Exhibit (d)(2)
PLAN AND AGREEMENT OF MERGER
DATED
JUNE 17, 2002
AMONG
THE FORTRESS GROUP, INC.,
LENNAR CORPORATION
AND
FG ACQUISITION CORPORATION
TABLE OF CONTENTS
Page
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Article 1 THE TENDER OFFER........................................................1
1.1 The Tender Offer............................................................1
1.2 Company Action..............................................................3
Article 2 THE MERGER..............................................................5
2.1 Agreement to Effect Merger..................................................5
2.2 The Merger..................................................................5
2.3 Certificate of Incorporation................................................6
2.4 By-Laws.....................................................................6
2.5 Directors...................................................................6
2.6 Officers....................................................................6
2.7 Stock of the Company........................................................6
2.8 Options and Warrants........................................................7
2.9 Stock of Acquisition........................................................8
2.10 Proxy Statement and Stockholders' Meeting...................................8
2.11 Dissenting Shares...........................................................9
2.12 Payment for Shares and Options.............................................10
Article 3 EFFECTIVE TIME OF MERGER...............................................13
3.1 Date of the Merger.........................................................13
3.2 Execution of Certificate of Merger.........................................13
3.3 Effective Time of the Merger...............................................13
Article 4 REPRESENTATIONS AND WARRANTIES.........................................13
4.1 Representations and Warranties of the Company..............................13
4.2 Representations and Warranties of Lennar and Acquisition...................23
4.3 Termination of Representations and Warranties..............................25
Article 5 ACTIONS PRIOR TO THE MERGER............................................26
5.1 Company's Activities Until Effective Time..................................26
5.2 No Lennar Involvement in Management........................................28
5.3 No Solicitation of Offers; Notice of Proposals from Others.................29
5.4 Acquisition's Efforts to Fulfill Conditions................................30
5.5 Company's Efforts to Fulfill Conditions....................................30
Article 6 CONDITIONS PRECEDENT TO MERGER.........................................30
6.1 Conditions to the Company's Obligations....................................30
6.2 Conditions to Acquisition's Obligations....................................31
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TABLE OF CONTENTS
(continued)
Page
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Article 7 TERMINATION............................................................32
7.1 Right to Terminate.........................................................32
7.2 Manner of Terminating Agreement............................................33
7.3 Effect of Termination......................................................33
Article 8 ABSENCE OF BROKERS.....................................................33
8.1 Representations and Warranties Regarding Brokers and Others................33
Article 9 OTHER AGREEMENTS.......................................................34
9.1 Indemnification for Prior Acts.............................................34
9.2 Funds for Debt Tender......................................................35
9.4 Past Service and Deductible Credit to Employees............................35
Article 10 LENNAR GUARANTY........................................................36
10.1 Guaranty of Acquisition's Obligations......................................36
Article 11 GENERAL................................................................36
11.1 Expenses...................................................................36
11.2 Access to Properties, Books and Records....................................36
11.3 Press Releases.............................................................37
11.4 Entire Agreement...........................................................37
11.5 Effect of Disclosures......................................................37
11.6 Captions...................................................................38
11.7 Benefit of Agreement.......................................................38
11.8 Prohibition Against Assignment.............................................38
11.9 Notices and Other Communications...........................................38
11.10 Governing Law..............................................................39
11.11 Amendments.................................................................40
11.12 Counterparts...............................................................40
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PLAN AND AGREEMENT OF MERGER
This is a Plan and Agreement of Merger (the "Agreement") dated June 17,
2002, among The Fortress Group, Inc. (the "Company"), a Delaware corporation,
Lennar Corporation ("Lennar"), a Delaware corporation, and FG Acquisition
Corporation ("Acquisition"), a Delaware corporation.
ARTICLE 1
THE TENDER OFFER
1.1 THE TENDER OFFER. (a) Not later than the date of this Agreement,
Acquisition will make a public announcement of an offer (the "Tender Offer") to
purchase any and all of the outstanding common stock of the Company, par value
$.01 per share, ("Common Stock") which Acquisition does not own at a price (the
"Tender Offer Price") of $3.68 net per share in cash.
(b) Promptly (and in any event within five business days) after the
public announcement of the Tender Offer, Acquisition will file with the
Securities and Exchange Commission ("SEC") a Tender Offer Statement on Schedule
TO with respect to the Tender Offer (together with any amendments or
supplements, the "Schedule TO"), including forms of an offer to purchase, a
letter of transmittal and a summary advertisement (the Schedule TO and the
documents included in it by which the Tender Offer will be made, as they may be
supplemented or amended, being the "Offer Documents"). Not later than the first
business day after that, Acquisition will communicate the Tender Offer to the
record holders and beneficial owners of the Common Stock. Each of Acquisition
and the Company will promptly correct any information provided by it for use in
the Offer Documents if and to the extent that information is or becomes
incomplete or inaccurate in any material respect, and Acquisition will
supplement or amend the Offer Documents to the extent required by the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules under it,
file the amended or supplemented Offer
Documents with the SEC and, if required, disseminate the amended Offer Documents
or supplements to the Company's stockholders. The Company and its counsel will
be given a reasonable opportunity to review and comment on the Offer Documents
and any amendments or supplements to them before they are filed with the SEC or
disseminated to the Company's stockholders. If Acquisition receives comments
from the staff of the SEC with regard to the Offer Documents, Acquisition will,
as promptly as practicable, provide the Company and its counsel with a written
description of the comments, and with a copy of any letter the Company or its
counsel may receive from the staff of the SEC containing some or all of the
comments.
(c) The day on which the Tender Offer expires (the "Expiration
Date") will be 20 business days after the day on which the Tender Offer is first
communicated to the record owners of the Common Stock, but Acquisition may
extend the Expiration Date to not later than 60 days after the Schedule TO is
filed with the SEC.
(d) Subject to the conditions to the Tender Offer set forth on
Exhibit 1.1-D, Acquisition will, not later than five days after the Expiration
Date, accept for payment and pay for all the shares of Common Stock which are
properly tendered on or before the Expiration Date in response to the Tender
Offer and not withdrawn. Lennar will provide Acquisition with the funds it
requires to pay for those shares of Common Stock. The obligation of Acquisition
to accept for payment and pay for shares which are properly tendered on or
before the Expiration Date and not withdrawn will not be subject to any
conditions other than those set forth on Exhibit 1.1-D. Acquisition will not,
without the prior consent of the Company, (i) decrease the Tender Offer Price
below that described in subparagraph (a), (ii) decrease the number of shares
being solicited in the Tender Offer, (iii) change the form of consideration
payable in the Tender Offer, (iv) modify or add to the conditions set forth on
Exhibit 1.1-D or (v) extend the Expiration Date to a day which is more than 60
days after the day on which the Schedule TO is filed with the SEC, except that
(A) if the Tender Offer is modified to increase the Tender Offer Price or in any
other
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manner permitted by this Agreement, the Expiration Date may be extended to the
extent required by the rules under the Exchange Act or any interpretation of
those rules by the staff of the SEC, (B) if anyone other than Acquisition makes
a tender offer for Common Stock before the Tender Offer expires at a price
higher than the Tender Offer Price, Acquisition may extend the Expiration Date
until not more than 10 business days after the other tender offer expires, and
(C) if Acquisition is prevented by an order of a court or other governmental
agency from accepting shares which are tendered in response to the Tender Offer,
Acquisition may extend the Expiration Date until 10 business days after the
earliest day on which Acquisition is able to accept shares without violating any
order of any court or other governmental agency. Acquisition may extend the
Tender Offer for a subsequent offer period after the Expiration Date as
permitted by Rule 14d-11 under the Exchange Act.
1.2 COMPANY ACTION. (a) The Company approves of and consents to the
Tender Offer and represents and warrants that its Board of Directors (the
"Board") has (i) determined that this Agreement and the transactions
contemplated by this Agreement are fair to and in the best interests of the
Company and its stockholders, (ii) approved this Agreement and the transactions
contemplated by it, including the Tender Offer and the Merger (described in
Article 2), and declared that this Agreement is advisable, and (iii) resolved to
recommend that the Company's stockholders tender their shares in response to the
Tender Offer, and approve and adopt this Agreement and approve the Merger. The
Company has been advised by each of its directors and executive officers that he
or she intends to tender and sell all his or her shares of Common Stock in
response to the Tender Offer, except that directors and executive officers whose
sales of their shares in response to the Tender Offer might result in liability
under Section 16(b) of the Exchange Act have stated that if they do not tender
and sell their shares in response to the Tender Offer, they will vote their
shares in favor of approval of the Merger. Notwithstanding anything contained in
this subparagraph (a) or elsewhere in this Agreement, if
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the Board, after consultation with its counsel about the Board's fiduciary
obligations, determines in good faith to withdraw, modify or amend the
recommendation, because the failure to do so could reasonably be expected to
violate the directors' fiduciary duties under applicable law, that withdrawal,
modification or amendment will not constitute a breach of this Agreement.
(b) The Company will file with the SEC, promptly after Acquisition
files the Schedule TO, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements, the "Schedule 14D-9") containing
the recommendations described in subparagraph (a) and will disseminate the
Schedule 14D-9 as required by Rule 14d-9 under the Exchange Act. The Company and
Acquisition each agrees to correct promptly any information provided by it for
use in the Schedule 14D-9 if and to the extent that information is or becomes
incomplete or inaccurate in any material respect and the Company will file any
necessary amendment or correction to the Schedule 14D-9 with the SEC and
disseminate the amendment or correction (or the amended or corrected Schedule
14D-9) to the Company's stockholders to the extent required by the Exchange Act
or the rules under it.
(c) In connection with the Tender Offer, the Company will promptly
furnish Acquisition with mailing labels, security position listings and any
other available listing or computer files containing the names and addresses of
the record holders or beneficial owners of shares of Common Stock as of a recent
date and the Company will furnish Acquisition with such additional information
and assistance (including, without limitation, updated lists of stockholders,
mailing labels and lists of securities positions) as Acquisition or its
representatives may reasonably request in order to communicate the Tender Offer
to the record holders and beneficial owners of the Common Stock. Subject to the
requirements of applicable law, Acquisition will hold in confidence the
information contained in any such labels, listings or files, and will use that
information only in connection with the Tender Offer and the Merger. If this
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Agreement is terminated, Acquisition will return to the Company the originals
and all copies of that information which are in Acquisition's possession.
ARTICLE 2
THE MERGER
2.1 AGREEMENT TO EFFECT MERGER. If (a) Acquisition purchases the shares
of Common Stock which are properly tendered on or before the Expiration Date in
response to the Tender Offer and not withdrawn, or Acquisition fails to purchase
those shares under circumstances which constitute a breach of Acquisition's
obligations under Article 1, or (b) Acquisition terminates the Tender Offer
without purchasing shares of Common Stock because a condition set forth on
Exhibit 1.1-D was not fulfilled, but Acquisition nonetheless notifies the
Company that Acquisition wants to be merged into the Company, and (c) the
conditions to the Merger set forth in Paragraph 6.2 are satisfied or waived,
Acquisition will take all steps in its power to cause Acquisition to be merged
into the Company (the "Merger") on the terms and with the effects set forth in
Paragraphs 2.2 through 2.9, including voting all the Common Stock and all the
Class AAA Preferred Stock of the Company ("Class AAA Preferred Stock")
beneficially owned by it in favor of adoption of this Agreement and approval of
the Merger and, if necessary to cause this Agreement to be adopted and the
Merger to be approved by the Company's stockholders, exercising warrants to
purchase a sufficient number of shares of Common Stock so Acquisition will own
at least a majority of the outstanding shares of Common Stock and voting those
shares in favor of adoption of this Agreement and approval of the Merger.
2.2 THE MERGER. In the Merger, Acquisition will be merged into the
Company, which will be the surviving corporation of the Merger (the "Surviving
Corporation"). Except as specifically provided in this Agreement, when the
Merger becomes effective, (i) the real and personal property, other assets,
rights, privileges, immunities, powers, purposes and franchises of the Company
will continue unaffected and unimpaired by the Merger, (ii) the separate
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existence of Acquisition will terminate, and Acquisition's real and personal
property, other assets, rights, privileges, immunities, powers, purposes and
franchises will be merged into the Surviving Corporation, and (iii) the Merger
will have the other effects specified in Section 259 of the Delaware General
Corporation Law (the "DGCL").
2.3 CERTIFICATE OF INCORPORATION. From the Effective Time (described in
Paragraph 3.3) until subsequently amended, the Certificate of Incorporation of
Acquisition immediately before the Effective Time will be the Certificate of
Incorporation of the Surviving Corporation, except that it will provide that the
name of the Surviving Corporation will be "The Fortress Group, Inc." That
Certificate of Incorporation, separate and apart from this Agreement, may be
certified as the Certificate of Incorporation of the Surviving Corporation.
2.4 BY-LAWS. At the Effective Time, the By-Laws of Acquisition
immediately before the Effective Time will be the By-Laws of the Surviving
Corporation, until they are altered, amended or repealed.
2.5 DIRECTORS. The directors of Acquisition immediately before the
Effective Time will be the directors of the Surviving Corporation after the
Effective Time and will hold office in accordance with the By-Laws of the
Surviving Corporation.
2.6 OFFICERS. The officers of Acquisition immediately before the
Effective Time will be the officers of the Surviving Corporation after the
Effective Time and will hold office at the pleasure of the Board of Directors of
the Surviving Corporation.
2.7 STOCK OF THE COMPANY. (a) Except as provided in subparagraph (b) or
Paragraph 2.11, at the Effective Time each share of Common Stock which is
outstanding immediately before the Effective Time will be converted into and
become the right to receive a sum in cash (the "Merger Price") equal to the
Tender Offer Price.
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(b) Each share of Common Stock held in the treasury of the Company,
and each share of Common Stock held by Acquisition or by any direct or indirect
subsidiary of the Company, immediately before the Effective Time will, at the
Effective Time, be cancelled and cease to exist and no payment will be made with
respect to any of those shares.
(c) Each share of Class AAA Preferred Stock will, at the Effective
Time, be converted into and become one share of Preferred Stock, par value $.01
per share, of the Surviving Corporation.
(d) Each share of Series E 6% Convertible Preferred Stock of the
Company ("Series E Stock") will be converted into and become the right to
receive $100 in cash plus accrued dividends.
2.8 OPTIONS AND WARRANTS. (a) Except as provided in subparagraph (b),
at the Effective Time, each option or warrant issued by the Company which is
outstanding at that time, other than the Supplemental Warrants (described in
Paragraph 4.1(g)), will become the right to receive a sum in cash equal to (i)
the amount, if any, by which the Merger Price exceeds the per share exercise
price of the option or warrant, times (ii) the number of shares of Common Stock
issuable upon exercise of the option or warrant in full. In order to receive the
amount to which a holder of an option or warrant is entitled under this
Paragraph, the holder must deliver to the Company (x) any certificate or option
agreement relating to the option or warrant and (y) a document in which the
holder acknowledges that the payment the holder is receiving is in full
satisfaction of any rights the holder may have under or with regard to the
option or warrant. Failure to deliver the items described in clauses (x) and (y)
of the preceding sentence will not, however, affect the fact that at the
Effective Time each option or warrant which is outstanding at that time will
become the right to receive in cash the sum described in the first sentence of
this subparagraph, and will no longer entitle the holder to acquire shares of
Common Stock or to
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receive anything other than the sum in cash described in the first sentence of
this subparagraph.
(b) At the Effective Time, each Supplemental Warrant will become a
warrant which entitles the holder to purchase one share of common stock of the
Surviving Corporation for $0.04.
2.9 STOCK OF ACQUISITION. At the Effective Time, each share of common
stock of Acquisition ("Acquisition common stock") which is outstanding
immediately before the Effective Time will be converted into and become one
share of common stock of the Surviving Corporation ("Surviving Corporation
Common Stock"). At the Effective Time, a certificate which represented
Acquisition common stock will automatically become and be a certificate
representing the number of shares of Surviving Corporation Common Stock into
which the Acquisition common stock represented by the certificate was converted.
2.10 PROXY STATEMENT AND STOCKHOLDERS' MEETING If the conditions
described in Paragraph 2.1 are satisfied and approval of the Merger by the
Company's stockholders is required by applicable law or by the rules of a stock
exchange or securities quotation system on which the Common Stock is listed or
quoted, the Company will cause its stockholders to vote on, or seek their
consent to, a proposal to approve the Merger as promptly as practicable after
the Expiration Date or after the expiration of any subsequent offering period.
If a proxy statement relating to the Merger (the "Proxy Statement") must be
filed with the SEC, the Company will (i) file the Proxy Statement with the SEC
as promptly as practicable after the Expiration Date or the end of any
subsequent offering period, (ii) use its best efforts to cause review of the
Proxy Statement by the SEC staff to be completed as promptly as practicable,
(iii) describe in the Proxy Statement the recommendation of its Board of
Directors that the Company's stockholders vote to adopt this Agreement and
approve the Merger (except that, if
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the Board, after consultation with its counsel about the Board's fiduciary
obligations, determines in good faith to withdraw, modify or amend that
recommendation, because the failure to do so could reasonably be expected to
violate the directors' fiduciary duties under applicable law, that withdrawal,
modification or amendment will be described in the Proxy Statement), (iv) as
promptly as practicable, and in any event within 5 days after the Company is
informed that the SEC staff has no further comments about the Proxy Statement,
cause the Proxy Statement to be mailed to its stockholders and (v) cause a
stockholders meeting at which the Company's stockholders will be asked to vote
upon the Merger (the "Stockholders Meeting") to be held not later than the 30th
day after the day on which the Proxy Statement is mailed.
(a) Acquisition will supply to the Company all information in
Acquisition's possession, including any required financial statements of
Acquisition, which the Company is required to include in the Proxy Statement and
in all other respects cooperate with the Company in its efforts to file the
Proxy Statement with the SEC and cause review of the Proxy Statement to be
completed as promptly as practicable after it is filed with the SEC.
2.11 DISSENTING SHARES. (a) If Section 262 of the DGCL applies to the
Merger, notwithstanding any provision of this Agreement to the contrary, Common
Stock that is outstanding immediately prior to the Effective Time which is held
by stockholders who have complied with Section 262 of the DGCL (including making
a timely demand for appraisal and not voting in favor of or consenting to the
Merger) will not be converted into the right to receive the Merger Price.
Instead, if the Merger takes place, the Surviving Corporation will pay the
holders of those shares the fair value of the shares determined as provided in
Section 262 of the DGCL. Shares held by stockholders who fail to perfect, or who
otherwise properly withdraw or lose, their rights to receive the fair value of
their shares determined as provided in Section 262 of the DGCL will be deemed to
have been converted, at the later of the Effective Time or the time the
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stockholders withdraw or lose their rights to receive the fair value of their
shares, into the right to receive the Merger Price, without any interest.
(b) The Company will promptly give Acquisition (i) notice of any
demands for appraisal received by the Company, any withdrawals of any such
demands, and any other material communications required by, or relating to,
Section 262 of the DGCL which the Company receives and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under Section 262 of the DGCL. The Company will not, except with the prior
written consent of Acquisition (or, after the Effective Time, Lennar),
voluntarily make any payment with respect to any demand for payment of the fair
value of shares or offer to settle or settle any such demand.
2.12 PAYMENT FOR SHARES AND OPTIONS. (a) Prior to the Effective Time,
Acquisition will designate a bank or trust company reasonably acceptable to the
Company to act as Paying Agent in connection with the Merger (the "Paying
Agent"). At, or immediately before, the Effective Time, Acquisition or the
Surviving Corporation will provide the Paying Agent with the funds necessary to
make the payments contemplated by Paragraphs 2.7 and 2.8 and an instruction
that, except as provided in subparagraph (e), the Paying Agent is not to use the
funds for any purpose other than to make those payments. Until used for that
purpose, the funds will be invested by the Paying Agent, as directed by the
Surviving Corporation, in obligations of or guaranteed by the United States of
America or obligations of an agency of the United States of America which are
backed by the full faith and credit of the United States of America, in
commercial paper obligations rated A-1 or P-1 or better by Xxxxx'x Investors
Services Inc. or Standard & Poors' Corporation, or in deposit accounts,
certificates of deposit or banker's acceptances of, repurchase or reverse
repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks, each of which has capital, surplus and undivided profits
aggregating more than $500 million (based on the most recent financial
statements of the
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banks which are then publicly available at the SEC or otherwise). All those
investments will be readily marketable, except that up to 50% of them may be
non-marketable investments which will mature within less than 30 days. To the
extent the sum held by the Paying Agent is not sufficient to permit the Paying
Agent to make all the payments required by Paragraphs 2.7 and 2.8, the Surviving
Corporation or Lennar will provide the Paying Agent with the additional funds
which are required.
(b) Promptly after the Effective Time, the Surviving Corporation
will cause the Paying Agent to mail to each person who was a record holder of
Common Stock at the Effective Time a form of letter of transmittal (including
instructions) for use in effecting the surrender of stock certificates
representing Common Stock ("Certificates") in order to receive payment of the
Merger Price. When the Paying Agent receives a Certificate, together with a
properly completed and executed letter of transmittal and any other required
documents, the Paying Agent will pay to the holder of the shares represented by
the Certificate, or as otherwise directed in the letter of transmittal, the
Merger Price with regard to those shares, and the Certificate will be cancelled.
No interest will be paid or accrued on the cash payable upon the surrender of
Certificates. If payment is to be made to a person other than the person in
whose name a surrendered Certificate is registered, the surrendered Certificate
must be properly endorsed or otherwise be in proper form for transfer, and the
person who surrenders the Certificate must provide funds for payment of any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the surrendered Certificate or establish to the
satisfaction of the Surviving Corporation that the tax has been paid. After the
Effective Time, a Certificate which has not been surrendered will represent only
the right to receive the Merger Price, without any interest.
(c) The Paying Agent may withhold from the sum payable to any
person as a result of the Merger, and pay to the appropriate taxing authorities,
any amounts which the
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Paying Agent or Acquisition is required (or reasonably believes it is required)
to withhold under the Internal Revenue Code of 1986, as amended (the "Code"), or
any provision of state, local or foreign tax law. Any sum which is withheld and
paid to a taxing authority as permitted by this Paragraph will be deemed to have
been paid to the person with regard to whom it is withheld.
(d) If a Certificate has been lost, stolen or destroyed, the
Surviving Corporation will accept an affidavit and indemnification reasonably
satisfactory to it instead of the Certificate.
(e) At any time which is more than six months after the Effective
Time, the Surviving Corporation may require the Paying Agent to deliver to it,
promptly after a demand by the Surviving Corporation, any funds which had been
made available to the Paying Agent and have not been disbursed to holders of
shares of Common Stock (including, without limitation, interest and other income
received by the Paying Agent in respect of the funds made available to it), and
after the funds have been delivered to the Surviving Corporation, former
stockholders of the Company who have not yet surrendered the Certificates they
were holding, must look to the Surviving Corporation (and only to the Surviving
Corporation) for payment of the Merger Price upon surrender of those
Certificates. Neither the Surviving Corporation nor the Paying Agent will be
liable to any former stockholder of the Company for any Merger consideration
which is delivered to a public official pursuant to any abandoned property,
escheat or similar law.
(f) After the Effective Time, the Surviving Corporation will not
record any transfers of shares of Common Stock on the stock transfer books of
the Company or the Surviving Corporation, and the stock ledger of the Company
will be closed. If, after the Effective Time, Certificates are presented for
transfer, they will be cancelled and treated as having been surrendered for the
Merger Price.
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ARTICLE 3
EFFECTIVE TIME OF MERGER
3.1 DATE OF THE MERGER. The day on which the Merger is to take place
(the "Merger Date") will be (a) the business day after the day on which the
Merger is approved by the holders of a majority of the outstanding shares of
Common Stock or (b) if approval of the Merger by the Company's stockholders is
not required by applicable law or by the rules of a securities exchange or
securities quotation system on which the Common stock is listed or quoted, a day
designated by Acquisition which will be not later than the later of August 1,
2002 or the fifth business day after the Expiration Date. The Merger Date may be
changed with the consent of the Company and Acquisition.
3.2 EXECUTION OF CERTIFICATE OF MERGER. Not later than 3:00 P.M. New
York City time on the day before the Merger Date, (a) Acquisition and the
Company will each execute a certificate of merger (the "Certificate of Merger")
substantially in the form of Exhibit 3.2 and deliver it to Xxxxxxxx Chance
Xxxxxx & Xxxxx LLP for filing with the Secretary of State of Delaware. If all
the conditions in Article 6 are fulfilled or waived, Acquisition will cause the
Certificate of Merger to be filed with the Secretary of State of Delaware on the
Merger Date or as soon after that date as is practicable.
3.3 EFFECTIVE TIME OF THE MERGER. The Merger will become effective at
11:59 P.M. on the day on which the Certificate of Merger is filed with the
Secretary of State of Delaware (that being the "Effective Time").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Acquisition as follows:
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(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
(b) The Company has all corporate power and authority necessary to
enable it to enter into this Agreement and carry out the transactions
contemplated by this Agreement. All corporate actions necessary to authorize the
Company to enter into this Agreement and carry out the transactions contemplated
by it, other than adoption of this Agreement by the stockholders of the Company,
have been taken. This Agreement has been duly executed by the Company and is a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(c) Except as shown on Schedule 4.1-C, neither the execution and
delivery of this Agreement or of any document to be delivered in accordance with
this Agreement nor the consummation of the transactions contemplated by this
Agreement or by any document to be delivered in accordance with this Agreement
will violate, result in a breach of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, the
Certificate of Incorporation or By-Laws of the Company, any agreement or
instrument to which the Company or any subsidiary of the Company is a party or
by which any of them is bound, any law, or any order, rule or regulation of any
court or governmental agency or other regulatory organization having
jurisdiction over the Company or any of its subsidiaries, except breaches or
defaults which (i) could not reasonably be expected, individually or in
aggregate, to have a Material Adverse Effect on the Company, (ii) would not be a
basis for preventing or delaying the expiration of the Tender Offer or
Acquisition's purchase of the shares which are tendered in response to the
Tender Offer, and (iii) would not result in liability of Lennar or of the Buyer.
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(d) No governmental filings, authorizations, approvals, or
consents, or other governmental actions, other than those expressly described in
this Agreement, are required to permit the Company to fulfill all its
obligations under this Agreement.
(e) The Company and each of its subsidiaries is qualified to do
business as a foreign corporation in each state in which it is required to be
qualified, except states in which the failure to qualify, in the aggregate,
would not have a Material Adverse Effect upon the Company. As used in this
Agreement, the term "Material Adverse Effect" upon a company means a material
adverse effect upon (i) the consolidated financial position of that company and
its subsidiaries taken as a whole, or (ii) the consolidated results of
operations of that company and its subsidiaries taken as a whole compared with
the consolidated results of their operations during the same period of the prior
year. For the purposes of the definition of Material Adverse Effect, (x) an
adverse change in financial condition will be material if it is a reduction of
5% or more in working capital, tangible net worth or net asset value, and (y) an
adverse change in results of operations will be material if it is a reduction of
5% or more in total revenues, net income before income taxes, net income, or
earnings before interest, taxes, depreciation and amortization.
(f) The only authorized stock of the Company is 99,000,000 shares
(which the Company has proposed reducing to 14,000,000 shares) of Common Stock,
par value $.01 per share, and 1,000,000 shares of preferred stock, par value
$.01 per share. At the date of this Agreement, the only outstanding stock of the
Company is not more than 3,130,000 shares of Common Stock, not more than 28,500
shares of Class AAA Preferred Stock and not more than 800 shares of Series E
Stock. All those shares have been duly authorized and issued and are fully paid
and non-assessable. Except as shown on Schedule 4.1-F, the Company has not
issued any options, warrants or convertible or exchangeable securities which are
outstanding, and is not a party to any other agreements, which require, or upon
the passage of time, the
15
payment of money or the occurrence of any other event may require, the Company
to issue or sell any of its stock.
(g) The Certificate of Designations relating to the Class AAA
Preferred Stock is in the form of Exhibit 4.1-G(1), and the Warrant Agreement
relating to the Supplemental Warrants described on Schedule 4.1-F (the
"Supplemental Warrants") is in the form of Exhibit 4.1-G(2) (including the
amendments in letter agreements between the Company and Prometheus dated March
29, 2001, October 25, 2001, January 28, 2002 and March 20, 2002, a letter
agreement between the Company and Short dated October 25, 2001 and a Recognition
Agreement among the Company, Prometheus and Short dated July 31, 2001).
(h) The Board has approved (i) the acquisition by Acquisition or
another wholly owned subsidiary of Lennar of (x) Class AAA Preferred Stock,
Supplemental Warrants and Common Stock as contemplated by a Securities Purchase
Agreement in the form of Exhibit 4.1-H dated the same date as this Agreement
among Acquisition, Lennar, Prometheus and Xxxxxx Xxxxx (the "Securities Purchase
Agreement"), (y) Common Stock as contemplated by this Agreement and (z) Common
Stock upon exercise of Supplemental Warrants, and (ii) any other acquisitions of
stock or other securities of the Company by Lennar or any of its subsidiaries
which take place after completion of the closing under the Securities Purchase
Agreement. Because of that approval, none of (A) any of the transactions which
is the subject of the Securities Purchase Agreement, (B) any of the transactions
which is the subject of this Agreement or (C) the acquisition of Common Stock by
Acquisition through exercise of Supplemental Warrants, will cause Acquisition or
Lennar to be subject to the restrictions upon business combinations contained in
Section 203 of the DGCL.
(i) Except as shown on Schedule 4.1-I, (i) each of the corporations
and other entities of which the Company owns directly or indirectly more than
50% of the equity (each
16
corporation or other entity of which a company owns directly or indirectly more
than 50% of the equity being a "subsidiary" of that company) has been duly
incorporated, and is validly existing and in good standing, under the laws of
its state of incorporation or formation, except to the extent failures of
subsidiaries to be in good standing would not, individually or in aggregate,
have a Material Adverse Effect upon the Company, (ii) all the shares of stock of
each of the Company's subsidiaries which are owned by the Company or any of its
subsidiaries are duly authorized and validly issued and, with regard to stock of
corporations or other equity interests in limited liability entities, fully paid
and non-assessable, and are not subject to any preemptive rights, and (iii)
neither the Company nor any of its subsidiaries has issued any options, warrants
or convertible or exchangeable securities, or is a party to any other
agreements, which require, or upon the passage of time, the payment of money or
the occurrence of any other event may require, the Company or any subsidiary to
issue or sell any stock or other equity interests in any of the Company's
subsidiaries (other than to the Company or to wholly owned subsidiaries of the
Company), and there are no registration covenants or transfer or voting
restrictions with respect to outstanding securities of any of the Company's
subsidiaries.
(j) Since January 1, 1999, the Company has filed with the SEC all
forms, statements, reports and documents it has been required to file under the
Securities Act of 1933, as amended, the Exchange Act or the rules under either
of them.
(k) The Company's Annual Report on Form 10-K for the year ended
December 31, 2001 (the "Company 10-K") and its Report on Form 10-Q for the
period ended March 31, 2002 (the "March 31 10-Q") which were filed with the SEC,
including the documents incorporated by reference in each of them, each
contained in all material respects all the information required to be included
in it and, when it was filed, did not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made in it, in light of the circumstances under which they were made, not
17
misleading. Without limiting what is said in the preceding sentence, the
financial statements included in the Company 10-K all were prepared, and the
financial information included in the March 31 10-Q was derived from financial
statements which were prepared, in accordance with accounting principles
generally accepted in the United States ("GAAP") applied (except as set forth in
the notes to them) on a consistent basis, except that financial information
included in the March 31 10-Q does not contain notes and is subject to normal
year end adjustments, and those financial statements present fairly, in all
material respects, in accordance with GAAP the consolidated financial condition
and the consolidated results of operations of the Company and its subsidiaries
at the dates, and for the periods, to which they relate. The Company has not
filed, or been required to file, any reports with the SEC with regard to any
period which ended, or any event which occurred, after March 31, 2002.
(l) Except as disclosed in the March 31 10-Q or in Schedule 4.1-L,
since December 31, 2001, (i) the Company and its subsidiaries have conducted
their businesses in the ordinary course consistent with the manner in which they
were conducted prior to December 31, 2001, (ii) there has not been a material
adverse change in the financial condition, results of operations, business or
prospects of the Company and its subsidiaries taken as a whole, other than as a
result of changes in general economic conditions or conditions generally in the
homebuilding industry and (iii) nothing has occurred, other than changes in
general economic conditions or conditions generally in the homebuilding
industry, which is likely to have a Material Adverse Effect on the Company.
(m) Except as shown on Schedule 4.1-M, neither the Company nor any
of its subsidiaries (i) owns any equity interests in any entities whose
financial statements are not included in the consolidated financial statements
Company and its subsidiaries to which the Company or any of its subsidiaries has
made capital contributions or otherwise transferred assets with a value totaling
more than $100,000 as to any single entity or more than $200,000 in
18
total, or (ii) is a guarantor of (other than by reason of endorsements for
collection in the ordinary course), or may otherwise be obligated with regard
to, indebtedness of any entity whose financial statements are not included in
the consolidated financial statements of the Company and its subsidiaries
totaling more than $100,000 as to any single entity or more than $200,000 in
total. If the financial statements of all the entities listed, or which should
have been listed, on Schedule 4.1-M had been included in the consolidated
financial statements of the Company and its subsidiaries, and all the
indebtedness guaranteed by the Company, or for which the Company may otherwise
be obligated, which is, or should have been, listed on Schedule 4.1-M were
treated as liabilities on those financial statements, there would not have been
a material effect on any of the consolidated current assets, total assets, net
working capital, current liabilities, total liabilities or net worth of the
Company and its subsidiaries at December 31, 2001 or at March 31, 2002, or on
their consolidated revenues, net income or earnings before interest, taxes,
depreciation and amortization during the year ended December 31, 2001 or the
three months ended March 31, 2002.
(n) The assets of the Company and its subsidiaries constitute, in
the aggregate, all the material assets necessary for the conduct of their
businesses as they currently are being conducted.
(o) The Company and its subsidiaries have at all times complied,
and currently are complying, with all applicable Federal, state, local and
foreign laws and regulations, except failures to comply which would not
reasonably be expected, in the aggregate, to have a Material Adverse Effect on
the Company.
(p) Except as set forth on Schedule 4-1-P, the Company and its
subsidiaries have all licenses and permits which are required at the date of
this Agreement to enable them to conduct their businesses as they currently are
being conducted, except licenses or permits the
19
lack of which would not reasonably be expected, in the aggregate, to have a
Material Adverse Effect on the Company.
(q) The Company and each of its subsidiaries has filed when due
(taking account of extensions) all Tax Returns which it has been required to
file (other than Tax Returns relating to Taxes which will be immaterial in
amount and as to which the delinquency in filings will not lead to significant
interest or penalties) and has paid all Taxes shown on those returns to be due.
Those Tax Returns are correct and complete in all material respects and
accurately reflect all Taxes required to have been paid, except to the extent of
items which may be disputed by applicable taxing authorities but for which there
is substantial authority to support the position taken by the Company or the
subsidiary and which have been adequately reserved against in accordance with
GAAP on the balance sheet at March 31, 2002, included in the March 31 10-Q.
Except as shown on Schedule 4.1-Q, at the date of this Agreement, (i) no
extension of time given by the Company or any of its subsidiaries for completion
of the audit of any of its Tax Returns is in effect, (ii) no tax lien which is
currently in effect has been filed by any taxing authority against the Company
or any of its subsidiaries or any of their assets, (iii) no Federal, state or
local audits or other administrative proceedings or court proceedings with
regard to Taxes are presently pending with regard to the Company or any of its
subsidiaries, (iv) neither the Company nor any subsidiary is a party to any
agreement providing for the allocation or sharing of Taxes (other than
agreements among the Company and wholly owned subsidiaries), (v) neither the
Company nor any subsidiary has participated in or cooperated with an
international boycott as that term is used in Section 999 of the Code, (vi)
neither the Company nor any subsidiary is liable as a transferee, a successor or
otherwise for any Tax incurred by any other person (other than liabilities of
members of the Company's affiliated group for taxes resulting from activities of
other members of that affiliated group), (vii) the Company is not required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason
20
of a voluntary change in accounting method and the IRS is not seeking to cause
the Company to make a change in accounting method, (viii) neither the Company
nor any subsidiary has filed a consent pursuant to Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
Subsection (f) asset (as that term is defined in Section 341(f)(4) of the Code)
owned by the Company or any subsidiary and (ix) there is no material
intercompany income or gain which may in the future become taxable to the
Company, whether on disposition of particular subsidiaries or otherwise. For the
purposes of this Agreement, the term "Taxes" means all taxes (including, but not
limited to, withholding taxes), assessments, fees, levies and other governmental
charges, and any related interest or penalties. For the purposes of this
Agreement, the term "Tax Return" means any report, return or other information
required to be supplied to a taxing authority in connection with Taxes.
(r) Except as would not reasonably be expected to have, in
aggregate, a Material Adverse Effect upon the Company or to interfere in a
material respect with the use by the Company or its subsidiaries of properties
which are material to them, (i) the Company and its subsidiaries have all
environmental permits which are necessary to enable them to conduct their
businesses as they currently are being conducted without violating any
Environmental Laws, (ii) neither the Company nor any subsidiary has received any
notice of noncompliance or liability under any Environmental Law, (iii) neither
the Company nor any subsidiary has performed any acts, including but not limited
to releasing, storing or disposing of hazardous materials, there is no condition
on any property owned or leased by the Company or a subsidiary, and there was no
condition on any property formerly owned or leased by the Company or a
subsidiary while the Company or a subsidiary owned or leased that property, and
(iv) except as shown on Schedule 4.1-R, neither the Company nor any subsidiary
is subject to any order of any court or governmental agency requiring the
Company or any subsidiary to take, or refrain from taking, any actions in order
to comply with any Environmental Law and no action
21
or proceeding seeking such an order is pending or, insofar as any officer of the
Company is aware, threatened against the Company. As used in this Agreement, the
term "Environmental Law" means any Federal, state or local law, rule,
regulation, guideline or other legally enforceable requirement of a governmental
authority relating to protection of the environment or to environmental
conditions which affect human health or safety.
(s) Except as shown on Schedule 4.1-S, there are no contracts,
agreements or other arrangements which could result in the payment by the
Company or by any subsidiary of an "Excess Parachute Payment" as that term is
used in Section 280G of the Code or the payment by the Company or any of its
subsidiaries of compensation which will not be deductible because of Section
162(m) of the Code.
(t) Except as described on Schedule 4.1-T, at the date of this
Agreement, neither the Company nor any of its subsidiaries is a party to any
litigation.
(u) Neither the Schedule 14D-9 nor any information supplied in
writing by the Company for inclusion in the Offering Documents will, at the
respective times the Schedule 14D-9 and the Schedule TO are filed with the SEC
and first published, sent or given to the Company's stockholders, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated or included in it or necessary in order to make the statements made or
included in it, in light of the circumstances under which they are made, not
misleading. On the day, if any, on which the Proxy Statement is mailed to the
Company's stockholders and on the day of the Stockholders Meeting, if there is
one, the Proxy Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated in it or necessary in
order to make the statements in it, in light of the circumstances under which
they are made, not misleading or necessary to correct any statement in any
earlier communication by the Company with respect to the Stockholders Meeting or
the solicitation of proxies to be
22
used at the Stockholders Meeting. However, the Company does not make any
representations or warranties with respect to information supplied by
Acquisition or any of its affiliates or representatives for inclusion in the
Schedule 14D-9 or the Proxy Statement, or with respect to the Offering Documents
(except to the extent of information supplied by the Company for inclusion in
the Offering Documents). The Schedule 14D-9 and the Proxy Statement each will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules under it.
4.2 REPRESENTATIONS AND WARRANTIES OF LENNAR AND ACQUISITION. Lennar
and Acquisition jointly and severally represent and warrant to the Company as
follows:
(a) Each of Lennar and Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) Each of Lennar and Acquisition has all corporate power and
authority necessary to enable it to enter into this Agreement and carry out the
transactions contemplated by this Agreement. All corporate actions necessary to
authorize Acquisition to enter into this Agreement and carry out the
transactions contemplated by it have been taken. This Agreement has been duly
executed by Acquisition and is a valid and binding agreement of Acquisition,
enforceable against Acquisition in accordance with its terms.
(c) Neither the execution or delivery of this Agreement or of any
document to be delivered in accordance with this Agreement nor the consummation
of the transactions contemplated by this Agreement or by any document to be
delivered in accordance with this Agreement will violate, result in a breach of,
or constitute a default (or an event which, with notice or lapse of time or both
would constitute a default) under, the Certificate of Incorporation or By-Laws
of Lennar or Acquisition, any agreement or instrument to which Lennar,
Acquisition or any other subsidiary of Lennar, is a party or by which any of
them is bound, any law, or any
23
order, rule or regulation of any court or governmental agency or other
regulatory organization having jurisdiction over Lennar, Acquisition or any
other subsidiary of Lennar, except violations or breaches of, or defaults under,
agreements or instruments which would not have a Material Adverse Effect on the
Company or adversely affect the ability of Lennar or Acquisition to consummate
the transactions contemplated by this Agreement.
(d) No governmental filings, authorizations, approvals or consents,
or other governmental actions are required to permit Acquisition to fulfill all
its obligations under this Agreement.
(e) Acquisition was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement. Acquisition has not, and on the
Effective Date will not have, engaged in any activities or incurred, directly or
indirectly, any obligations or liabilities, except the activities relating to or
contemplated by this Agreement and obligations or liabilities incurred in
connection with those activities and with the transactions contemplated by this
Agreement.
(f) Neither any of the Offer Documents nor any information supplied
by Acquisition in writing for inclusion in the Schedule 14D-9 will, at the
respective times the Schedule TO and the Schedule 14D-9 are filed with the SEC
and first published, sent or given to the Company's stockholders, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated or included in it or necessary in order to make the statements made or
included in it, in light of the circumstances under which they are made, not
misleading. On the day, if any, on which the Proxy Statement described in
Paragraph 2.10 is mailed to the Company's stockholders and on the day of the
Stockholders Meeting, if there is one, none of the information supplied by
Acquisition for inclusion in the Proxy Statement will contain an untrue
statement of a material fact or omit to state a material fact required to be
stated or included in it or necessary in order to make the statements made or
included in it, in light of the
24
circumstances under which they are made, not misleading or necessary to correct
any statement by Acquisition in any earlier communication with respect to the
Stockholders Meeting or the solicitation of proxies to be used at the
Stockholders Meeting. However, Acquisition does not make any representations or
warranties with respect to information supplied by the Company or any of its
affiliates or representatives for inclusion in the Offering Documents, or with
respect to the Schedule 14D-9 or the Proxy Statement (except to the extent of
information supplied by Acquisition for inclusion in the Schedule 14D-9 or the
Proxy Statement). The Offering Documents will comply as to form in all material
respects with the requirements of the Exchange Act and the rules under it.
(g) Acquisition is wholly owned by Lennar. Lennar has, and will
provide to Acquisition, sufficient funds to enable Acquisition to purchase and
pay for in a timely manner all the Common Stock which is tendered in response to
the Tender Offer and to enable Acquisition to fulfill in a timely manner all its
obligations with regard to the Merger and all its other obligations under this
Agreement.
(h) Neither Acquisition nor Lennar is the subject of any suit or
governmental proceeding, or subject to any order of any governmental agency,
which seeks to prevent Acquisition from completing, or could reasonably be
expected materially and adversely to effect Acquisition's ability to complete,
the transactions which are the subject of this Agreement, nor, to the best of
Lennar's or Acquisition's knowledge, has any such suit or proceeding been
threatened.
4.3 TERMINATION OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties in Paragraphs 4.1, 4.2 and 8.1 will terminate when Acquisition
completes the purchase of Class AAA Preferred Stock, Common Stock and
Supplemental Warrants at the
25
closing under the Securities Purchase Agreement (the "Securities Purchase"), and
after that time, none of the Company, Lennar or Acquisition, nor any of their
respective stockholders, will have any rights or claims, other than for
intentional fraud, as a result of any of those representations and warranties.
Acquisition will notify the Company in writing when it completes the Securities
Purchase.
ARTICLE 5
ACTIONS PRIOR TO THE MERGER
5.1 COMPANY'S ACTIVITIES UNTIL EFFECTIVE TIME. From the date of this
Agreement until the earlier of the Effective Time or the time this Agreement is
terminated in accordance with Article 7, the Company will, and will cause each
of its subsidiaries to, except with the written consent of Acquisition:
(a) Operate its business in the ordinary course and in a manner
consistent with the manner in which it is being operated at the date of this
Agreement.
(b) Take all commercially reasonable steps available to it to
maintain the goodwill of its business and, except as otherwise requested by
Acquisition, the continued employment of its executives and other key employees.
(c) At its expense, maintain its assets in good repair and
condition, except to the extent of reasonable wear and use and damage by fire or
other unavoidable casualty.
(d) Not make any borrowings other than borrowings in the ordinary
course of business under working capital lines which are disclosed in the notes
to the consolidated balance sheet at December 31, 2001 included in the Company
10-K or the consolidated balance sheet at March 31, 2002 included in the March
31 10-Q.
26
(e) Not enter into any contractual commitments involving capital
expenditures, loans or advances, and not voluntarily incur any contingent
liabilities, except in each case in the ordinary course of business.
(f) Not redeem or purchase any of its stock and not declare or pay
any dividends, or make any other distributions or repayments of debt to its
stockholders (other than payments by subsidiaries of the Company to the Company
or to other wholly owned subsidiaries of the Company and other than scheduled
payments of debt to unrelated creditors, none of which owns 5% or more of any
class or series of the Company's stock).
(g) Not 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.
(h) Except as required by law or changes in GAAP, maintain its
books of account and records in all material respects in the usual manner, in
accordance with GAAP applied on a consistent basis, subject to normal year-end
adjustments and accruals.
(i) Comply in all material respects with all applicable laws and
regulations of governmental agencies.
(j) Not purchase, sell, dispose of or encumber any property or
assets, or engage in any activities or transactions, except (i) construction,
sale and delivery of homes, and provision of mortgage financing to homebuyers,
in the ordinary course of business, and directly related activities, (ii)
purchases or sales of homesites (either land or finished lots) required by
contracts which are in effect at the date of this Agreement, (iii) a sale of the
Company's operations in Texas known as Wilshire Homes ("Wilshire Homes") for not
less than $23 million and (iv) a sale of assets related to homesites in the
Victoria Crossing community in New Jersey
27
to The Xxxxx Company as part of the sale of Xxxxxxxxx Homes which was
substantially completed in February 2002.
(k) Not enter into or, except as required by law, amend any
employment, severance or similar agreements or arrangements, or increase the
salaries of any employees, other than through normal annual increases averaging
not more than 5%.
(l) Not adopt, become an employer with regard to, or, except as
required by law, amend any employee compensation, employee benefit or
post-employment benefit plan.
(m) Not amend its certificate of incorporation or by-laws or adopt
a certificate of designations creating a class or series of preferred stock.
(n) Not (i) issue or sell any of its stock (except upon exercise of
options or warrants which are outstanding on the date of this Agreement) or any
options, warrants or convertible or exchangeable securities or (ii) split,
combine, or reclassify its outstanding stock.
(o) Not authorize or enter into any agreement to take any of the
actions referred to in subparagraphs (a ) through (n) above.
5.2 NO LENNAR INVOLVEMENT IN MANAGEMENT. Lennar will not (i) until the
earlier of the Expiration Date or the time this Agreement is terminated in
accordance with Article 7, attempt to cause anybody to be elected to, or removed
from, the Company's Board of Directors or (ii) until the earlier of the
Effective Time or the time this Agreement is terminated in accordance with
Article 7, (x) attempt to cause persons designated by it who are not directors
of the Company at the date of this Agreement to be elected to a majority of the
positions on the Company's Board of Directors or (y) attempt to change the way
in which the Company is managed.
28
5.3 NO SOLICITATION OF OFFERS; NOTICE OF PROPOSALS FROM OTHERS. (a) The
Company will not, and will not authorize or, insofar as it is within the
Company's control, permit its or any of its subsidiaries' officers, directors,
employees, agents or representatives (including any investment banker, attorney
or accountant retained by it or by any of its subsidiaries) directly or
indirectly to initiate, solicit, encourage or otherwise facilitate any inquiry
or the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving the Company, or
any purchase of or tender offer for, all or any significant portion of the
Company's equity securities or any significant portion of the assets of the
Company and its subsidiaries on a consolidated basis, other than Wilshire Homes
(each of these being an "Acquisition Proposal").
(b) Subparagraph (a) will not prevent the Company from, in response
to an Acquisition Proposal which the Company receives despite complying with
subparagraph (a) and which the Company's Board determines, in good faith after
consultation with its independent financial advisor, would result (if
consummated in accordance with its terms) in a transaction which (i) would
result in the Company's stockholders' receiving consideration with a value per
share of Common Stock which is greater than the Tender Offer Price and (ii)
would be more favorable to the Company's stockholders than the Tender Offer and
the Merger, furnishing non-public information (after receipt of a
confidentiality agreement in customary form) to the person, entity or group (the
"Potential Acquiror") which makes the Acquisition Proposal and entering into
discussions and negotiations with that Potential Acquiror.
(c) If the Company receives an Acquisition Proposal, or the Company
learns that someone other than Acquisition is contemplating soliciting tenders
of Common Stock or otherwise proposes to acquire the Company or a substantial
portion of its Common Stock or assets (other than in the ordinary course of
business) if the Company's stockholders do not
29
tender their Common Stock to Acquisition or do not approve the Merger, the
Company will promptly notify Acquisition of that fact and provide Acquisition
with all information in the Company's possession which Acquisition reasonably
requests regarding the Acquisition Proposal, solicitation of tenders or other
proposed transaction, and the Company will promptly, from time to time, provide
Acquisition with any additional information (other than immaterial details) the
Company obtains regarding the Acquisition Proposal, the solicitation of tenders
or the other proposed transaction.
5.4 ACQUISITION'S EFFORTS TO FULFILL CONDITIONS. Acquisition and Lennar
each will use its best efforts (including, but not limited to, fulfilling its
obligations under Paragraphs 2.1 and 2.10) to cause all the conditions set forth
in Paragraph 6.1 to be fulfilled on or before the Merger Date, and will not take
or fail to take any action that could reasonably be expected to result in those
conditions not being fulfilled.
5.5 COMPANY'S EFFORTS TO FULFILL CONDITIONS. The Company will use its
best efforts (including, but not limited to, fulfilling its obligations under
Paragraph 2.10) to cause all the conditions set forth in Paragraph 6.2 to be
fulfilled on or before the Merger Date, and will not take or fail to take any
action that could reasonably be expected to result in those conditions not being
fulfilled.
ARTICLE 6
CONDITIONS PRECEDENT TO MERGER
6.1 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the
Company to complete the Merger are subject to satisfaction of the following
conditions (any or all of which may be waived by the Company):
(a) Acquisition and Lennar will have fulfilled all their
obligations under this Agreement required to have been fulfilled on or before
the Merger Date, except failures which
30
(i) would not, in the aggregate, materially impair or delay the ability of
Acquisition and the Company to effect the Merger and (ii) would not have, or
reasonably be expected to have, a Material Adverse Effect on the Company, or
which (iii) have been caused by or result from a breach of this Agreement by the
Company.
(b) No order will have been entered by any court or governmental
authority which has jurisdiction over the Company and be in force which
invalidates this Agreement or restrains the Company from completing the
transactions which are the subject of this Agreement
(c) If approval of the Merger by the Company's stockholders is
required by applicable law or by the rules of any securities exchange or
quotation system on which the Common Stock is listed or quoted, the Merger will
have been approved by the holders of a majority of the outstanding shares of
Common Stock.
6.2 CONDITIONS TO ACQUISITION'S OBLIGATIONS. The obligations of
Acquisition to complete the Merger are subject to the following conditions (any
or all of which may be waived by Acquisition):
(a) The Company will have fulfilled in all material respects all
its obligations under this Agreement required to have been fulfilled on or
before the Merger Date, except failures which (i) would not, in the aggregate,
materially impair or delay the ability of Acquisition and the Company to effect
the Merger and (ii) would not have, or reasonably be expected to have, a
Material Adverse Effect on the Company, or which (iii) have been caused by or
result from a breach of this Agreement by Lennar or Acquisition.
(b) No order will have been entered by any court or governmental
authority which has jurisdiction over Acquisition, Lennar or the Company and be
in force which invalidates
31
this Agreement or restrains Lennar or Acquisition from completing the
transactions which are the subject of this Agreement.
(c) If approval of the Merger by the Company's stockholders is
required by applicable law or by the rules of any securities exchange or
quotation system on which the Common Stock is listed or quoted, the Merger will
have been approved by the holders of at least a majority of the outstanding
shares of Common Stock.
ARTICLE 7
TERMINATION
7.1 RIGHT TO TERMINATE. This Agreement may be terminated at any time
prior to the Effective Time (whether or not the Company's stockholders have
approved the Merger):
(a) By mutual consent of the Company and Acquisition.
(b) By the Company, before Acquisition completes the Securities
Purchase, if it is determined that any of the representations or warranties of
Acquisition contained in this Agreement was not complete and accurate in all
material respects (or, with respect to representations and warranties which are
limited to items which are material or will have a Material Adverse Effect, in
all respects) on the date of this Agreement.
(c) By the Company if any of the conditions in Paragraph 6.1 is not
satisfied or waived by the Company on or before the Merger Date and, in the case
of the condition in Paragraph 6.1(b), if the order has become final and
non-appealable.
(d) By Acquisition, before Acquisition completes the Securities
Purchase, if it is determined that any of the representations or warranties of
the Company contained in this Agreement was not complete and accurate in all
material respects (or, with respect to
32
representations and warranties which are limited to items which are material or
will have a Material Adverse Effect, in all respects) on the date of this
Agreement.
(e) By Acquisition if any of the conditions in Paragraph 6.2 is not
satisfied or waived by Acquisition on or before the Merger Date and, in the case
of the condition in Paragraph 6.2(b), if the order has become final and
non-appealable .
7.2 MANNER OF TERMINATING AGREEMENT If at any time the Company or
Acquisition has the right under Paragraph 7.1 to terminate this Agreement, it
can terminate this Agreement by a notice to the other of them that it is
terminating this Agreement.
7.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Paragraph 7.1, after this Agreement is terminated, neither party will have any
further rights or obligations under this Agreement. Nothing contained in this
Paragraph will, however, relieve either party of liability for any breach of
this Agreement which occurs before this Agreement is terminated.
ARTICLE 8
ABSENCE OF BROKERS
8.1 REPRESENTATIONS AND WARRANTIES REGARDING BROKERS AND OTHERS. The
Company represents and warrants to Acquisition and Lennar, and each of
Acquisition and Lennar represents and warrants to the Company, that nobody acted
as a broker, a finder or in any similar capacity in connection with the
transactions which are the subject of this Agreement, except that USB Warburg
acted as a financial adviser to the Company. The Company will pay all the fees
and expenses of USB Warburg with regard to the transactions which are the
subject of this Agreement or of the Securities Purchase Agreement, which will
not exceed in total $1,450,000. The Company and Acquisition each indemnifies the
other of them against, and agrees to hold the other of them harmless from, all
losses, liabilities and expenses (including, but not limited to, reasonable fees
and expenses of counsel and costs of investigation) incurred
33
because of any claim by anyone for compensation as a broker, a finder or in any
similar capacity by reason of services allegedly rendered to the indemnifying
party or an affiliate of the indemnifying party in connection with the
transactions which are the subject of this Agreement.
ARTICLE 9
OTHER AGREEMENTS
9.1 INDEMNIFICATION FOR PRIOR ACTS. (a) The Surviving Corporation will
honor, and will not amend or modify for at least six years after the date of
this Agreement, any obligations of the Company and its subsidiaries (including
those under their certificates of incorporation or by-laws as in effect at the
date of this Agreement) to indemnify current and former directors, officers or
employees of the Company or its subsidiaries (each an "Indemnified Party") with
respect to matters which occur on or prior to the Effective Time. The Surviving
Corporation will maintain in effect for not less than six years after the
Effective Time, with respect to occurrences prior to the Effective Time, the
Company's policies of directors and officers' liability insurance which are in
effect on the date of this Agreement and are listed on Schedule 9.1
(notwithstanding any provisions of those policies that they will terminate as a
result of Merger), or substantially similar insurance, and umbrella coverage of
$10 million under policies maintained by Lazard Freres Real Estate Investors
L.L.C., to the extent that insurance is available at a cost not exceeding (i)
$600,000, minus (ii) credits for unused premiums relating to periods after the
basic policy coverage is terminated. If that insurance is not available at a
cost not exceeding $600,000 minus those credits, the Surviving Corporation will
provide the maximum coverage which is available for that amount.
(b) The provisions of this Paragraph 9.1 are intended to be for the
benefit of, and will be enforceable by, the respective current and former
directors, officers and employees of the Company or its subsidiaries to which
they relate and their heirs and legal representatives.
34
9.2 FUNDS FOR DEBT TENDER. If because of the Securities Purchase, the
Company is required to make a tender offer for its 13.75% Senior Notes due 2003
("Senior Notes") for 101% of their principal amount plus accrued interest, at
the Company's request Lennar will make available to the Company the funds it
requires to purchase the Senior Notes which are tendered in response to that
tender offer, either (at Lennar's election) by a loan which matures on the same
date as, and bears interest at the same rate as, the Senior Notes, or by
purchasing the tendered Senior Notes from the Company for a price equal to 101%
of their principal amount plus the accrued but unpaid interest to the date the
Senior Notes are tendered.
9.3 AMENDMENTS TO SECURITIES PURCHASE AGREEMENT. Lennar and Acquisition
will not amend the Securities Purchase Agreement to increase the price being
paid for any securities they are purchasing under the Securities Purchase
Agreement without prior notice to the Company and a determination by the Board
that the amendment does not affect the approval of the transactions which are
the subject of the Securities Purchase Agreement described in Paragraph 4.1(h).
9.4 PAST SERVICE AND DEDUCTIBLE CREDIT TO EMPLOYEES. For all purposes
under Lennar compensation plans and benefit plans which are applicable after the
Effective Time to persons who are employees of the Company and its subsidiaries,
(i) service with the Company or its subsidiaries before the Effective Time will
be treated as though it were service with Lennar and its subsidiaries, except to
the extent that treatment would result in duplication of benefits, and (ii) to
the extent permitted by applicable benefit plans, for the purpose of determining
whether annual or other deductible amounts required by those plans have been
paid, amounts paid while employed by the Company or its subsidiaries before the
Effective Time which were not reimbursed under the comparable plans maintained
by the Company or its subsidiaries will be taken into account.
35
ARTICLE 10
LENNAR GUARANTY
10.1 GUARANTY OF ACQUISITION'S OBLIGATIONS. Lennar guarantees the
timely fulfillment by Acquisition of all Acquisition's obligations under this
Agreement.
ARTICLE 11
GENERAL
11.1 EXPENSES. The Company, Lennar and Acquisition will each pay its
own expenses in connection with the transactions which are the subject of this
Agreement, including legal fees.
11.2 ACCESS TO PROPERTIES, BOOKS AND RECORDS. From the date of this
Agreement until the earlier of the Effective Time or the time this Agreement is
terminated in accordance with Article 7, the Company will, and will cause each
of its subsidiaries to, give representatives of Acquisition and Lennar, and
representatives of any lenders from which Acquisition or Lennar is seeking to
obtain financing for the Surviving Corporation after the Merger, upon reasonable
notice, full access during normal business hours to all of their respective
properties, books and records, provided that right of access is exercised in a
manner that does not unreasonably interfere with the Company's or its
subsidiaries' normal business activities. Acquisition and Lennar each will, and
will cause each of its representatives to, hold all information it receives as a
result of its access to the properties, books and records of the Company or its
subsidiaries in confidence, except to the extent that information (i) is or
becomes available to the public (other than through a breach of this Agreement),
(ii) becomes available to Acquisition or Lennar from a third party which,
insofar as Acquisition or Lennar is aware, is not under an obligation to the
Company, or to a subsidiary of the Company, to keep the information
confidential, (iii) was known to Acquisition, Lennar or any other of Lennar's
subsidiaries before it was made available to Acquisition or Lennar or its
representative by the Company or a subsidiary, (iv) otherwise is
36
independently developed by Acquisition, Lennar or another of Lennar's
subsidiaries, or (v) Acquisition or Lennar reasonably believes is required to be
included in the Offering Documents, the Schedule TO or the Proxy Statement. If
this Agreement is terminated before the Effective Time, Acquisition and Lennar
each will, at the request of the Company, deliver to the Company all documents
and other material obtained by Acquisition or Lennar from the Company or a
subsidiary in connection with the transactions which are the subject of this
Agreement or evidence that that material has been destroyed by Acquisition or
Lennar.
11.3 PRESS RELEASES. The Company and Lennar will consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement, but nothing in this Paragraph will
prevent any party, or any affiliate of a party, from making any statement 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 the affiliate
are listed, quoted or traded.
11.4 ENTIRE AGREEMENT. This Agreement and the documents to be delivered
in accordance with this Agreement contain the entire agreement among the
Company, Lennar and Acquisition relating to the transactions which are the
subject of this Agreement and those other documents, all prior negotiations,
understandings and agreements between the Company and either Lennar or
Acquisition are superseded by this Agreement and those other documents, and
there are no representations, warranties, understandings or agreements
concerning the transactions which are the subject of this Agreement or those
other documents other than those expressly set forth in this Agreement or those
other documents.
11.5 EFFECT OF DISCLOSURES. Any information disclosed by a party in any
representation or warranty contained in this Agreement (including any exhibit or
schedule to this Agreement)
37
will be treated as having been disclosed in connection with each representation
and warranty made by that party in this Agreement.
11.6 CAPTIONS. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
11.7 BENEFIT OF AGREEMENT. This Agreement is for the benefit of the
parties to it, their respective successors and any permitted assigns. Except as
stated in Paragraph 9.1(b), this Agreement is not intended to be for the benefit
of, or to give any rights to, anybody other than the parties, their respective
successors and any permitted assigns.
11.8 PROHIBITION AGAINST ASSIGNMENT. Neither this Agreement nor any
right of any party under it may be assigned, except that Acquisition may assign
its rights under this Agreement to a corporation or other entity a majority of
the equity of which is directly or indirectly owned by Lennar if (i) that entity
agrees in writing to be bound by all the terms and conditions of this Agreement
to the full extent they apply to Acquisition, and (ii) the assignment will not
materially impede or delay the transactions which are the subject of this
Agreement.
11.9 NOTICES AND OTHER COMMUNICATIONS. Any notice or other
communication under this Agreement must be in writing and will be deemed given
when it is delivered in person or sent by facsimile (with proof of receipt at
the number to which it is required to be sent), on the business day after the
day on which it is sent by a major nationwide overnight delivery service, or on
the fifth business day after the day on which it is mailed by first class mail
from within the United States of America, to the following addresses (or such
other address as may be specified after the date of this Agreement by the party
to which the notice or communication is sent):
If to Lennar or Acquisition:
38
Lennar Corporation
000 X.X. 000xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxx
Facsimile No.: 000-000-0000
and
Attention: Xxxxx XxXxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxx X. Xxxxxxxxx
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
If to the Company.:
The Fortress Group, Inc.
0000 Xxxxxx Xxxx.
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Facsimile No.: 000-000-0000
with copies to:
Xxxxxx Xxxxxx
Chairman of Fortress Planning Committee
Lazard Freres Real Estate Investors L.L.C.
00 Xxxxxxxxxxx Xxxxx, 00xxXxxxx
Xxx Xxxx, XX 00000
Facsimile No.: 000-000-0000
and to:
Xxxx X. Xxxxxxxx
Milbank, Tweed, Xxxxxx & XxXxxx LLP
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: 000-000-0000
11.10 GOVERNING LAW. (a) This Agreement will be governed by, and
construed under, the substantive laws of the State of Delaware, without giving
effect to conflicts of laws principles which would apply the laws of any other
jurisdiction.
39
(b) The Company, Lennar and Acquisition each agrees that any action
or proceeding relating to this Agreement or the transactions contemplated by it
may be brought in any Federal or state court sitting in the State of Delaware in
the United States of America and each of them (i) consents to the jurisdiction
of each of those courts in any such action or proceeding, (ii) agrees not to
seek to have the venue of any such action or proceeding changed because of
inconvenience of the forum or otherwise (except that nothing in this Paragraph
will prevent a party from removing an action from a state court to a Federal
court sitting in that state), and (iii) agrees that process in any such action
or proceeding may be served by registered mail or in any other manner permitted
by the rules of the court in which the action or proceeding is brought.
11.11 AMENDMENTS. This Agreement may be amended by, but only by, a
document in writing signed by both the Company and Lennar. Provisions may be
waived by, but only by, a document signed by the waiving party.
11.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, some of which may be signed by fewer than all the parties or may
contain facsimile copies of pages signed by some of the parties. Each of those
counterparts will be deemed to be an original copy of this Agreement, but all of
them together will constitute one and the same agreement.
40
IN WITNESS WHEREOF, the Company, Lennar and Acquisition have
executed this Agreement, intending to be legally bound by it, on the day shown
on the first page of this Agreement.
THE FORTRESS GROUP, INC.
By: /S/ XXXXXX X. XXXXXX
---------------------------------
Title: President and Chief Executive
Officer
LENNAR CORPORATION
By: /S/ XXXXX X. XXXXXX
---------------------------------
Title: Vice President
FG ACQUISITION CORPORATION
By: /S/ XXXXX X. XXXXXX
---------------------------------
Title: Secretary
41
Exhibit 1.1-D
Acquisition will not be required to accept for payment or pay for any
Common Stock tendered in response to the Tender Offer if:
(a) A statute has been enacted, or a rule or regulation has been
adopted by a governmental authority, that would make it unlawful for Acquisition
to purchase all the shares which are tendered in response to the Tender Offer or
to carry out the Merger;
(b) An order has been entered by a court or other governmental
authority and is in force which invalidates this Agreement or restrains
Acquisition, Lennar or the Company from purchasing the shares which are tendered
in response to the Tender Offer, from completing the Merger, or from carrying
out any other of the transactions contemplated by this Agreement;
(c) The Company has not performed all the obligations it is required to
have performed under this Agreement by the Expiration Date, except failures
which (i) would not, in the aggregate, materially impair or delay Acquisition's
ability to complete the purchase of the Common Stock which is tendered in
response to the Tender Offer or the ability of Acquisition and the Company to
effect the Merger and (ii) would not have, or reasonably be expected to have, a
Material Adverse Effect on the Company, or which (iii) have been caused by or
result from a breach of this Agreement by Lennar or Acquisition.
(d) This Agreement has been terminated.
(e) The sale to Acquisition of Class AAA Preferred Stock, Common Stock
and Supplemental Warrants contemplated by the Securities Purchase Agreement to
occur at the closing under the Securities Purchase Agreement has not been
completed.
The conditions set forth above are for the sole benefit of Acquisition,
and may be waived by Acquisition, in whole or in part. Any delay by Acquisition
in exercising the right to terminate the Tender Offer because any of the
conditions are not fulfilled will not be deemed a waiver of its right to do so.
