the basis of facts, representations, assumptions and exclusions set forth or referred to in such opinion, the initial merger and the subsequent merger, considered together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. This opinion will be based on representations, warranties and covenants contained in representation letters provided by Lennar and WCI and on customary factual assumptions. The opinion described above will not be binding on the Internal Revenue Service, which we refer to as the “IRS” in this proxy statement/prospectus, or any court. Lennar and WCI have not sought and will not seek any ruling from the IRS regarding any matters relating to the initial merger or the subsequent merger, and as a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth below. In addition, if any of the representations, warranties, covenants or assumptions upon which the opinion is based are inconsistent with the actual facts, the U.S. federal income tax consequences of the initial merger and the subsequent merger could be adversely affected. WCI has the ability to waive the Tax Opinion Condition. WCI does not currently intend to waive the Tax Opinion Condition, but if WCI does waive the Tax Opinion Condition after the registration statement of which this proxy statement/prospectus forms a part is declared effective by the SEC, and if the tax consequences of the mergers to WCI stockholders have materially changed, WCI will recirculate appropriate soliciting materials to resolicit the votes of the WCI stockholders. Assuming that Lennar does not exercise its right to pay the merger consideration entirely in cash and that the Tax Opinion Condition is not waived by WCI, it is the opinion of Latham & Watkins LLP that, the initial merger and the subsequent merger, considered together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In such case, upon the exchange of WCI common stock for cash and Lennar Class A stock (and cash in lieu of fractional shares), the U.S. federal income tax consequences to a U.S. holder will be as follows:

Upon exchanging your WCI common stock for cash and Lennar Class A stock, you generally will recognize gain (but not loss) in an amount equal to the lesser of (a) the excess (if any) of the cash and the fair market value of Lennar Class A stock received over your adjusted tax basis in your WCI common stock or (b) the amount of cash you receive (other than cash received in lieu of fractional shares of Lennar Class A stock, which is separately addressed below). Any such gain will be capital gain, and will be long-term capital gain if, as of the effective date of the initial merger, your holding period for such WCI common stock exceeds one year. Long-term capital gains of individuals are generally eligible for reduced rates of taxation.

The aggregate tax basis of the Lennar Class A stock that you receive in the initial merger (including any fractional shares deemed received and exchanged for cash, as discussed below) will equal your aggregate adjusted tax basis in the shares of WCI common stock you surrender in the initial merger, decreased by the amount of cash you receive (other than cash received in lieu of a fractional shares of Lennar Class A stock, discussed below), and increased by the amount of any gain that you recognize in the initial merger as described in the preceding paragraph. Your holding period for the shares of Lennar Class A stock that you receive in the initial merger (including any fractional share deemed received and exchanged for cash, as discussed below) will include your holding period for the shares of WCI common stock that you surrender in the initial merger. If you acquired different blocks of WCI common stock at different times or at different prices, you should consult your own tax advisor regarding the manner in which the Lennar Class A stock and cash that you receive will be allocated to each block of WCI common stock, and the amount of any gain recognized, and the tax basis and holding period of each block of Lennar Class A stock you receive will be determined on a block-for-block basis depending on the basis and holding period of the blocks of WCI common stock exchanged for such consideration.

If you receive cash in lieu of a fractional share of Lennar Class A stock, you will be treated as having received such fractional share of Lennar Class A stock pursuant to the initial merger and then as having sold such fractional share of Lennar Class A stock for cash. As a result, you generally will recognize capital gain or loss equal to the difference between the amount of cash received for such fractional share and your basis in your fractional share of Lennar Class A stock as set forth above. Such capital gain or loss generally will be long-term capital gain or loss if, as of the effective date of the initial merger, your holding period for such fractional share (as described above) exceeds one year. Long-term capital gains of individuals are generally eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

If Lennar exercises its right to pay the merger consideration entirely in cash, the mergers will not qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In that case, upon exchanging your WCI common stock for cash, you will recognize gain or loss in an amount equal to the difference between the amount of cash that you receive and your adjusted tax basis in your WCI

 

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common stock. Any such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the initial merger, your holding period for such WCI common stock exceeds one year. Long-term capital gains of individuals are generally eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

Cash received by you pursuant to the initial merger may be subject to backup withholding at the applicable rate (currently 28%) if you fail to provide a valid taxpayer identification number and comply with certain certification procedures, or otherwise establish an exemption from backup withholding. Backup withholding is not an additional tax, but merely an advance payment that may be refunded to the extent that it results in an overpayment of tax, provided the required information is timely furnished to the IRS.

This discussion of certain material U.S. federal income tax considerations is not intended to be, and should not be construed as, tax advice. WCI stockholders are urged to consult their independent tax advisors with respect to the application of U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.

 

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THE MERGER AGREEMENT

This section of this proxy statement/prospectus describes the material provisions of the merger agreement, but does not describe all of the terms of the merger agreement and may not contain all of the information about the merger agreement that is important to you. The following summary is qualified by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement/prospectus and incorporated by reference herein. You are urged to read the full text of the merger agreement because it is the legal document that governs the mergers.

The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement. Factual disclosures about Lennar, WCI or any of their respective subsidiaries or affiliates contained in this proxy statement/prospectus or their respective public reports filed with the SEC may supplement, update or modify the factual disclosures contained in the merger agreement and described in this summary. The representations, warranties and covenants contained in the merger agreement were made only for purposes of the merger agreement, as of a specific date. These representations were made solely for the benefit of the parties to the merger agreement and may be subject to important qualifications and limitations agreed upon or understood by the contracting parties, including being qualified by confidential disclosures made for the purpose of allocating risk between parties to the merger agreement rather than the purpose of establishing these matters as facts, and may apply standards of materiality in ways that are different from those generally applicable to reports filed with the SEC or from what may be viewed as material by investors. The representations and warranties in the merger agreement do not survive completion of the mergers. For the foregoing reasons, one should not read the representations and warranties or any description thereof as characterizations of the actual state of facts or condition of Lennar or WCI, which are disclosed in the other information provided elsewhere in this proxy statement/prospectus or incorporated by reference herein.

Terms of the Mergers

The merger agreement provides that, upon the terms and subject to the conditions of the merger agreement, and in accordance with the DGCL, (i) at the effective time of the initial merger, Corporate Sub will merge with and into WCI, with WCI continuing as the surviving company and a direct, wholly owned subsidiary of Lennar, and (ii) immediately thereafter WCI, as the surviving company in the initial merger, will merge with and into LLC Sub in the subsequent merger, with LLC Sub continuing as the surviving company and a direct, wholly owned subsidiary of Lennar, unless Lennar has provided a written, irrevocable notice to WCI that the merger consideration will consist solely of cash and elects that there will not be a subsequent merger. At the effective time of the initial merger, each share of WCI common stock issued and outstanding immediately prior to the effective time of the initial merger, other than shares held by WCI, Lennar, Corporate Sub or LLC Sub and shares held by WCI stockholders who demand appraisal rights in accordance with, and otherwise comply with, Section 262 of the DGCL, will be automatically converted into the right to receive the merger consideration, valued at $23.50 per share of WCI common stock, which will consist of (a) cash consideration of at least $11.75, plus (b) a number of shares of Lennar Class A stock equal to (i) $23.50 minus the amount of the cash consideration, divided by (ii) the ten day VWAP. Lennar may elect to pay more than $11.75 per share in cash, including paying the entire $23.50 in cash, and if the share consideration would be less than 41% of the entire merger consideration, as calculated for tax purposes, Lennar will be required to pay the entire merger consideration in cash. Any shares of WCI common stock owned directly or indirectly by WCI, Lennar, Corporate Sub or LLC Sub as of immediately prior to the effective time of the initial merger (other than those held in a fiduciary capacity) will be cancelled and will receive no consideration.

Lennar will not issue fractional shares of new common stock in the initial merger. Instead, all fractional shares that a single holder of WCI common stock would be entitled to receive shall be aggregated, and any holder of WCI common stock who would be entitled to receive a fractional share will receive cash equal to the market value of a share of Lennar Class A stock times that fraction.

Exchange and Payment Procedures

Promptly after the effective time of the initial merger, if you are a WCI stockholder, Lennar’s distribution agent will mail (or, if you have consented under Section 232 of the DGCL, will arrange for the electronic delivery of) a letter of transmittal and instructions to you for use in effecting the surrender of your WCI common stock (including any stock certificates if you hold shares in certificated form) in exchange for the merger consideration. When you surrender the certificates for cancellation together with letters of transmittal and any other documents (including in respect of book-entry shares), you will be entitled to receive the merger consideration, including cash payable in lieu of any fractional new shares of Lennar Class A stock.

 

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PLEASE DO NOT SUBMIT YOUR WCI STOCK CERTIFICATES FOR EXCHANGE UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND LETTER OF TRANSMITTAL FROM THE DISTRIBUTION AGENT.

If you hold WCI stock certificates, you will not be entitled to receive any dividends or other distributions on Lennar Class A stock until the initial merger is completed and you have surrendered your WCI stock certificates, together with validly completed letters of transmittal and other required documents, in exchange for Lennar Class A stock. If Lennar effects any dividend or other distribution on the Lennar Class A stock with a record date occurring after the time the initial merger is completed and a payment date before the date you surrender your WCI stock certificates, you will receive the dividend or distribution, without interest, with respect to the whole shares of Lennar Class A stock issued to you after you surrender your WCI stock certificates, together with validly completed letters of transmittal and other required documents, and the shares of Lennar Class A stock are issued in exchange. If Lennar effects any dividend or other distribution on the Lennar Class A stock with a record date after the time the initial merger is completed and a payment date after the date you surrender your WCI stock certificates, you will receive the dividend or distribution, without interest, on that payment date with respect to the whole shares of Lennar Class A stock issued to you. The distribution agent may deduct and withhold amounts required under federal, state or local tax law.

Treatment of WCI Equity Awards

Long Term Incentive Plan Awards. At the effective time of the initial merger, each outstanding LTIP Award that is outstanding at that time will become fully vested and will become the right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) the cash consideration paid to WCI stockholders plus (y) the market value, based on the ten day VWAP, of the share consideration paid to WCI stockholders, multiplied by (ii) the number of shares of WCI common stock that would have been issuable upon settlement of such LTIP Award.

Restricted Shares. At the effective time of the initial merger, each share of WCI common stock granted pursuant to WCI’s 2013 Incentive Award Plan that is outstanding at that time and is unvested or otherwise subject to possible forfeiture, will become vested immediately prior to that time and will be cancelled and become a right to receive an amount in cash (with certain limited exceptions) equal to the greater of (A) $23.50 and (B)(x) the cash consideration paid to WCI stockholders plus (y) the market value, based on the ten day VWAP, of the share consideration paid to WCI stockholders.

Performance Share Units. Each performance share unit award granted pursuant to WCI’s 2013 Incentive Award Plan that is outstanding immediately prior to the effective time of the initial merger will be terminated immediately prior to the effective time of the initial merger in exchange for a right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) the cash consideration paid to WCI stockholders plus (y) the market value, based on the ten day VWAP, of the share consideration paid to WCI stockholders, multiplied by (ii) the number of shares of WCI common stock that would otherwise have become issuable thereafter pursuant to the terms of the applicable performance share unit award agreement had such award vested and been settled in shares.

Restricted Share Units. Each restricted share unit award granted pursuant to WCI’s 2013 Incentive Award Plan that is outstanding immediately prior to the effective time of the initial merger will be terminated in exchange for a right to receive an amount in cash equal to (i) the greater of (A) $23.50 and (B)(x) the cash consideration paid to WCI stockholders plus (y) the market value, based on the ten day VWAP, of the share consideration paid to WCI stockholders, multiplied by (ii) the number of restricted share units subject to such award.

Completion of the Mergers

Unless Lennar and WCI agree otherwise, the closing of the mergers shall take place on the day the merger proposal is approved by WCI stockholders or the following business day, subject to the satisfaction or waiver of the closing conditions described under “—Conditions to Completion of the Mergers” below (other than those conditions that by their nature are to be satisfied at closing, but subject to the satisfaction or waiver of those conditions, and, in the event the merger consideration is paid entirely in cash, those that will not apply as a result). The mergers will become effective at the time the applicable certificates of merger are filed with the Secretary of State of the State of Delaware or at such later time as may be specified therein.

 

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Conditions to Completion of the Mergers

Each party’s obligation to consummate the mergers is conditioned upon the satisfaction (or waiver by such party) at or prior to the closing of the initial merger of each of the following:

 

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approval of the merger proposal by vote of the holders of a majority of outstanding shares of WCI common stock;

 

•

if filings under the HSR Act are required, the termination or expiration of any waiting period (and any extension thereof) under the HSR Act applicable to the initial merger or any other transactions contemplated by the merger agreement;

 

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absence of any law, order, judgment, injunction or any other restrict or prohibition by any governmental entity prohibiting consummation of the initial merger;

 

•

(i) the truth and correctness in all material respects of the representations and warranties of the other party with respect to certain fundamental matters (organization, required power and authority, certain capitalization matters, sufficiency of funds (in the case of Lennar) and absence of undisclosed broker’s fees (in the case of WCI) as of the closing of the mergers, as though made on such date (except to the extent expressly made as of a specified date or period, in which case as of such date or period)), and (ii) the truth and correctness of all other representations and warranties of the other party as of the closing of the mergers, as though made on such date (except to the extent expressly made as of a specified date or period, in which case as of such date or period), except where the failure to be so true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth in any individual such representation or warranty) would not have, in the aggregate, in the case of WCI, a material adverse effect on WCI, or, in the case of Lennar, a material adverse effect on Lennar’s, LLC Sub’s or Corporate Sub’s ability to consummate the transactions contemplated by the merger agreement;

 

•

receipt of a certificate signed by an officer of the other party, dated as of the closing date, certifying that the preceding condition has been satisfied;

 

•

fulfillment, in all material respects, of all obligations of the other party required to be fulfilled by such other party on or before the closing date; and

 

•

unless the merger consideration consists entirely of cash:

 

•

effectiveness of the registration statement of which this proxy statement/prospectus is a part under the Securities Act and no stop order suspending the effectiveness of the registration statement having been issued and no proceedings for that purpose having been initiated or threatened in writing by the SEC;

 

•

approval of the new shares of Lennar Class A stock deliverable to WCI stockholders for listing on the NYSE, subject to official notice of issuance;

 

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receipt of a legal opinion of WCI’s counsel, to the effect that the mergers will constitute a “reorganization” within the meaning of Section 368(a) of the Code; and

 

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delivery by Lennar of a certificate signed by an executive officer of Lennar certifying as to certain representations related to the foregoing legal opinion.

 

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Representations and Warranties

Each of Lennar, LLC Sub and Corporate Sub, on the one hand, and WCI, on the other hand, has made representations and warranties with respect to itself and its subsidiaries regarding, among other things:

 

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organization, standing and corporate power, subsidiaries and qualification;

 

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corporate authority to enter into and (subject to stockholder approval in the case of WCI) perform the merger agreement, enforceability of the merger agreement and approval of the merger agreement by each party’s board of directors;

 

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absence of conflicts with or defaults under organizational documents, other contracts, and applicable laws;

 

•

no consents or approvals necessary, other than the termination or expiration of waiting periods under the HSR Act, if any;

 

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capital structure;

 

•

SEC filings since July 1, 2014, in the case of WCI, and December 1, 2014, in the case of Lennar, including financial statements contained in the filings;

 

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establishment and maintenance of internal controls and procedures;

 

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absence of undisclosed liabilities;

 

•

conduct of the business and absence of certain changes since June 30, 2016, in the case of WCI, and May 31, 2016, in the case of Lennar, except as contemplated by the merger agreement, including that there has been no event, change, development, condition, or occurrence that has had or would reasonably be expected to have a material adverse effect on the party making the representation;

 

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compliance with applicable laws;

 

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the absence of pending or threatened investigations or litigation;

 

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tax matters;

 

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environmental matters;

 

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compliance with anti-money laundering and anti-terrorism statutes;

 

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absence of prohibited payments;

 

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accuracy of the information supplied for inclusion in, and compliance with applicable securities laws by, this proxy statement/prospectus; and

 

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the absence of undisclosed brokers’ fees and expenses.

The merger agreement also contains representations and warranties made only by WCI regarding, among other things:

 

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equity interests in other entities;

 

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certain approvals by the WCI board related to the transactions contemplated by the merger agreement;

 

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validity of permits;

 

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title to real and personal properties;

 

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•

intellectual property and information technology matters;

 

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matters with respect to material contracts;

 

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labor and other employment matters, including benefit plans;

 

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insurance matters;

 

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opinions of financial advisors;

 

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certain franchise agreement matters; and

 

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that neither WCI nor any of its subsidiaries is required to register as an investment company.

Additionally, the merger agreement contains representations and warranties made only by Lennar, LLC Sub and Corporate Sub regarding, among other things:

 

•

the Lennar Class A stock that may be issued in connection with the mergers;

 

•

ownership of, and sole purpose of and lack of business engagement by, LLC Sub and Corporate Sub;

 

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sufficiency of funds to consummate the mergers; and

 

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neither Lennar nor any of its “affiliates” or “associates,” being or in the past three years having been an “interested stockholder” of WCI, as defined in Article TENTH B of WCI’s certificate of incorporation.

Many of the representations and warranties in the merger agreement are qualified by a “materiality” or “material adverse effect” standard (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct, individually or in the aggregate, would be material or would reasonably be expected to have a material adverse effect). For purposes of the merger agreement, a “material adverse effect” means, when used with respect to a party to the merger agreement, a material adverse effect upon the consolidated financial position, results of operations or business of such party and its subsidiaries, taken as a whole; provided, however, that the following shall not constitute, either individually or in combination, a “material adverse effect” or be taken into account when determining whether a “material adverse effect” has occurred or would reasonably be expected to occur:

 

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any changes in the economy or financial, credit or capital markets in the United States or in the world in general, including changes in interest or exchange rates;

 

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any changes in the availability or cost of borrowings or other costs of financing in the United States;

 

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any changes affecting the industry or industries in which such party or its subsidiaries conduct their businesses;

 

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changes in GAAP, accounting standards, or in any law applicable to such party or any of its subsidiaries, or any interpretation thereof after the date of the merger agreement;

 

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any changes relating to acts of god, calamities, terrorism, national political or social conditions, including the engagement by any country in hostilities, or the escalation or worsening thereof;

 

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any changes to the extent attributable to the announcement, pendency or consummation of the merger agreement or the transactions contemplated by the merger agreement (including any loss of employees or any loss of, or any disruption in, supplier, licensor, licensee, partner or similar relationships) or resulting from compliance with the terms of the merger agreement;

 

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with respect to WCI, any failure by WCI to meet any internal or third party estimates, projections or forecasts of revenue, earnings or other financial performance for any period ending (or for which revenues, earnings or other financial results are released) on or after the date of the merger agreement (provided that the underlying cause of the failure to meet estimates, projections or forecasts may be considered in determining whether a material adverse effect has occurred to the extent not otherwise excluded by another exception);

 

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•

with respect to WCI, any change, in and of itself, in the trading price or trading volume of WCI common stock on the NYSE;

 

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with respect to either WCI or Lennar, any legal proceeding commenced against WCI or any of its subsidiaries, or Lennar or any of its subsidiaries, arising from or otherwise relating to the mergers or any other transaction contemplated by the merger agreement;

 

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with respect to WCI, any action taken or not taken by WCI or its subsidiaries as expressly permitted or required by the merger agreement or any action taken or not taken with the written consent or at the written direction of Lennar; or

 

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with respect to either WCI or Lennar, any item set forth in WCI’s disclosure letter, or Lennar’s disclosure letter;

except to the extent that the effect of a change described in one or more of the first through fifth bullets above materially disproportionately adversely affects such party and its subsidiaries, taken as a whole, as compared to other companies engaged in similar businesses, and then only to the extent of such disproportionality.

Conduct of Business Prior to Closing

Each of Lennar and WCI has undertaken customary covenants in the merger agreement restricting the conduct of its respective business between the date of the merger agreement and the completion of the initial merger.

In general, each of Lennar and WCI has agreed to, and to cause each of its respective subsidiaries to, use commercially reasonable efforts to (i) operate its business in all material respects in the ordinary course of business consistent with past practice, (ii) maintain all its assets in good repair and condition (except to the extent of reasonable wear and use or of damage by fire or other unavoidable casualty or by any reason outside such party’s or its subsidiaries’ control) and (iii) maintain (and in the case of WCI, take all commercially reasonable steps available to it to maintain) the goodwill of its businesses. In the case of WCI, the impact of any loss of employees to the extent attributable to the announcement, pendency or consummation of the merger agreement or the transactions contemplated thereby will not be a breach of the foregoing requirements. In addition, between the date of the merger agreement and until the earlier of the effective time of the initial merger or the termination of the merger agreement, WCI has agreed, with respect to itself and its subsidiaries, not to, among other things, undertake any of the following (subject in each case to certain exceptions specified in the merger agreement or set forth in WCI’s disclosure letter) without Lennar’s prior written consent (which shall not be unreasonably withheld, delayed or conditioned):

 

•

make any borrowings other than borrowings in the ordinary course of business under working capital lines which are disclosed in the notes to the financial statements included in WCI’s most recent 10-K or the notes to the financial information included in WCI’s most recent 10-Q, in each case as of the date of the merger agreement;

 

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enter into any material contractual commitments involving capital expenditures, loans or advances, and not voluntarily incur any contingent liabilities, except in each case (A) in the ordinary course of business or (B) with respect to any land development, land acquisition or construction contract in the form in which it exists at the date of the merger agreement;

 

•

redeem or purchase any of its stock or declare or pay any dividends, or make any other distributions or repayments of debt to its stockholders (other than payments by subsidiaries of WCI to WCI or to wholly owned subsidiaries of WCI);

 

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make any loans or advances (other than advances in the ordinary course for travel and other normal business expenses) to stockholders, directors, officers or employees;

 

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•

make any material change to its methods of accounting in effect as of the date of the merger agreement, except as required by a change in GAAP (or any interpretation thereof) or in applicable law, or make any change with respect to accounting policies, unless required by GAAP or the SEC;

 

•

purchase, sell, dispose of or encumber any material property or assets, or engage in any material activities or transactions, except (i) purchases or sales in accordance with contracts entered into before the date of the merger agreement as they are in effect on the date of the merger agreement, (ii) purchases of real property for use in its homebuilding business having a purchase price with regard to any single purchase or group of related purchases of less than $15 million or less than $75 million in the aggregate, (iii) bulk land sales having a sale price as to any single sale or group of related sales of less than $5 million, (iv) sales of homes or lots in the ordinary course of business, (v) the exercise of options to purchase real property in the ordinary course of business and (vi) grants of easements and other encumbrances in the ordinary course of business to the extent such easements and encumbrances would not reasonably be expected to materially interfere with the use of the properties for the purposes for which they were acquired or as WCI currently intends to use them;

 

•

become engaged in any lines of business in which it is not actively engaged on the date of the merger agreement or discontinue any line of business in which it is actively engaged on the date of the merger agreement;

 

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(x) enter into or amend any employment, bonus, severance or similar agreements or arrangements that would have constituted a “material employment agreement” if in place on the date of the merger agreement or (y) increase the salaries of any employees, other than through normal annual merit increases or otherwise in connection with any promotion to fill a bona fide vacancy in a position in the aggregate averaging not more than 5% (provided that any promotional increase to an amount not exceeding the salary of the prior employee who vacated the applicable position will not count toward such 5%);

 

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adopt, become a sponsoring employer with regard to, or amend, any defined benefit plan or post-employment health or welfare plan or arrangement (other than as required by law);

 

•

amend its certificate of incorporation or bylaws;

 

•

(i) issue or sell any of its stock or any options, warrants or convertible or exchangeable securities that may entitle holders to acquire its stock, in each case, except in connection with the vesting or settlement of any equity incentive awards outstanding at the date of the merger agreement under the WCI’s equity incentive plans or otherwise, or (ii) split, combine or reclassify its outstanding stock;

 

•

enter into an agreement to modify in any material respect the nature or limits (including retention amounts) of insurance coverage that it or its subsidiaries maintain;

 

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(i) make, change or revoke any material elections under the Code or any state, local or foreign tax laws, (ii) change any annual tax accounting period, (iii) materially amend any tax return relating to a material amount of taxes, (iv) adopt or change an accounting method in respect of taxes except as required by applicable law, (v) consent to any extension or waiver of the limitation period applicable to a tax return relating to a material amount of taxes, (vi) request a tax ruling, (vii) engage in any transaction that will give rise to a material deferred gain or loss, (viii) enter into a tax sharing, tax indemnity or tax allocation agreement (other than as part of arrangements entered into in the ordinary course of business or in connection with transactions not primarily related to taxes), (ix) surrender any right to request a material refund of taxes or (x) settle or otherwise agree to a resolution of any material claim or assessment relating to taxes;

 

•

take any action, or fail to take any action, which action or failure to act prevents or impedes (whether as a direct or indirect consequence), or could reasonably be expected to prevent or impede, the transactions contemplated by the merger agreement from qualifying for the parties’ intended tax treatment;

 

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•

take any action or fail to take any action that would reasonably be expected to prevent or materially delay the consummation of the mergers or the other transactions contemplated by the merger agreement; and

 

•

authorize or enter into any agreement to take any of the actions referred to in the bullets above.

In addition, between the date of the merger agreement and the earlier of the effective time of the initial merger or the termination of the merger agreement, Lennar has agreed, with respect to itself and its subsidiaries, not to, among other things, undertake any of the following (subject in each case to certain exceptions specified in the merger agreement or set forth in Lennar’s disclosure letter) without WCI’s prior written consent (which shall not be unreasonably withheld, delayed or conditioned):

 

•

amend or propose to amend its certificate of incorporation or bylaws (or such equivalent organizational or governing documents of any subsidiary if such amendment would be adverse to Lennar or WCI);

 

•

split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests;

 

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take any action or fail to take any action (including entering into agreements with respect to any acquisitions, mergers, consolidations or business combinations) which would, or would reasonably be expected to: (A) result in the inability to pay the portion of the merger consideration consisting of shares of Lennar Class A stock or (B) restrict, or reasonably be expected to restrict, the ability of the Lennar Class A stockholders who received share consideration in the initial merger to sell any shares of that stock following the effective time of the initial merger;

 

•

take any action or fail to take any action (including entering into any contract, or authorizing, committing or agreeing to enter into any contract), which would, or would reasonably be expected to, impair Lennar’s ability to pay the aggregate cash portion of the merger consideration and any other amounts required to be paid by Lennar, LLC Sub and/or Corporate Sub in connection with the consummation of the mergers or the other transactions contemplated by the merger agreement;

 

•

adopt a plan of complete or partial liquidation or authorize a dissolution, consolidation, recapitalization or bankruptcy reorganization if such transaction would reasonably be expected to prevent or materially delay the consummation of the mergers or the other transactions contemplated by the merger agreement;

 

•

take any action, or fail to take any action, which action or failure to act prevents or impedes (whether as a direct or indirect consequence), or could reasonably be expected to prevent or impede, the transactions contemplated by the merger agreement from qualifying for the parties’ intended tax treatment;

 

•

take any action or fail to take any action that would reasonably be expected to prevent or materially delay the consummation of the mergers or the other transactions contemplated by the merger agreement; or

 

•

authorize or enter into any agreement to take any of the actions referred to in the bullets above.

Transaction Solicitation Period

The merger agreement provides for a transaction solicitation period beginning on the date of the merger agreement and ending on October 26, 2016. During the transaction solicitation period, WCI was permitted, directly or indirectly, including with the assistance of investment bankers, attorneys, accountants and other representatives, to:

 

•

actively seek and take any action to initiate, solicit, encourage or otherwise facilitate (whether publicly or otherwise) any alternative acquisition proposal;

 

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•

enter into and continue any discussions or negotiations relating to, or that may be expected to lead to, an alternative acquisition proposal; and

 

•

provide non-public information about WCI and its subsidiaries to prospective acquirors that entered into a confidentiality agreement with substantially the same terms with respect to confidentiality as those contained in the merger agreement.

If at any time during the transaction solicitation period, the WCI board had received a bona fide, written acquisition proposal from a third party, then, unless the WCI board determined, within three days after receipt of such proposal, that such proposal did not cause the third party to be an “excluded party” (which means a person or group from whom WCI received (during the transaction solicitation period) a written acquisition proposal that the WCI board determined (during the transaction solicitation period), in good faith and after consultation with WCI’s financial advisors, constituted, or would be reasonably expected to result in (if consummated in accordance with its terms), a transaction that would be more favorable to WCI stockholders than the mergers), then WCI was required to inform Lennar about such proposal within three days after WCI received such proposal, including the identity of the third party and a reasonably detailed description of the proposal’s material terms. During the transaction solicitation period, Credit Suisse, on behalf of WCI, contacted 44 entities approved by the WCI board that Credit Suisse had identified as possible alternate acquirors of WCI. Eight of these entities executed confidentiality agreements that made them eligible to receive non-public information of which six accessed WCI’s online data room. However, none of them submitted a proposal to acquire WCI during the transaction solicitation period.

No Solicitation; Notice of Proposals

Following the transaction solicitation period, subject to certain exceptions discussed below and except with respect to any excluded party, WCI must:

 

•

terminate all ongoing discussions with third parties regarding alternative acquisition proposals or otherwise regarding possible acquisition transactions; and

 

•

not authorize or permit its or any of its subsidiaries’ officers, directors, employees, agents or other representatives to initiate, solicit, knowingly encourage or otherwise knowingly facilitate (by making available non-public information or otherwise) any alternative acquisition proposal or any inquiry, proposal or offer with respect to a possible acquisition transaction.

Notwithstanding the above, in connection with any inquiry, proposal or offer with respect to a possible acquisition transaction that WCI receives after the end of the transaction solicitation period despite complying in all material respects with the obligations listed immediately above, WCI, its subsidiaries and their respective representatives may:

 

•

request clarifications from, provide non-public information about WCI and its subsidiaries (subject to an acceptable confidentiality agreement) to and engage in discussions and negotiations with the applicable third party regarding such possible alternative acquisition transaction if the WCI board determines, in good faith after consultation with WCI’s financial advisors and outside counsel, that such possible alternative acquisition transaction constitutes, or would reasonably be expected to result (if consummated in accordance with its terms) in a transaction that would be more favorable to WCI stockholders than the mergers; and

 

•

execute and enter into a binding agreement, on such terms and conditions as the WCI board may determine, with respect to a proposal that the WCI board determines constitutes a superior proposal; provided that such alternative acquisition agreement must expressly provide that WCI may terminate such agreement without cost to WCI, and WCI will not have any obligations or be subject to any restrictions under or as a result of such agreement in the event Lennar agrees to amend the terms and conditions of the merger agreement so that such alternative proposal would cease to constitute a superior proposal.

A “superior proposal” means an alternative acquisition proposal that includes a proposed price and a definitive agreement for WCI and the applicable counterparty to consummate such acquisition proposal that the WCI board determines, in good faith after

 

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consultation with WCI’s financial advisors and outside counsel, constitutes, or would reasonably be expected to result in (if consummated in accordance with its terms), a transaction that would be more favorable to WCI stockholders than the mergers.

Additionally, if at any time after the end of the transaction solicitation period, WCI receives an alternative acquisition proposal, request for non-public information in connection with such a proposal or an indication that a prospective acquirer intends to make such a proposal, then within two business days, WCI must inform Lennar, provide the identity of the third party from which the proposal, request or indication was received, and provide a reasonably detailed description of the material terms of such proposal, request or indication. Further, WCI must thereafter promptly provide Lennar with any additional material information WCI obtains regarding such proposal, request or indication, including information about steps that are taken in response to or in furtherance of the possible acquisition transaction.

Board Recommendation; Fiduciary Out

Subject to the transaction solicitation period, the WCI board must generally recommend that WCI stockholders adopt the merger agreement, and may be asked to reaffirm its recommendation from time to time. However, the WCI board may change its recommendation, which we refer to as a “change of recommendation” in this proxy statement/prospectus, if the WCI board determines, in good faith after consultation with its outside counsel, that the failure to do so would be inconsistent with its fiduciary duties under applicable law. A change of recommendation will not be a basis for WCI to cancel the meeting of stockholders called to vote on the merger proposal or otherwise attempt to prevent WCI stockholders from having an opportunity to vote on the merger proposal, unless such change of recommendation results in a termination of the merger agreement.

The merger agreement permits the WCI board to exercise a fiduciary out and terminate the merger agreement, which we refer to as the “fiduciary out termination right” in this proxy statement/prospectus, prior to the receipt of the approval of WCI stockholders if:

 

•

the WCI board determines that an acquisition proposal or other offer constitutes a superior proposal;

 

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WCI delivers to Lennar, LLC Sub and Corporate Sub written notice at least three business days (or two business days with respect to subsequent notices related to the same competing party) prior to its termination of the merger agreement, which notice must include an alternative acquisition agreement or a final draft of such an agreement with respect to such proposal, must state what the WCI board has determined in good faith to be the value per share of WCI common stock of the consideration WCI stockholders would receive as a result of the superior proposal and must state that the merger agreement will terminate on the date set forth in the notice (which will be no earlier than the day after the applicable notice period) unless Lennar agrees to amend the terms and conditions of the merger agreement such that the alternative proposal is no longer superior;

 

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WCI negotiates with Lennar in good faith during such three or two business day period, as applicable, to the extent Lennar desires to negotiate, regarding the changes to the terms and conditions that would cause the merger agreement to be at least as favorable to WCI stockholders as the alternative acquisition proposal, including describing how the WCI board values the components of the alternative acquisition proposal, how it values the components of the merger consideration, and all other respects in which the WCI board believes the alternative acquisition proposal is or may be more favorable to WCI stockholders than the merger agreement;

 

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Lennar fails to agree by the termination date set forth in the notice to amendments to the merger agreement such that, in the good faith judgment of the WCI board, the mergers would be at least as favorable to WCI stockholders as the alternative acquisition proposal; and

 

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WCI pays the applicable termination fee concurrently with the termination of the merger agreement, as discussed below in the section titled “—Effect of Termination; Termination Fees”.

 

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Reasonable Best Efforts to Obtain Required Stockholder Approval

WCI has agreed to take all action that is necessary in accordance with applicable law and its certificate of incorporation and bylaws to convene a special meeting of its stockholders as soon as practicable after this registration statement becomes effective for the purpose of obtaining the approval of WCI stockholders (and shall, subject to the other provisions of the merger agreement, use commercially reasonable efforts to convene such meeting of stockholders within 35 days after this registration statement becomes effective). Notwithstanding the foregoing, in no event shall WCI be required to convene the meeting of its stockholders earlier than 15 business days after the end of the transaction solicitation period, and WCI may, without the consent of Lennar, adjourn or postpone the meeting of WCI stockholders for up to 30 days (or for such longer period as required by law) if certain conditions are met. Subject to certain conditions, WCI shall use its reasonable best efforts to solicit from its stockholders proxies or votes approving the merger agreement and the transactions contemplated therein.

Agreement to Take Further Action and to Use Reasonable Best Efforts

Each of Lennar, LLC Sub, Corporate Sub and WCI are required (subject to certain conditions) to use their reasonable best efforts to cause all the conditions to the mergers to be fulfilled as promptly as practicable after the end of the transaction solicitation period and consummate the mergers. Without limiting the foregoing sentence, neither Lennar, WCI nor any of their subsidiaries may do anything that would prevent the mergers from qualifying for the parties’ intended tax treatment (to the extent the merger consideration includes shares of Lennar Class A stock).

Lennar and WCI are each required to make as promptly as practicable all filings, if any, required under any antitrust laws (including the HSR Act) with regard to the transactions that are the subject of the merger agreement. If applicable, Lennar and WCI shall each use its best efforts (including providing information to the Federal Trade Commission and the Department of Justice) to cause (a) any waiting periods required by antitrust laws (including the HSR Act) or pursuant to any other antitrust laws to be terminated or to expire as promptly as practicable and (b) any antitrust, competition or other investigations related to the transactions contemplated by the merger agreement to conclude as promptly as practicable, provided that Lennar will not be required, in order to terminate any waiting period or to prevent or resolve any objection by any government entity (including the Federal Trade Commission and the Department of Justice), to agree to dispose of, or hold separate, any business or aspect of a business or otherwise restrict any business activities or agree not to engage in any business activities in the future. In the event any government entity challenges or threatens to challenge the transactions that are the subject of the merger agreement based upon any antitrust laws or other competition laws, Lennar and WCI shall each use its best efforts to defend against that challenge, including engaging in litigation, through all available appeals.

Furthermore, WCI is required to, and must use reasonable best efforts to cause its and its subsidiaries’ officers and employees to, at Lennar’s sole expense, cooperate in all reasonable respects with the efforts of Lennar to arrange any financing that Lennar expects to use after the closing. Lennar must give WCI reasonable opportunity to review and comment upon any materials that include information about WCI or any of its subsidiaries prepared in connection with such financing, and Lennar shall include in such materials comments reasonably proposed by WCI. However, each of Lennar, LLC Sub and Corporate Sub, pursuant to the merger agreement, acknowledged and agreed that the obtainment of financing is not a condition to the closing of the mergers.

Employee Benefits Matters

From the effective time of the initial merger and for a period of no less than one year thereafter, Lennar will provide, or will cause to be provided, to each employee who remains in the active employment of Lennar or the surviving company or any subsidiary thereof, which we refer to as a “continuing employee” in this proxy statement/prospectus, with:

 

•

compensation (including, without limitation, certain cash incentive compensation opportunities and certain equity-based compensation), that is not less favorable than the compensation such employee was receiving as a WCI employee immediately before the effective time of the initial merger; and

 

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employee benefits that:

 

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if the effective time of the initial merger is on or before December 31, 2016, are, (x) on and before December 31, 2016, not less favorable than the employee benefits such employee was receiving as a WCI employee immediately before the effective time of the initial merger, and (y) beginning January 1, 2017, the same as those provided to employees of Lennar or its subsidiaries in South Florida who are performing similar functions; and

 

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if the effective time of the initial merger is on or after January 1, 2017, are, from the effective time of the initial merger until December 31, 2017, at the election of Lennar, either (x) the same as those being provided by WCI immediately prior to the effective time of the initial merger, or (y) the same as those provided by Lennar and its subsidiaries to their similarly-situated employees during such period; and

 

•

in all cases, from the effective time of the initial merger through December 31, 2017, the vacation and other paid time off policies applicable to a continuing employee shall be no less favorable than those applicable to a continuing employees immediately prior to the effective time of the initial merger.

Effective as of the effective time of the initial merger and thereafter, Lennar shall, or shall cause the surviving company to:

 

•

provide that periods of employment with WCI or any of its current or former affiliates or any predecessor of WCI shall be taken into account for all purposes under all employee benefit plans maintained by Lennar or any of its subsidiaries for the benefit of the continuing employees, including without limitation vacation or other paid-time-off plans or arrangements, 401(k), pension or other retirement plans and any severance or health or welfare plans (other than for purposes of determining any accrued benefit under any defined benefit pension plan or as would result in a duplication of benefits);

 

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ensure that no eligibility waiting periods, actively-at-work requirements or pre-existing condition limitations or exclusions shall apply with respect to the continuing employees under applicable Lennar benefit plans (except to the extent applicable under WCI benefit plans immediately prior to the effective time of the initial merger);

 

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waive any and all evidence of insurability requirements with respect to continuing employees to the extent such evidence of insurability requirements were not applicable to the continuing employees under the WCI benefit plans immediately prior to the effective time of the initial merger; and

 

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credit each continuing employee with all deductible payments, out-of-pocket or other co-payments paid by such employee under WCI benefit plans prior to the effective time of the initial merger during the year in which the mergers occur for the purpose of determining the extent to which any such employee has satisfied his or her deductible and whether he or she has reached the out-of-pocket maximum under any Lennar benefit plan for such year.

The mergers will not affect any continuing employee’s accrual of, or right to use, in accordance with WCI policy as in effect immediately prior to the effective time of the initial merger, any personal, sick, vacation or other paid-time-off accrued but unused by such continuing employee immediately prior to the effective time of the initial merger, except to the extent of accruals relating to periods after December 31, 2017 (which will be subject to Lennar’s policies and practices).

Other Covenants and Agreements

The merger agreement contains additional agreements relating to, among other matters:

Access to Information; Confidentiality

Until the effective time of the initial merger or termination of the merger agreement, WCI will, and will cause each of its subsidiaries to (in each case with certain exceptions), give representatives of Lennar, LLC Sub and Corporate Sub, or of any potential lenders or other sources of financing to Lennar, LLC Sub or Corporate Sub for financing to be used by Lennar and its subsidiaries after the

 

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mergers, full access during normal business hours to all of their respective properties, books and records and to personnel who are knowledgeable about the various aspects of the business of WCI and its subsidiaries. Until the closing, Lennar, LLC Sub and Corporate Sub each will, and will cause their representatives to (in each case with certain exceptions), hold all information they receive as a result of their access to the properties, books, records and personnel of WCI or its subsidiaries in confidence. If the merger agreement is terminated before the effective time of the initial merger, Lennar, LLC Sub and Corporate Sub each will, at the request of WCI, deliver to WCI all documents and other material obtained by Lennar or either of LLC Sub or Corporate Sub from WCI or a subsidiary in connection with the transactions which are the subject of the merger agreement or evidence that such material has been destroyed by Lennar, LLC Sub or Corporate Sub.

Indemnification and Insurance

Pursuant to the merger agreement, Lennar, LLC Sub and Corporate Sub have agreed that all rights of indemnification, advancement of expenses, exculpation and limitation of liabilities existing in favor of the current or former directors, officers and employees of WCI and its subsidiaries and each such person who served at the request of WCI or any of its subsidiaries as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise as provided in WCI’s certificate of incorporation and bylaws or similar organizational documents of any subsidiary of WCI or under any indemnification, employment or other similar agreements between any indemnified party and WCI or any subsidiary of WCI, in each case as in effect on the date of the merger agreement with respect to matters occurring prior to the effective time of the initial merger, shall survive the mergers and continue in full force and effect in accordance with their respective terms.

Pursuant to the merger agreement, Lennar also has guaranteed the indemnification and expense advancement obligations of the surviving company of the mergers and its subsidiaries under those provisions of WCI’s certificate of incorporation or bylaws. Lennar will, or will cause the surviving company of the mergers to, maintain in effect for not less than six years after the effective time of the initial merger, with respect to occurrences prior to the effective time of the initial merger, WCI’s policies of directors’ and officers’ liability insurance which are in effect on the date of the merger agreement and are set forth in WCI’s disclosure letter (notwithstanding any provisions of those policies that they will terminate as a result of the mergers), or substantially similar insurance, to the extent that insurance is available at an annual cost not exceeding 300% of the annual cost of the policies of directors and officers liability insurance which are in effect at the date of the merger agreement. To the extent that insurance is not available at an annual cost that will not exceed that amount, Lennar will, or will cause the surviving company of the mergers to, maintain in effect for that period the maximum amount of such insurance coverage that can be obtained for that maximum annual cost.

Certain Tax Matters

Unless Lennar notifies WCI that the merger consideration will consist solely of cash consideration, the parties to the merger agreement have agreed that the merger agreement will constitute a “plan of reorganization” within the meaning of Treasury Regulations Section 1.368-2(g). The parties have agreed not to take or knowingly fail to take (or cause any other person to take or knowingly fail to take) any action, which action or failure to act could reasonably be expected to prevent or impede the ability of Latham & Watkins LLP to deliver an opinion that the initial merger and the subsequent merger, considered together, will constitute a “reorganization” within the meaning of Section 368(a) of the Code. WCI and Lennar have agreed to use their respective best efforts to deliver to Latham & Watkins LLP a certificate signed by an executive officer certifying certain representations related to the opinion. WCI has agreed to use its reasonable best efforts to cause Latham & Watkins LLP to provide the opinion.

Press Releases

WCI and Lennar have agreed to consult with each other before issuing any press releases or otherwise making any public statements with respect to the merger agreement, the mergers and the transactions contemplated by the merger agreement, provided that any party or any affiliate of any party may make any statement or announcement when and as required by law or by the rules of any securities exchange or securities quotation or trading system on which securities of that party or an affiliate are listed, quoted or traded. Notwithstanding the foregoing, in connection with any action by WCI or the WCI board related to a change of recommendation or the transaction solicitation period and permitted by the merger agreement, WCI will not be required to consult with Lennar, LLC Sub or Corporate Sub prior to issuing any press release or otherwise making any public announcements with respect to such actions and the reasons for such actions.

 

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Communications to WCI Employees

WCI has agreed to provide Lennar reasonable opportunity to review and comment on the form of any written statements to WCI employees and its subsidiaries informing them about the mergers prior to any distribution of such statements.

Defense Against Litigation

WCI has agreed to promptly advise Lennar of any litigation commenced after the date of the merger agreement against WCI or any of its directors (in their capacity as such) by any WCI stockholder (on their own behalf or on behalf of WCI) relating to the merger agreement or the transactions contemplated thereby, and has agreed to keep Lennar reasonably informed regarding any such litigation. WCI has also agreed to give Lennar the opportunity to consult with WCI regarding the defense or settlement of any such litigation and has agreed to consider Lennar’s views with respect to such litigation or settlement. Lennar has agreed to promptly advise WCI of any litigation commenced after the date of the merger agreement against Lennar, its affiliates or any of its directors (in their capacity as such) in connection with the merger agreement or the transactions contemplated thereby.

Termination of the Merger Agreement

The merger agreement may be terminated prior to the closing of the initial merger, whether before or after approval of the merger proposal by WCI stockholders is obtained (except as otherwise provided below), as follows:

 

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by the mutual written consent of Lennar and WCI;

 

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by either Lennar or WCI (provided that such party’s breach is not the primary cause of such condition):

 

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if the closing date does not occur on or before the outside date; provided, however, that if certain conditions have not been satisfied or duly waived by the fifth business day prior to the outside date, WCI may, by written notice to Lennar, extend the outside date by two additional months until May 22, 2017; provided, further, that if on May 22, 2017, certain conditions have not been satisfied or duly waived, WCI may, by written notice to Lennar, extend the outside date by an additional ten months until March 22, 2018; or

 

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if any order of any governmental entity having competent jurisdiction is entered permanently enjoining WCI, Lennar, LLC Sub or Corporate Sub from consummating the mergers and such order has become final and non-appealable;

 

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by WCI:

 

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if either Lennar, LLC Sub or Corporate Sub has breached any of its representations or warranties in the merger agreement in a way that the related condition to closing would not be satisfied, and this breach is either incurable or not cured within 45 business days after Lennar’s receipt of written notice of such breach; provided that WCI will not have the right terminate on this basis if, at the time of such termination, WCI is in breach of any of its representations, warranties, covenants or agreements under the merger agreement that would result in a failure of any condition to Lennar’s, LLC Sub’s or Corporate Sub’s obligations to effect the mergers;

 

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if the WCI board exercises its fiduciary out termination right pursuant to the terms of the merger agreement, as discussed above in the section titled “—Board Recommendation; Fiduciary Out”; or

 

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if all the conditions to Lennar’s, LLC Sub’s and Corporate Sub’s obligations to effect the mergers have been satisfied, and Lennar, LLC Sub and Corporate Sub have failed to consummate the initial merger by the time the closing should have occurred pursuant to the merger agreement; or

 

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by Lennar:

 

•

if WCI has breached any of its representations or warranties in the merger agreement in a way that the related condition to closing would not be satisfied, and this breach is either incurable or not cured within 45 business days after WCI’s receipt of written notice of such breach; provided that Lennar will not have the right terminate on this basis if, at the time of such termination, Lennar is in breach of any of its representations, warranties, covenants or agreements under the merger agreement that would result in a failure of any condition to WCI’s obligations to effect the initial merger; or

 

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if, prior to approval of the merger proposal by WCI stockholders, (i) the WCI board effects, or there is a public statement that the WCI board intends to effect (which the WCI board does not deny in a filing with the SEC within three business days following a request by Lennar to do so), a change of recommendation, other than in either case in connection with WCI’s fiduciary out termination right, or (ii) in connection with a tender or exchange offer by a third party for 15% or more of WCI’s stock, (x) the WCI board (or any committee thereof) recommends that WCI stockholders tender into such offer or (y) WCI does not file with the SEC a statement within 10 business days that includes a recommendation that WCI stockholders do not tender into the offer.

Effect of Termination; Termination Fees

If the merger agreement is validly terminated, then, with certain exceptions, the merger agreement will be null and void and none of the parties will have any further rights or obligations thereunder. However, unless the merger agreement is terminated in a manner pursuant to which either the termination fee or the excluded party termination fee is payable (as discussed below), then nothing shall relieve either party of liability for any breach of the merger agreement that occurs before the merger agreement is terminated.

The merger agreement requires WCI to pay Lennar under some circumstances a termination fee of $22.5 million (which would have been $11.25 million if the termination had been in order to enable WCI to enter into a transaction that was the subject of an alternative acquisition proposal received during the transaction solicitation period). The termination fee is payable under the circumstances described below:

 

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the termination fee is payable if:

 

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WCI terminates the merger agreement as a result of a superior proposal received from a third party that is not an excluded party;

 

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Lennar terminates the merger agreement in connection with the WCI board effecting a change in recommendation; or

 

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Lennar terminates the merger agreement in connection with the WCI board recommending that WCI stockholders tender their WCI common stock, or failing to recommend that WCI stockholders not tender their WCI common stock, in response to a tender or exchange offer by a third party;

 

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the excluded party termination fee would have been payable if:

 

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WCI had terminated the merger agreement as a result of a superior proposal received from an excluded party; or

 

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Lennar had terminated the merger agreement in connection with the WCI board recommending that WCI stockholders tender their WCI common stock, or failing to recommend that WCI stockholders not tender their WCI common stock, in response to a tender or exchange offer by an excluded party.

Amendment and Waiver

Amendment. To the extent permitted by applicable law, at any time prior to the effective time of the initial merger (whether before or after receipt of the approval of WCI stockholders), the merger agreement may be amended by the parties by action taken by or on behalf of their respective boards of directors and by a document in writing signed by each of WCI, Lennar, LLC Sub and Corporate Sub; provided, however, that following receipt of the approval of WCI stockholders, (a) there will be no amendment that decreases the merger consideration and there shall be no amendment to the indemnification and insurance provisions of the merger agreement and (b) no amendment that requires further approval by WCI stockholders may be made without such stockholder approval.

Waiver. At any time prior to the effective time of the initial merger, the parties may, to the extent permitted by applicable law, (i) extend the time for the performance of any of the obligations or other acts of the other parties, (ii) waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant thereto, or (iii) waive compliance with any of the agreements or conditions contained in the merger agreement; provided, however, that after receipt of the approval of WCI stockholders, no extension or waiver that, by law, requires further approval by such stockholders may be made without the approval of such stockholders. Any agreement on the part of any party to any such extension or waiver is valid only if set forth in a written instrument signed by such party. The failure or delay of any party to assert any of its rights under the merger agreement or otherwise shall not constitute a waiver of those rights, nor shall any single or partial exercise of any right under the merger agreement preclude any other or further exercise of any rights thereunder.

Assignment

Neither the merger agreement nor any of the rights, interests or obligations of any party thereunder may be assigned (by operation of law or otherwise), except that either LLC Sub or Corporate Sub may assign its rights under the merger agreement to an entity that is a direct, wholly owned subsidiary of Lennar and, as to an assignment by LLC Sub, to an entity that is treated as disregarded and separate from Lennar for U.S. federal income tax purposes (provided that such assignment by either LLC Sub or Corporate Sub shall not impede or delay the consummation of the transactions contemplated by the merger agreement, including the mergers, or otherwise materially adversely affect the rights of WCI stockholders under the merger agreement). No assignment by any party will relieve such party of any of its obligations under the merger agreement. Subject to the foregoing, the merger agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Specific Performance

The parties to the merger agreement have acknowledged that money damages would not be an adequate remedy if WCI, Lennar, LLC Sub or Corporate Sub failed to perform in any material respect any of their obligations under the merger agreement in accordance with the terms thereof, and accordingly they have agreed that in addition to any other remedy to which a party may be entitled at law or in equity, any party will be entitled to obtain an order compelling specific performance of another party’s obligations under the merger agreement, without any requirement that it post a bond, and the parties agree that if any proceeding is brought in equity to compel performance of any provision of the merger agreement, no party will raise the defense that there is an adequate remedy at law. Except as otherwise provided in the merger agreement, no remedy will be exclusive of any other remedy to which a party may be entitled thereunder, or by law or equity, and the remedies available to a party will be cumulative.

Governing Law

The merger agreement is governed by, and construed under, the laws of the State of Delaware.

 

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INFORMATION ABOUT LENNAR

Business

The following is a brief description of the business activities conducted by Lennar. More detailed information is contained in Lennar’s Annual Report on Form 10-K for the year ended November 30, 2015 and other documents that are incorporated by reference into this proxy statement/prospectus, and WCI stockholders are urged to refer to those documents for additional information about Lennar. See “Where You Can Find More Information” beginning on page 122.

Lennar is one of the nation’s largest homebuilders, a provider of real estate related financial services, a commercial real estate, investment management and finance company through its Rialto segment and a developer of multifamily rental properties in select U.S. markets primarily through unconsolidated entities.

Lennar’s homebuilding operations are the most substantial part of its business, comprising $8.5 billion in revenues, or approximately 89% of consolidated revenues in fiscal 2015, and $6.7 billion, or approximately 89% of consolidated revenues, in the first nine months of fiscal 2016. Lennar currently groups its homebuilding activities into four reportable segments, which it refers to as Homebuilding East, Homebuilding Central, Homebuilding West and Homebuilding Houston, based primarily upon similar economic characteristics, geography and product type. It groups information about its homebuilding activities in states in which its homebuilding activities are not economically similar to those in other states in the same geographic area under “Homebuilding Other.” As of August 31, 2016, Lennar’s reportable homebuilding segments and Homebuilding Other had operations located in:

East: Florida, Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia

Central: Arizona, Colorado and Texas (other than Houston)

West: California and Nevada

Houston: Houston, Texas

Other: Illinois, Minnesota, Oregon, Tennessee and Washington

Lennar’s other reportable segments are Lennar Financial Services, Rialto and Lennar Multifamily.

Lennar’s quarterly reports on Form 10-Q filed for the quarters ended February 29, 2016, May 31, 2016 and August 31, 2016, which are incorporated by reference into this proxy statement/prospectus, include reclassifications of prior year segment information as Lennar in its first quarter of fiscal 2016 changed its reportable segments due to a change in management structure. These reclassifications had no impact on Lennar’s condensed consolidated financial statements.

Homebuilding Operations

Lennar’s homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which it has investments. It primarily sells single-family attached and detached homes in communities targeted to first-time, move-up and active adult homebuyers. It operates primarily under the Lennar brand name.

Lennar is involved in all phases of planning and building in its residential communities, including land acquisition, site planning, preparation and improvement of land and design, construction and marketing of homes. It uses independent subcontractors for most aspects of home construction. At August 31, 2016, it was actively building and marketing homes in 694 communities, including 3 communities being constructed by unconsolidated joint ventures.

Lennar generally supervises and controls the development of land and the design and building of its residential communities with a relatively small labor force. It hires subcontractors for site improvements and virtually all of th