UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 2)*

 

 

William Lyon Homes

(Name of Issuer)

Class A Common Stock, par value $0.01 per share

(Title of Class of Securities)

552074700

(CUSIP Number)

William H. Lyon

4695 MacArthur Court, 8th Floor

Newport Beach, CA, 92660

Tel: (949) 833-3600

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

May 1, 2019

(Date of Event which Requires Filing of this Statement)

 

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box  ☐.

 

 

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.

 

 

 

*	The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

 

SCHEDULE 13D

 

CUSIP No. 552074700

 

1		NAME OF REPORTING PERSON   William H. Lyon
2		CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)  ☐        (b)  ☐
3		SEC USE ONLY
4		SOURCE OF FUNDS   PF, AF
5		CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)  ☐
6		CITIZENSHIP OR PLACE OF ORGANIZATION   United States

NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH				7		SOLE VOTING POWER   7,115,265*
				8		SHARED VOTING POWER   0
				9		SOLE DISPOSITIVE POWER   7,115,265*
				10		SHARED DISPOSITIVE POWER   0

11		AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON   7,115,265*
12		CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES  ☐
13		PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)   17.5%*
14		TYPE OF REPORTING PERSON   IN

 

 

*	See Item 5 of this Statement on Schedule 13D for additional information.

SCHEDULE 13D

 

CUSIP No. 552074700

 

1		NAME OF REPORTING PERSON   Lyon Shareholder 2012, LLC
2		CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)  ☐        (b)  ☐
3		SEC USE ONLY
4		SOURCE OF FUNDS   WC
5		CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)  ☐
6		CITIZENSHIP OR PLACE OF ORGANIZATION   Delaware

NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH				7		SOLE VOTING POWER   6,724,944*
				8		SHARED VOTING POWER   0
				9		SOLE DISPOSITIVE POWER   6,724,944*
				10		SHARED DISPOSITIVE POWER   0

11		AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON   6,724,944*
12		CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES  ☐
13		PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)   16.5%*
14		TYPE OF REPORTING PERSON   OO

 

 

*	See Item 5 of this Statement on Schedule 13D for additional information.

This Amendment No. 2 to Schedule 13D amends and supplements the Schedule 13D filed by William H. Lyon and Lyon Shareholder 2012, LLC (“Lyon Investor”, and together with Mr. Lyon, the “Reporting Persons”) with the Securities and Exchange Commission (the “SEC”) on June 24, 2013, as amended by Amendment No. 1 filed on December 14, 2017. This Amendment No. 2 amends and supplements the Schedule 13D as specifically set forth herein.

All capitalized terms contained herein but not otherwise defined shall have the meanings ascribed to such terms in the Schedule 13D, as amended. Information given in response to each item shall be deemed incorporated by reference in all other items, as applicable.

 

Item 4.

Purpose of Transaction

Item 4 of Schedule 13D is supplemented and superseded, as the case may be, as follows:

Grant of a Limited Waiver Under Section 203 of the Delaware General Corporation Law

On May 1, 2019, the Board of Directors (the “Board”) of William Lyon Homes (the “Issuer”) approved a limited waiver (the “Limited Waiver”) solely for purposes of Section 203 of the Delaware General Corporation Law (the “DGCL”) to allow Mr. Lyon, the Lyon Investor and The William Harwell Lyon Separate Property Trust (the “Lyon Separate Property Trust”, and together with Mr. Lyon and the Lyon Investor, the “Lyon Family Stockholders”) to enter into certain agreements, arrangements and/or understandings (“Section 203 Agreements”) with potential unaffiliated co-investors in connection with evaluating, supporting, developing, or making a potential proposal (a “Proposal”) for a possible business combination with the Issuer. As a result of any possible Section 203 Agreements, a potential unaffiliated co-investor could be considered a non-approved “interested stockholder” for purposes of Section 203 of the DGCL and otherwise subject to the restrictions on “business combinations” under Section 203 of the DGCL. Therefore, in the interests of preserving the ability of the Issuer to enter into potential business combinations that the Board may determine to be in the best interests of the Issuer and its stockholders, the Board granted the Limited Waiver.

The Limited Waiver covers the approval of the entry by the Lyon Family Stockholders into Section 203 Agreements, which may be requested by the Lyon Family Stockholders from time to time, with persons or entities that are approved in advance by the Board (or any committee thereof that is expressly authorized to approve such actions by the Board) and that enter into a standstill and confidentiality agreement with the Issuer in a form acceptable to the Board (or an authorized committee thereof). In addition, the Limited Waiver does not approve the voluntary acquisition by a potential co-investor of any equity securities of the Issuer; however, any recapitalization or merger transaction effected by the Issuer, the formation of a “group” between the Lyon Family Stockholders and a potential co-investor, or any business combination that results from a Proposal approved by the Board, shall not constitute a voluntary acquisition.

The Limited Waiver shall be automatically withdrawn and revoked on May 1, 2020 (the “Anniversary Date”), provided that if, prior to such Anniversary Date, the Lyon Family Stockholders and a potential co-investor have entered into any written Section 203 Agreements with respect to a Proposal, such agreements shall continue to be deemed to be approved for purposes of Section 203 of the DGCL until the date that is the earliest of (a) the consummation of the business combination contemplated by a definitive agreement with respect to such Proposal, (b) the termination of the applicable Section 203 Agreements in accordance with their terms, or (c) 180 days after the Anniversary Date.

Confidentiality Agreement

In addition, on May 1, 2019, and as a condition to the effectiveness of the Limited Waiver, the Lyon Family Stockholders entered into a Confidentiality Agreement with the Issuer (the “Confidentiality Agreement”) that includes customary provisions governing the treatment of confidential information about the Issuer and a standstill provision pursuant to which the Lyon Family Stockholders agreed that until the earlier of (i) one year from the date of the Confidentiality Agreement (or if prior to one year from the date of the Confidentiality Agreement, the Lyon Family Stockholders have entered into, and provided written notice to the Issuer of, a written agreement, arrangement, and/or understanding with a potential co-investor with respect to a potential transaction with the Issuer, 18 months from the date of the Confidentiality Agreement), or (ii) the execution of a final definitive agreement with respect to a negotiated business combination between the Issuer and the Lyon Family Stockholders and their affiliates, unless specifically invited in writing by the Board, neither the Lyon Family Stockholders nor any of their representatives acting on their behalf or on behalf of other persons acting in concert with them will in any manner, directly or indirectly, effect or seek, offer or propose to effect, or announce any intention to effect or cause or participate in: (a) any voluntary acquisition of (1) any securities (or beneficial ownership thereof) of the Issuer in excess of any such securities beneficially owned by the Lyon Family Stockholders as of the date of the Confidentiality Agreement, other than acquisitions of Class B Common Stock pursuant to the exercise of the Class B Warrant or preemptive rights under the Issuer’s Amended and Restated Certificate of Incorporation or acquisitions pursuant to equity awards granted by the Issuer or the exercise of equity awards held by the Lyon Family Stockholders, or (2) any material assets, indebtedness or businesses of the Issuer; (b) any tender offer or exchange offer, merger or other business combination involving the Issuer or any material assets of the Issuer; (c) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Issuer or any of its affiliates; (d) any solicitation of proxies or consents to vote any voting securities of the Issuer or any of its affiliates, except in Mr. Lyon’s capacity solely as an officer or director of the Issuer on behalf of the Issuer; (e) any action, whether alone or in concert with others, to seek or obtain additional representation on the Board or, to seek to advise or influence any person with respect to the voting of any voting securities of the Issuer; or (f) any action which would or would reasonably be expected to force the Lyon Family Stockholders, their representatives, or the Issuer to make a public announcement regarding any of the types of matters set forth in the foregoing.

The foregoing description of the Confidentiality Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Confidentiality Agreement, which is filed as Exhibit J hereto and is incorporated herein by reference.

The Reporting Persons intend to review their investment in the Issuer on a continuing basis and may from time to time and at any time in the future depending on various factors, including, without limitation, the Issuer’s financial position and strategic direction, actions taken by the Board, price levels of the Issuer’s securities, other investment opportunities available to the Reporting Persons, conditions in the securities market and general economic and industry conditions, take such actions with respect to the investment in the Issuer as they deem appropriate. These actions may include (subject to any applicable restrictions in the Confidentiality Agreement): (i) acquiring beneficial ownership of additional shares of Class A Common Stock and/or other equity, debt, notes, other securities, or derivative or other instruments that are based upon or relate to the value of securities of the Issuer (collectively, “Securities”) in the open market or otherwise; (ii) disposing of any or all of their Securities in the open market or otherwise; (iii) engaging in any hedging or similar transactions with respect to the Securities; or (iv) proposing or considering one or more of the actions described in subsections (a) through (j) of Item 4 of Schedule 13D, including, without limitation, acquiring 100% of the outstanding Class A Common Stock of the Issuer in one or more transactions. The Reporting Persons may have conversations with members of the Issuer’s management team, members of the Board or other investors regarding multiple topics, including, but not limited to, potential strategic alternatives to promote value for the benefit of all shareholders. Mr. Lyon, as an officer and director of the Issuer, is also eligible to receive grants and awards of additional securities of the Issuer pursuant to equity incentive and similar equity compensation plans that may be implemented from time to time by the Issuer.

 

Item 5.

Interest in Securities of the Issuer

Item 5 of Schedule 13D is hereby amended and restated as follows:

(a) (b) Items 7 through 11 and 13 of each of the cover pages of this Amendment No. 2 to Schedule 13D are incorporated herein by reference.

(a)

The Reporting Persons beneficially own an aggregate of 7,115,265 shares of Class A Common Stock, representing 17.5% of the outstanding shares of Class A Common Stock. Of the shares of Class A Common Stock reported as beneficially owned by the Reporting Persons herein:

 

(i)

Mr. Lyon beneficially owns 387,388 shares of Class A Common Stock directly, which includes 91,305 shares of unvested restricted stock and 80,000 shares of Class A Common Stock issuable upon the exercise of options;

 

(ii)

Mr. Lyon beneficially owns 2,933 shares of Class A Common Stock as trustee of the Lyon Separate Property Trust; and

 

(iii)

the Lyon Investor (A) holds 4,817,394 shares of Class B Common Stock of the Issuer, which shares are convertible at any time on a one-for-one basis into shares of Class A Common Stock, and (B) has the right to acquire up to an additional 1,907,550 shares of Class B Common Stock of the Issuer (which shares are also convertible at any time on a one-for-one basis into shares of Class A Common Stock) pursuant to the terms of the Class B Warrant.

The members of Lyon Investor are the Lyon Separate Property Trust, the Lyon Shareholder 2012 Irrevocable Trust No. 1 established December 24, 2012, and the Lyon Shareholder 2012 Irrevocable Trust No. 2 established December 24, 2012 (collectively, the “Lyon Trusts”). Mr. Lyon is the manager of the Lyon Investor and the trustee of the Lyon Trusts, and in such capacities, has voting and investment power with respect to the securities held by the Lyon Investor and the Lyon Separate Property Trust. Mr. Lyon is the beneficiary of each of the Lyon Trusts.

The aggregate Class A Common Stock share and percentage beneficial ownership figures for the Reporting Persons referenced above assume the exercise in full of the Class B Warrant by the Lyon Investor and the conversion of all shares of Class B Common Stock owned by the Lyon Investor into shares of Class A Common Stock on a one-for-one basis, as well as the exercise in full of the options to purchase 80,000 shares of Class A Common Stock. Such figures further are based upon 33,961,228 shares of Class A Common Stock otherwise outstanding as of March 18, 2019, as reported in the Issuer’s Proxy Statement filed with the SEC on March 29, 2019.

The Lyon Investor, as the holder of Class B Common Stock of the Issuer, is entitled to cast five votes per share of Class B Common Stock in any election of directors and on any other matter on which the Issuer’s stockholders are entitled to vote generally. Each holder of Class A Common Stock is entitled to cast one vote per share of Class A Common Stock in any election of directors and on any other matter on which the Issuer’s stockholders are entitled to vote generally. Except as otherwise required by law or the Issuer’s Certificate of Incorporation, on all matters submitted to a vote of the Issuer’s stockholders generally, the holders of the Class A Common Stock and Class B Common Stock vote together as a single class. Assuming the exercise in full of the Class B Warrant and the options to purchase 80,000 shares of Class A Common Stock, the shares of Class A Common Stock and Class B Common Stock beneficially owned by the Reporting Persons as reported herein represent 50.3% of the total voting power of the Issuer’s outstanding common stock. Excluding the shares of Class B Common Stock issuable upon exercise of the Class B Warrant, the shares of Class A Common Stock and Class B Common Stock beneficially owned by the Reporting Persons as reported herein represent 42.1% of the total voting power of the Issuer’s outstanding common stock.

(b)

The number of shares of Class A Common Stock beneficially owned by Mr. Lyon as reported herein and as to which he has:

 

(i)

Sole power to vote or direct the vote: 7,115,265

 

(ii)

Shared power to vote or direct the vote: 0

 

(iii)

Sole power to dispose or direct the disposition: 7,115,265

 

(iv)

Shared power to dispose or direct the disposition: 0

The number of shares of Class A Common Stock beneficially owned by the Lyon Investor as reported herein and as to which the Lyon Investor has:

 

(i)

Sole power to vote or direct the vote: 6,724,944

 

(ii)

Shared power to vote or direct the vote: 0

 

(iii)

Sole power to dispose or direct the disposition: 6,724,944

 

(iv)

Shared power to dispose or direct the disposition: 0

(c)

On March 1, 2019, the Issuer awarded 14,723 shares of restricted Class A Common Stock to Mr. Lyon that vest in three equal installments on each of March 1, 2020, 2021 and 2022, subject to certain restrictions. The award was made in consideration of Mr. Lyon’s service as an officer and employee of the Issuer. In addition, on March 1, 2019, the Issuer withheld 31,144 shares of Class A Common Stock from Mr. Lyon to cover applicable withholding taxes related to the vesting of restricted stock awards. Further, on March 31, 2019, options to purchase 40,000 shares of Class A Common Stock held by Mr. Lyon vested and became exercisable for an exercise price of $25.82 per share. Other than as disclosed herein, the Reporting Persons have not effected any transactions in the Class A Common Stock during the past 60 days prior to the date of this filing.

(d)

Of the shares of Class A Common Stock reported as beneficially owned by the Reporting Persons herein:

 

(i)

Mr. Lyon, as trustee of the Lyon Separate Property Trust, beneficially owns 2,933 shares of Class A Common Stock, and

 

(ii)

the Lyon Investor (A) holds 4,817,394 shares of Class B Common Stock of the Issuer, which shares are convertible at any time on a one-for-one basis into shares of Class A Common Stock, and (B) has the right to acquire up to an additional 1,907,550 shares of Class B Common Stock of the Issuer (which shares are also convertible at any time on a one-for-one basis into shares of Class A Common Stock) pursuant to the terms of the Class B Warrant.

Each of the Lyon Separate Property Trust and the Lyon Investor has the right to receive or the power to direct the receipt of dividends from, or the proceeds from sale of, the securities owned by it. Mr. Lyon is the trustee of the Lyon Separate Property Trust and the manager of the Lyon Investor, and in such capacities, has voting and investment power with respect to the securities held by each of them.

(e)

Not applicable.

 

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

Item 6 of Schedule 13D is supplemented and superseded, as the case may be, as follows:

The disclosure in Item 4 is incorporated by reference herein.

The Confidentiality Agreement is filed as Exhibit J to this Amendment No. 2 to Schedule 13D and is incorporated by reference herein.

 

Item 7.

Material to Be Filed as Exhibits

Item 7 of Schedule 13D is supplemented and superseded, as the case may be, as follows:

Exhibit J – Confidentiality Agreement, dated May 1, 2019, by and among William Lyon Homes, William H. Lyon, Lyon Shareholder 2012, LLC and The William Harwell Lyon Separate Property Trust.

SIGNATURES

After reasonable inquiry and to the best of its knowledge and belief, the undersigned each certifies that that the information with respect to it set forth in this statement is true, complete and correct.

Dated: May 1, 2019

 

 

Exhibit J

 

May 1, 2019            

William H. Lyon

PO Box 8858

Newport Beach CA 92658

Lyon Shareholder 2012, LLC

The William Harwell Lyon Separate Property Trust

PO Box 8858

Newport Beach CA 92658

Attention: Mr. William H. Lyon

Re: Confidentiality Agreement

Ladies and Gentlemen:

In connection with the consideration by William H. Lyon, Lyon Shareholder 2012, LLC, a Delaware limited liability company (“Lyon LLC”), and The William Harwell Lyon Separate Property Trust (together with Mr. Lyon and Lyon LLC, “you”) of a possible negotiated business combination (a “Possible Transaction”) with William Lyon Homes, a Delaware corporation, and/or its subsidiaries or divisions (collectively, with such subsidiaries and divisions, the “Company”), the Company may make available to you and your Representatives (as hereinafter defined) certain Evaluation Material (as hereinafter defined), including certain information concerning the business, financial condition, operations, assets and liabilities of the Company. As a condition to such information being furnished to you and your Representatives, you agree that you will, and will cause your Representatives to, treat the Confidential Information (as hereinafter defined) in accordance with the provisions of this letter agreement and take or abstain from taking certain other actions as set forth herein.

1. Evaluation Material; Confidential Information; Other Defined Terms. As used in this letter agreement:

a) The term “Evaluation Material” shall mean (i) all information relating, directly or indirectly, to the Company or its business, including, without limitation, information related to the Company’s markets, condition (financial or other), operations, assets, liabilities, results of operations, cash flows or prospects (whether prepared by the Company, its advisors or otherwise), which is delivered, disclosed or furnished to you or to your Representatives, before, on or after the date hereof, regardless of the manner in which it is delivered, disclosed or furnished (including in connection with your or your affiliates’ official capacity as an officer or director of the Company), or which you or your Representatives otherwise learn or obtain, through observation or through analysis of such information, data or knowledge, and (ii) the portions of all notes, analyses, compilations, studies, forecasts, interpretations or other documents prepared by you or your Representatives that contain any such information. Notwithstanding the foregoing, the term Evaluation Material shall not include information that (i) is or becomes generally available to the public other than as a result of a disclosure by you or your Representatives in breach of this letter agreement, (ii) was within your possession on a non-confidential basis prior to it being furnished to you by or on behalf of the Company or any of its Representatives, provided that you did not know or have reason to believe that the source of such information was bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the Company with respect to such information; or (iii) becomes available to you on a non-confidential basis from a source other than the Company or any of its Representatives, provided that you do not know or have reason to believe that the source is bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the Company with respect to such information.

b) The term “Discussion Information” shall mean the fact that you or any of your Representatives has received Evaluation Material or that Evaluation Material has been made available to you or any of your Representatives, that investigations, discussions or negotiations are taking place concerning a Possible Transaction or any of the terms, conditions or other facts with respect to any Possible Transaction, including the status thereof and the identity of the parties thereto, unless such information is or becomes generally available to the public other than as a result of a disclosure by you or your Representatives in breach of this letter agreement.

c) The term “Confidential Information” shall mean the Evaluation Material and the Discussion Information.

d) The term “Representatives” (i) with respect to you, shall only include your officers, managers, directors, general partners, employees, outside counsel, financial advisors, accountants and consultants and, subject to (a) receipt of prior written consent of the Company and (b) compliance with Section 2 below, shall also include potential sources of equity or debt financing (and their respective counsel and advisors), and (ii) with respect to the Company, shall include its directors, stockholders, officers, employees, agents, affiliates, partners, and advisors (including, without limitation, attorneys, accountants, consultants and financial advisors) and those of such affiliates, excluding, in each case, you and your Representatives.

e) The terms (i) “affiliates,” “beneficial ownership” and “group” shall have the respective meanings given to such terms under the Securities Exchange Act of 1934, as amended, except that, for purposes of this letter agreement, you shall not be considered an affiliate of the Company, and the Company shall not be considered your affiliate, and (ii) “person” shall be broadly interpreted to include the media and any corporation, partnership, group, individual or other entity.

2. Use and Disclosure of Confidential Information.

a) You hereby agree that you and your Representatives shall use the Confidential Information solely for the purpose of evaluating a Possible Transaction and for no other purpose, that the Confidential Information will be kept confidential and that you and your Representatives will not disclose any of the Confidential Information in any manner whatsoever; provided, however, that you may disclose Confidential Information (i) to which the Company gives its prior written consent, (ii) as permitted under Paragraph 3 of this letter agreement, and (iii) to your Representatives who (a) need to know such information for the purpose of evaluating a Possible Transaction, (b) are made aware of the terms of this letter agreement and (c) (1) agree to be bound by the terms hereof or (2) are bound by contractual, legal or fiduciary obligations of confidentiality to you that are at least as protective as the confidentiality terms herein. Notwithstanding the foregoing, you agree that you and your Representatives shall not disclose or make available any Evaluation Material to any potential sources of equity or debt financing (or their respective counsel or advisors), except to the extent that the Company has provided express prior written consent to disclosing or making available such information to such potential source of equity or debt financing (or their respective counsel or advisors). In any event, you agree to undertake reasonable precautions to safeguard and protect the confidentiality of the Confidential Information and to accept responsibility for any breach of this letter agreement by you or any of your Representatives.

b) To the extent that any Confidential Information may include materials subject to the attorney-client privilege, work product doctrine or any other applicable privilege concerning pending or threatened legal proceedings or governmental investigations, you and the Company understand and agree that you and the Company have a commonality of interest with respect to such matters, and it is the mutual desire, intention and understanding of you and the Company that the sharing of such materials is not intended to, and shall not, waive or diminish in any way the confidentiality of such materials or its continued protection under the attorney-client privilege, work product doctrine or other applicable privilege. Accordingly, and in furtherance of the foregoing, you agree not to claim or contend that the Company has waived any attorney-client privilege, work product doctrine or any other applicable privilege by providing information pursuant to this letter agreement or any subsequent definitive written agreement regarding a Possible Transaction.

 

2

3. Required Disclosures. In the event that you or any of your Representatives are requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar legal process or by applicable statute, rule, regulation or by governmental regulatory authorities) to disclose any Confidential Information, you shall provide the Company with prompt written notice of any such request or requirement so that the Company may in its sole discretion seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this letter agreement with respect to such disclosure. If, in the absence of a protective order or other remedy or the receipt of a waiver by the Company, you or any of your Representatives are nonetheless, in the opinion of legal counsel, legally compelled to disclose Confidential Information to any tribunal, you or your Representatives may, without liability hereunder, disclose to such tribunal only that portion of the Confidential Information that such counsel advises you is legally required to be disclosed, provided that you use your commercially reasonable efforts to preserve the confidentiality of the Confidential Information, including, without limitation, by cooperating with the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information by such tribunal; and provided further that you shall promptly notify the Company of (i) your determination to make such disclosure and (ii) the nature, scope and contents of such disclosure. In addition, in the event that you or any of your Representatives are legally compelled, in the opinion of legal counsel, to disclose any Confidential information in any reports or filings made pursuant to the Securities Exchange Act of 1934, as amended, or any similar state law, rule or regulation, or pursuant to the rules or regulations of any securities exchange; you may disclose such Confidential Information if you provide prompt written notice to the Company in advance of such disclosure, such notice to include the nature, scope and contents of such disclosure.

4. Destruction of Evaluation Material. Upon the written request of the Company in its sole discretion, you will promptly (and in any case within seven days of the Company’s request) destroy and cause your Representatives to destroy all Evaluation Material (and any copies thereof) in your and their respective possession; provided, however, you and each of your Representatives may retain one (1) copy of the Evaluation Material to the extent required for purposes of defending any legal proceeding or as is required to be maintained in order to satisfy any law, rule, or regulation to which you or such Representative is subject. Notwithstanding the destruction of the Evaluation Material, you and your Representatives shall continue to be bound by your obligations of confidentiality and other obligations and agreements hereunder.

5. Standstill. You agree that, until the earlier of (i) the Standstill Period (as hereinafter defined), or (ii) the execution of a final definitive agreement with respect to a Possible Transaction by the Company and you or your affiliates, unless specifically invited in writing by the Board of Directors of the Company, neither you nor any of your Representatives acting on your behalf or on behalf of other persons acting in concert with you will in any manner, directly or indirectly, effect or seek, offer or propose (whether publicly or otherwise) to effect, or announce any intention to effect or cause or participate in:

a) any voluntary acquisition of (i) any securities (or beneficial ownership thereof), or rights or options to acquire any securities (or beneficial ownership thereof) of the Company in excess of any such securities beneficially owned by you as of the date of this letter agreement, other than (A) the acquisition by you of shares of Class B Common Stock, par value $0.01 per share, of the Company (“Class B Common Stock”) pursuant to your exercise of (1) any outstanding warrant held by you as of the date of this letter agreement or (2) your preemptive rights to acquire Class B Common Stock under Company’s Amended and Restated Certificate of Incorporation, (B) the conversion of any Class B Common Stock held by you into Class A Common Stock, par value $0.01 per share, of the Company (“Class A Common Stock”), (C) the acquisition by you of any equity awards that may granted or issued to you by the Company on or after the date hereof, and (D) the acquisition by you of shares of Class A Common Stock pursuant to the exercise of any equity awards held by you, or (ii) any material assets, indebtedness or businesses of, the Company;

 

3

b) any tender or exchange offer, merger or other business combination involving the Company or any material assets of the Company;

c) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its affiliates;

d) any “solicitation” of “proxies” (as such terms are used in the proxy rules of the Securities and Exchange Commission) or consents to vote any voting securities of the Company or any of its affiliates, except in your capacity solely as an officer or director of the Company on behalf of the Company;

e) any action, whether alone or in concert with others, to seek or obtain additional representation on the Board of Directors or, to seek to advise or influence any person with respect to the voting of any voting securities of the Company; or

f) any action which would or would reasonably be expected to force you, your Representatives or the Company to make a public announcement regarding any of the types of matters set forth in the foregoing.

For purposes of this letter agreement, the “Standstill Period” shall mean the later of (i) one (1) year from the date of this letter agreement, or (ii) if, prior to one (1) year from the date of this letter agreement, you have entered into, and provided written notice to the Company of, a written agreement, arrangement, and/or understanding with any potential unaffiliated co-investor with respect to a Possible Transaction, 18 months from the date of this letter agreement.

6. Remedies. It is understood and agreed that money damages would not be an adequate remedy for any breach of this letter agreement by you or any of your Representatives and that the Company shall be entitled to seek equitable relief, including, without limitation, injunction and specific performance, as a remedy for any such actual or potential breach. Such remedies shall not be deemed to be the exclusive remedies for a breach by you of this letter agreement but shall be in addition to all other remedies available at law or equity to the Company. You further agree not to raise as a defense or objection to the request or granting of such relief that any breach of this letter agreement is or would be compensable by an award of money damages, and you agree to waive any requirements for the securing or posting of any bond in connection with such remedy.

7. Governing Law. This letter agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within the State of Delaware, without regard to the conflict of law provisions thereof that would result in the application of the laws of any other jurisdiction.

8. Assignment; Successors. Any assignment of this letter agreement, by operation of law or otherwise, by you without the prior written consent of the Company shall be null and avoid. This letter agreement shall be binding on and inure to the benefit of, and be enforceable by, the Company and its successors and assigns.

9. Term. This letter agreement will terminate on the date that is two years from the date hereof.

10. Miscellaneous. This letter agreement contains the entire agreement between you and the Company regarding its subject matter and supersedes all prior and contemporaneous agreements, understandings, arrangements and discussions, whether oral or written, between you and the Company regarding such subject matter. No provision in this letter agreement can be waived, modified or amended except by written consent of you and the Company, which consent shall specifically refer to the provision to be waived, modified or amended and shall explicitly make such waiver, modification or amendment. It is understood and agreed that no failure or delay by the Company in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. If any

 

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provision of this letter agreement is found to violate any statute, regulation, rule, order or decree of any governmental authority, court, agency or exchange, such invalidity shall not be deemed to affect any other provision hereof or the validity of the remainder of this letter agreement, and such invalid provision shall be deemed deleted herefrom to the minimum extent necessary to cure such violation. This letter agreement may be signed by facsimile or PDF and in one or more counterparts, each of which shall be deemed an original but all of which shall be deemed to constitute a single instrument.

[Signature Page Follows]

 

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Please confirm your agreement with the foregoing by having a duly authorized officer of your organization sign and return one copy of this letter to the undersigned, whereupon this letter agreement shall become a binding agreement among you and the Company.

 

 

CONFIRMED AND AGREED as of the date written above:
/s/ William H. Lyon
William H. Lyon

 

Lyon Shareholder 2012, LLC

By:		/s/ William H. Lyon
		Name: William H. Lyon Title: Manager

The William Harwell Lyon Separate Property Trust

By:		/s/ William H. Lyon
		Name: William H. Lyon Title: Trustee

[Signature Page to Confidentiality Agreement]