PLAN OF CONVERSION
Exhibit 2.1
PLAN OF CONVERSION
This Plan of Conversion (this “Plan of Conversion”) of The New Home Company LLC, a Delaware limited liability company (the “Company”), is made and entered into effective as of [—], 2013 in accordance with the terms of the Company’s Limited Liability Company Operating Agreement, dated as of August 18, 2010, as amended and supplemented as of the date hereof (the “LLC Agreement”), the Delaware Limited Liability Company Act and the Delaware General Corporation Law. Capitalized terms used but not otherwise defined in this Plan of Conversion have the meanings ascribed to such terms in the LLC Agreement.
RECITALS
A. The Company was formed under the name The New Home Company LLC on June 25, 2009 by the filing of a certificate of formation with the Secretary of State of the State of Delaware. Under the terms of the LLC Agreement, the Company is managed by its board of managers (the “Board”).
B. A conversion of a Delaware limited liability company into a Delaware corporation may be made under Title 8, Section 265 of the Delaware General Corporation Law and Title 6, Section 18-216 of the Delaware Limited Liability Company Act.
C. The LLC Agreement provides in part that the Board has the power and authority to take any action of any kind and to do anything and everything it deems necessary or appropriate in accordance with the provisions of the LLC Agreement.
D. The Board has unanimously approved the conversion of the Company into a Delaware corporation (the “Conversion”), the terms of this Plan of Conversion and, following the Conversion, the initial public offering (the “IPO”) of the shares of Common Stock (as defined below).
NOW, THEREFORE, the Company does hereby adopt this Plan of Conversion to effectuate the Conversion as follows:
1. Terms and Conditions of Conversion.
(a) The name of the converting entity is The New Home Company LLC, and the name of the converted entity is The New Home Company Inc. (the “Corporation”).
(b) The Conversion shall become effective at the time of the filing of the Certificate of Conversion (the “Effective Time”) with the Secretary of State of the State of Delaware, in substantially the form attached hereto as Exhibit A.
(c) At the Effective Time, the Company shall continue its existence in the organizational form of a Delaware corporation. All of the rights, privileges and powers of the Company and all property and all debts due to the Company, as well as all other things and causes of action belonging to the Company, shall remain vested in the Corporation and shall be the property of the Corporation. All actions and resolutions of the Board and the Members, as
applicable, taken or adopted from the inception of the Company prior to the Effective Time shall continue in full force and effect as if the Corporation’s Board of Directors and the stockholders, respectively, had taken such actions and adopted such resolutions. All rights of creditors and all liens upon any property of the Company shall be preserved unimpaired, and all debts, liabilities and duties of the Company shall remain attached to the Corporation and may be enforced against the Corporation to the same extent as if said debts, liabilities and duties had originally been incurred or contracted by the Corporation in its capacity as a Delaware corporation.
(d) At the Effective Time, all outstanding interests of the Company shall be automatically converted into shares of common stock of the Corporation, par value $0.01 (the “Common Stock”), as provided in Section 3 below, with such shares of Common Stock having the respective rights, preferences and privileges set forth in the Initial Certificate of Incorporation and, upon its subsequent filing, the Restated Certificate of Incorporation (as each term is defined below).
(e) At the Effective Time, the LLC Agreement shall be terminated and of no further force or effect, and no party shall have any further rights, duties or obligations pursuant to the LLC Agreement, except that Section 4.4 of the LLC Agreement and the Supplement to Amended and Restated Limited Liability Company Agreement , dated June 13, 2013 shall survive such termination. Notwithstanding the foregoing, the termination of the LLC Agreement shall not relieve any party thereto from any liability arising in connection with any breach by such party of the LLC Agreement.
2. Certificate of Incorporation; Directors. At the Effective Time, an initial Certificate of Incorporation of the Corporation shall be filed with the Secretary of State of the State of Delaware in substantially in the form attached hereto as Exhibit B (the “Initial Certificate of Incorporation”). Pursuant to an Action of the Sole Incorporator substantially in the form attached hereto as Exhibit C, which shall be executed immediately following the filing of the Initial Certificate of Incorporation, the initial directors of the Corporation shall be elected. Thereafter immediately following the filing of the Initial Certificate of Incorporation, the initial directors shall ratify and approve the bylaws of the Corporation substantially in the form attached hereto as Exhibit D, and shall authorize and approve the Amended and Restated Certificate of Incorporation of the Corporation substantially in the form attached hereto as Exhibit E (the “Restated Certificate of Incorporation”), and shall recommend that the stockholders of the Corporation approve the Restated Certificate of Incorporation. Upon obtaining the foregoing stockholder approval, the Restated Certificate of Incorporation shall be filed with the Secretary of State of the State of Delaware.
3. Manner and Basis of Converting Members’ Capital in the Company.
(a) At the Effective Time, the Members’ capital in the Company immediately prior to the Effective Time shall be converted automatically, without any action on the part of the Members, into validly issued, fully paid and non-assessable shares of the Corporation’s Common Stock. Subject to the Management Transfer (as defined below) required pursuant to Section 3(b) below, the initial allocation of such shares of Common Stock among the Members shall be as set forth on Exhibit F, and the Members confirm and agree to such initial allocation.
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(b) Pursuant to the LLC Agreement, following the Conversion and the pricing of the IPO, if the Allocated Value (as defined below) to each of IHP Capital Partners VI, LLC, Watt/TNHC LLC and TCN/TNHC LP (each an “External Member” and collectively, the “External Members”) does not meet the Allocated Value requirements set forth below, TNHC Partners shall, at or prior to the closing of the IPO, transfer shares of Common Stock (the “Management Transfer”) it received pursuant to the Conversion to each of the External Members in accordance with the calculations set forth below:
(i) If the Allocated Value is less than $27,500,000, such number of shares of Common Stock that is necessary so that the Allocated Value after the Management Transfer is increased by 50% of the difference between the Allocated Value prior to the Management Transfer and $27,500,000; and
(ii) If the Allocated Value immediately after the Management Transfer effected in accordance with Section 3(b)(i) does not equal or exceed $25,000,000, such number of shares in addition to the shares of Common Stock transferred in accordance with Section 3(b)(i) as is necessary for the Allocated Value to equal $25,000,000 after the transfers in accordance with Section 3(b)(i) and this Section 3(b)(ii).
For the purpose of this Section 3(b), “Allocated Value” means the value of the shares of Common Stock received by each of the External Members in the Conversion, calculated by multiplying the total number of shares of Common Stock received by such External Member in the Conversion (excluding the value of the shares of Common Stock received by the External Members associated with the capital raise related to the Fourth Amendment) by the price to the public of the shares of Common Stock sold in the IPO.
(c) Any shares of Common Stock issued in exchange for the Members’ capital that, immediately prior to the Effective Time, were unvested or were subject to a repurchase option, risk of forfeiture or other condition pursuant to the terms of the LLC Agreement, an employment agreement or any other applicable agreement of the Company shall be subject to the vesting requirements, repurchase options, risks of forfeiture or other conditions that may be set forth in a new or amended employment agreement or other applicable agreement between the Corporation and the holder receiving such shares of Common Stock, and the certificate representing such shares of Common Stock, if any, may accordingly be marked with appropriate legends in the discretion of the Corporation.
(d) No fractional shares of Common Stock will be issued in connection with the Conversion. Except as provided herein, no other assets of the Corporation will be distributed to Members in connection with the Conversion and the IPO.
(e) The shares of Common Stock into which the Members’ capital shall be converted at the Effective Time have not been registered under the Securities Act or the securities laws of any state and may not be transferred, pledged or hypothecated except as permitted under the Securities Act and applicable state securities laws pursuant to registration or exemption therefrom; any certificates evidencing the Common Stock, if any, or any other securities issued in respect of the Common Stock upon any split, dividend, recapitalization, merger, consolidation or similar event, shall bear any legend required by the Corporation,
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required under applicable U.S. federal and state securities laws or called for by any agreement between the Corporation and any stockholder.
4. Registration Rights Agreement. Each person that executes a counterpart signature page to the Registration Rights Agreement dated as of the Effective Time, substantially in the form attached hereto as Exhibit G (the “Registration Rights Agreement”), shall hold certain shelf, demand and piggyback registration rights set forth in the Registration Rights Agreement with respect to the Common Stock such person receives in connection with the Conversion.
5. Investor Rights Agreement. Each person that executes a counterpart signature page to the Investor Rights Agreement dated as of the Effective Time, substantially in the form attached hereto as Exhibit H (the “Investor Rights Agreement”), shall hold certain rights set forth in the Investor Rights Agreement with respect to the Common Stock such person receives in connection with the Conversion.
6. U.S. Federal Income Tax Consequences. The Conversion has been structured to be treated, for U.S. federal income tax purposes, as if the Company transferred its assets to the Corporation for shares of the Corporation’s Common Stock pursuant to an exchange described in Section 351 of the Internal Revenue Code of 1986, as amended, followed by a distribution of the shares of the Corporation’s Common Stock to the Members in liquidation of the Company, as described in Rev. Rul. 2004-59.
7. Amendment or Termination. This Plan of Conversion may be amended or terminated by the Company and the Conversion may be abandoned at any time prior to the Effective Time, notwithstanding any prior approval of this Plan of Conversion by the Members.
8. Counterparts. This Plan of Conversion may be executed in two or more counterparts, and each such counterpart and copy shall be and constitute an original instrument.
9. Governing Law. This Plan of Conversion shall be governed by and construed under the laws of the State of Delaware.
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IN WITNESS WHEREOF, the undersigned, having received the required approval from the Board, hereby adopts this Plan of Conversion as of the date set forth above.
| THE NEW HOME COMPANY LLC | ||
| By: | ||
| Name: H. Lawrence Webb | ||
| Title: Chief Executive Officer | ||
The undersigned Members of the Company hereby execute, agree to and approve this Plan of Conversion, including the exhibits hereto, as of the date set forth above.
| TNHC PARTNERS LLC, a Delaware limited liability company: | ||
| By: | ||
| H. LAWRENCE WEBB, Manager | ||
| By: | ||
| WAYNE J. STELMAR, Manager | ||
| By: | ||
| JOSEPH D. DAVIS, Manager | ||
| By: | ||
| THOMAS REDWITZ, Manager | ||
| IHP CAPITAL PARTNERS VI, LLC, a Delaware limited Liability company | ||||||||||
| By: | Institutional Housing Partners VI, L.P., | |||||||||
| a California limited partnership | ||||||||||
| Its Manager | ||||||||||
| By: | IHP Capital Partners, | |||||||||
| a California corporation | ||||||||||
| Its General Partner | ||||||||||
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| WATT/TNHC LLC, a California limited liability company: | ||||||||||
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| TCN/TNHC LP, a Delaware limited partnership | ||||||||||
| By: | TCN/TNHC GP LLC, | |||||||||
| a Delaware limited liability company | ||||||||||
| Its General Partner | ||||||||||
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Exhibit A
Certificate of Conversion
STATE OF DELAWARE
CERTIFICATE OF CONVERSION
FROM A LIMITED LIABILITY COMPANY TO A CORPORATION
Pursuant to Title 8, Section 265 of the Delaware General Corporation Law, the undersigned, on behalf of The New Home Company LLC, a Delaware limited liability company, does hereby submit this Certificate of Conversion for the purpose of converting to a Delaware corporation.
| 1. | The date on which The New Home Company LLC was first formed is June 25, 2009. |
| 2. | The jurisdiction in which The New Home Company LLC was first formed is the state of Delaware. |
| 3. | The jurisdiction immediately prior to the filing of this Certificate of Conversion is the state of Delaware. |
| 4. | The name of the limited liability company immediately prior to the filing of this Certificate of Conversion is “The New Home Company LLC”. |
| 5. | The name of the corporation as set forth in its Certificate of Incorporation filed in accordance with Section 265(b)(2) of the Delaware General Corporation Law is “The New Home Company Inc.”. |
IN WITNESS WHEREOF, the undersigned being duly authorized to sign on behalf of the converting limited liability company has executed this Certificate on this [—] day of [—], 2013.
| The New Home Company LLC | ||
| By: | ||
| Name: H. Lawrence Webb | ||
| Title: Chief Executive Officer | ||
Exhibit B
Initial Certificate of Incorporation
CERTIFICATE OF INCORPORATION
OF
THE NEW HOME COMPANY INC.
| 1. | The name of the corporation is The New Home Company Inc. |
| 2. | The address of its registered office in the State of Delaware is [Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801]. The name of its registered agent at such address is [The Corporation Trust Company]. |
| 3. | The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. |
| 4. | The total number of shares of stock which the corporation shall have authority to issue is 550,000,000 each with a $0.01 par value. |
| 5. | The name and mailing address of the incorporator is as follows: |
| Name | Address | |
| H. Lawrence Webb | 95 Enterprise, Suite 325 Aliso Viejo, California 92656 |
| 6. | The corporation is to have perpetual existence. |
| 7. | Each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the corporation shall be indemnified and held harmless by the corporation to the fullest extent permitted by the General Corporation Law of Delaware. The right to indemnification conferred in this Section shall also include the right to be paid by the corporation the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by the General Corporation Law of Delaware. The rights to indemnification and advancement conferred in this Section shall be contract rights and shall become vested by virtue of the director’s or officer’s service at the time when the state of facts giving rise to the claim occurred. The corporation may, by action of its Board of Directors, provide indemnification to such of the employees and agents of the corporation to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by the General Corporation Law of Delaware. |
| 8. | The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. |
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Incorporation as of [—], 2013.
| H. Lawrence Webb |
| Sole Incorporator |
Exhibit C
Action of the Sole Incorporator
THE NEW HOME COMPANY INC.
INFORMAL ACTION OF THE SOLE INCORPORATOR
THE UNDERSIGNED, being the sole incorporator of The New Home Company Inc., a corporation organized and existing under the laws of the State of Delaware (the “Company”), hereby consents, pursuant to Sections 107 and 108(c) of the General Corporation Law of the State of Delaware, to the adoption of the following resolutions with the same force and effect as if such resolutions had been adopted at a duly convened meeting of the sole incorporator of the Company:
RESOLVED, that the Board of Directors of the Company consists of one (1) member; and be it
FURTHER RESOLVED, that H. Lawrence Webb be, and he hereby is, elected as a Director of the Company, effective on the date hereof, to serve or hold office until the first annual meeting of stockholders or until their successors are elected and qualify; and be it
FURTHER RESOLVED, that H. Lawrence Webb be, and hereby is, appointed as the Chairman of the Board of Directors of the Company; and be it
FURTHER RESOLVED, the sole incorporator of the Company shall have no further rights, duties, or obligations in connection with the Company as incorporator thereof.
Executed as of the date set forth beside the sole incorporator’s signature below.
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| [—], 2013 | |
| H. Lawrence Webb, Incorporator |
Exhibit D
Bylaws
[In the form filed with the Registration Statement]
Exhibit E
Restated Certificate of Incorporation
[In the form filed with the Registration Statement]
Exhibit F
Allocation of Shares of Common Stock
| Member | Capital Percentage | Initial Allocation of Shares of Common Stock to be Received (i) Upon Conversion of Members’ | ||
| TNHC Partners LLC | 25% | To be determined in accordance with the terms of Section 7.1(b) of the LLC Agreement and the related Example 7.1(b), and (i) upon Conversion, based initially upon the midpoint of the range of the price per share of Common Stock indicated on the cover page of the preliminary prospectus used in the roadshow marketing the IPO and the price to book value multiple reflected by such midpoint, and (ii) upon the pricing of the IPO, as adjusted based upon the actual initial offering price per share to the public in the IPO and the price to book value multiple reflected by such actual price | ||
| IHP Capital Partners VI, LLC | 25% | To be determined in accordance with the terms of Section 7.1(b) of the LLC Agreement and the related Example 7.1(b), and (i) upon Conversion, based initially upon the midpoint of the range of the price per share of Common Stock indicated on the cover page of the preliminary prospectus used in the roadshow marketing the IPO and the price to book value multiple reflected by such midpoint, and (ii) upon the pricing of the IPO, as adjusted based upon the actual initial offering price per share to the public in the IPO and the price to book value multiple reflected by such actual price | ||
| Watt/TNHC LLC | 25% | To be determined in accordance with the terms of Section 7.1(b) of the LLC Agreement and the related Example 7.1(b), and (i) upon Conversion, based initially upon the midpoint of the range of the price per share of Common Stock indicated on the cover page of the preliminary prospectus used in the roadshow marketing the IPO and the price to book value multiple reflected by such midpoint, and (ii) upon the pricing of the IPO, as adjusted based upon the actual initial offering price per share to the public in the IPO and the price to book value multiple reflected by such actual price | ||
| TCN/TNHC LP | 25% | To be determined in accordance with the terms of Section 7.1(b) of the LLC Agreement and the related Example 7.1(b), and (i) upon Conversion, based initially upon the midpoint of the range of the price per share of Common Stock indicated on the cover page of the preliminary prospectus used in the roadshow marketing the IPO and the price to book value multiple reflected by such midpoint, and (ii) upon the pricing of the IPO, as adjusted based upon the actual initial offering price per share to the public in the IPO and the price to book value multiple reflected by such actual price | ||
Exhibit G
Registration Rights Agreement
[In the form filed with the Registration Statement]
Exhibit H
Investor Rights Agreement
[In the form filed with the Registration Statement]
