PLAN AND AGREEMENT OF MERGER
DATED AS OF
JUNE 10, 1997
BETWEEN
PACIFIC GREYSTONE CORPORATION
AND
LENNAR CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I
MERGER OF LENNAR AND GREYSTONE
1.1 The Merger......................................... 1
ARTICLE II
TERMS AND CONDITIONS OF THE MERGER
2.1 Certificate of Incorporation....................... 1
2.2 By-Laws............................................ 2
2.3 Directors.......................................... 2
2.4 Officers........................................... 2
2.5 Stock of Greystone................................. 2
2.6 Stock of Lennar.................................... 2
2.7 Exchange of Certificates........................... 3
2.8 Greystone Options.................................. 4
ARTICLE III
EFFECTIVE TIME
3.1 Date of the Merger................................. 5
3.2 Execution of Certificate of Merger................. 5
3.3 Effective Time of the Merger....................... 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Lennar........... 5
4.2 Representations and Warranties of Greystone........ 17
4.3 Termination of Representations and Warranties...... 25
ARTICLE V
ACTIONS PRIOR TO THE MERGER
5.1 Activities Until Effective Time.................... 25
5.2 HSR Act Filings.................................... 30
5.3 Registration Statement, Proxy Statements and
Stockholders' Meetings........................... 30
5.4 No Solicitation of Offers; Notice of
Indications of Interest.......................... 32
5.5 Lennar's Efforts to Fulfill Conditions............. 34
5.6 Greystone's Efforts to Fulfill Conditions.......... 35
5.7 Merger Date Audit.................................. 35
5.8 Indemnification for Prior Acts..................... 37
5.9 Amendments to the Spin Off Agreement
and Partnership Agreement........................ 40
5.10 Compensation, Benefits............................. 40
ARTICLE VI
CONDITIONS PRECEDENT TO MERGER
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6.1 Conditions to Greystone's Obligations.............. 41
6.2 Conditions to Lennar's Obligations................. 45
ARTICLE VII
TERMINATION
7.1 Right to Terminate................................. 47
7.2 Manner of Terminating Agreement.................... 49
7.3 Effect of Termination.............................. 49
ARTICLE VIII
ABSENCE OF BROKERS
8.1 Representations and Warranties Regarding
Brokers and Others............................... 50
ARTICLE IX
GENERAL
9.1 Expenses........................................... 50
9.2 Access to Properties, Books and Records............ 50
9.3 Plan of Reorganization............................. 52
9.4 Press Releases..................................... 52
9.5 Entire Agreement................................... 52
9.6 Survival of Obligations............................ 52
9.7 Effect of Disclosures.............................. 53
9.8 Captions........................................... 53
9.9 Prohibition Against Assignment..................... 53
9.10 Modification or Amendment.......................... 53
9.11 Waiver of Conditions............................... 53
9.12 No Third Party Beneficiaries....................... 53
9.13 Notices and Other Communications................... 53
9.14 Governing Law...................................... 54
9.15 Counterparts....................................... 54
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PLAN AND AGREEMENT OF MERGER
This is a Plan and Agreement of Merger, dated as of
June 10, 1997 between PACIFIC GREYSTONE CORPORATION ("Grey-
stone"), a Delaware corporation, and LENNAR CORPORATION ("Len-
nar"), a Delaware corporation.
ARTICLE I
MERGER OF LENNAR AND GREYSTONE
1.1 The Merger. At the Effective Time (defined be-
low), Lennar will be merged with and into Greystone (the
"Merger"), with Greystone being the surviving corporation of
the Merger (the "Surviving Corporation"). Except as specifi-
cally provided in this Agreement, at the Effective Time (i) the
real and personal property, other assets, rights, privileges,
immunities, powers, purposes and franchises of Greystone will
continue unaffected and unimpaired by the Merger, (ii) the
separate existence of Lennar will terminate, and its real and
personal property, other assets, rights, privileges, immuni-
ties, powers, purposes and franchises will be merged into the
Surviving Corporation and (iii) the Merger will have such other
effects as are set forth in Section 259 of the General Corpo-
rate Law of the State of Delaware (the "GCL").
ARTICLE II
TERMS AND CONDITIONS OF THE MERGER
The terms and conditions of the Merger will be as
follows:
2.1 Certificate of Incorporation. From the Effec-
tive Time (defined below) until subsequently amended, the Cer-
tificate of Incorporation of the Surviving Corporation will be
in the
form of Exhibit 2.1, and that Certificate of Incorporation,
separate and apart from this Agreement, may be certified as the
Certificate of Incorporation of the Surviving Corporation.
2.2 By-Laws. At the Effective Time, the By-Laws of
the Surviving Corporation will be in the form of Exhibit 2.2,
until they are altered, amended or repealed.
2.3 Directors. The persons listed on Exhibit 2.3
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 for the respective terms
shown on Exhibit 2.3.
2.4 Officers. The persons listed on Exhibit 2.4
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.
2.5 Stock of Greystone. Prior to the Effective
Time, the Board of Directors of Greystone will declare a 13.8%
stock dividend (the "Stock Dividend") payable prior to the Ef-
fective Time to the holders of record of common stock, par
value $.01 per share, of Greystone ("Greystone common stock"),
with a reasonable provision for cash in lieu of fractional
shares. Each share of common stock, par value $.01 per share,
of Greystone ("Greystone common stock") which is outstanding
immediately prior to the Effective Time (including, but not
limited to, shares issued as a result of the Stock Dividend)
will, at and after the Effective Time, continue to be one share
of common stock, par value $.10 per share, of the Surviving
Corporation ("Common Stock"). After the Effective Time a cer-
tificate which represented Greystone common stock prior to the
Effective Time will automatically become and be a certificate
representing the number of shares of Common Stock equal to the
number of shares of Greystone common stock represented by the
certificate before the Merger.
2.6 Stock of Lennar. Each share of common stock,
par value $.10 per share, of Lennar ("Lennar Common Stock")
which is outstanding immediately prior to the Effective Time
will, at the Effective Time, be converted into and become one
share of Common Stock. Each
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share of class B common stock, par value $.10 per share, of
Lennar ("Lennar class B stock") which is outstanding
immediately prior to the Effective Time will, at the Effective
Time, be converted into and become one share of Class B Common
Stock ("Class B Stock"), par value $.10 per share, of the
Surviving Corporation. At the Effective Time, all the Lennar
common stock and Lennar class B stock outstanding immediately
before the Merger will automatically be cancelled and after the
Effective time a certificate which represented Lennar common
stock or Lennar class B stock will automatically become and be
a certificate representing the number of shares of Common Stock
or Class B Stock into which the Lennar common stock or Lennar
class B stock represented by the certificate was converted.
2.7 Exchange of Certificates. (a) At any time af-
ter the Effective Time, any holder of a certificate which had
represented Greystone common stock prior to the Effective Time
(an "Old Certificate") may submit that Old Certificate to an
exchange agent designated by the Surviving Corporation (the
"Exchange Agent"), accompanied by such document of transmittal
as the Surviving Corporation may reasonably require, and re-
ceive a new certificate (a "New Certificate") representing the
number of shares of Common Stock into which the number of
shares of Greystone common stock represented by the submitted
certificate were converted.
(b) As promptly as practicable after the Effec-
tive Time, the Surviving Corporation shall send to each holder
of record of shares of Greystone common stock immediately prior
to the Effective Time transmittal materials for use in exchang-
ing Old Certificates for New Certificates. When Old Certifi-
cates are submitted for exchange, the Surviving Corporation
shall cause the New Certificates representing the shares of
common stock into which the shares of Greystone Common Stock
represented by the Old Certificate are converted as a result of
the Merger to be delivered to the holder who submitted the Old
Certificates. No interest will be paid on any cash to be paid
to a holder in lieu of fractional shares or otherwise.
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(c) If an Old Certificate has been lost, stolen
or destroyed, the Surviving Corporation will accept an af-
fidavit and indemnity reasonably satisfactory to it in lieu of
the Old Certificate.
(d) Notwithstanding the foregoing, none of the
Surviving Corporation, the Exchange Agent, any other agent act-
ing on behalf of the Surviving Corporation, or any other party
to this Agreement, shall be liable to any former holder of
Greystone common stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, es-
cheat or similar laws.
2.8 Greystone Options. All options granted by Grey-
stone pursuant to any plans listed on Exhibit 4.2-O(2) that are
outstanding as of the Effective Time (collectively, the "Com-
pany Options") shall be fully vested and exercisable as of the
Effective Time (other than, unless Greystone shall otherwise
elect prior to the Effective Time, Company Options which were
granted less than six months before the Effective Time, which
shall vest in accordance with their terms), shall be adjusted
as set forth in the following sentence (unless by their terms
they were already adjusted to take account of the Stock Divi-
dend) and shall otherwise survive the consummation of the
Merger on the same terms and conditions as were applicable to
the Company Options immediately before the Effective Time.
Each Company Option shall be adjusted so as to represent an
option (i) with respect to a number of shares of Common Stock
equal to the number of shares of Greystone common stock subject
to such Company Option immediately before the Effective Time
(not adjusted to take account of the Stock Dividend), times
1.138 (with any resultant fractional share of Common Stock
rounded to the nearest whole share), and (ii) with a per-share
exercise price equal to the per-share exercise price of such
Company Option immediately before the Effective Time divided by
1.138 (with any resultant fraction of a cent per share rounded
to the nearest whole cent).
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ARTICLE III
EFFECTIVE TIME
3.1 Date of the Merger. The day on which the Merger
is to take place (the "Merger Date") will be the later of (a)
August 15, 1997, and (b) the business day after the first day
on which all the conditions in Paragraphs 6.1 and 6.2 (other
than delivery of officers certificates and opinions of counsel,
which will continue to be conditions until they are delivered
on the Merger Date) have been satisfied or waived. The Merger
Date may be changed with the consent of Greystone and Lennar.
For the purposes of this Paragraph, a "business day" is a day
on which certificates of merger may be filed with the Secretary
of State of Delaware.
3.2 Execution of Certificate of Merger. If all the
conditions in Article VI are satisfied or waived, on the Merger
Date, (a) Greystone will execute a certificate of merger (the
"Certificate of Merger") substantially in the form of Exhibit
3.2 and 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 when the Certificate
of Merger is filed with Secretary of State of Delaware or at
such other time as may be specified in the Certificate of
Merger (that being the "Effective Time").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Lennar. Len-
nar represents and warrants to Greystone as follows:
(a) Lennar is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware.
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(b) Lennar has all corporate power and author-
ity necessary to enable it to enter into this Agreement and
carry out the transactions contemplated by this Agreement. All
corporate actions necessary to authorize Lennar to enter into
this Agreement and to carry out the transactions contemplated
by it, other than the approval by the stockholders of Lennar
contemplated by Section 6.2(f), have been taken. The approval
by the Board of Directors of Lennar of this Agreement and of an
agreement dated the same day as this Agreement with Warburg,
Pincus Investors L.P. (the "Warburg Voting Agreement"), consti-
tute approval sufficient so that neither Greystone nor any
record or beneficial owner of stock of Greystone will be sub-
ject to the prohibitions of Section 203 of the GCL with regard
to Lennar or the Surviving Corporation. This Agreement has
been duly executed by Lennar and is a valid and binding agree-
ment of Lennar, enforceable against Lennar in accordance with
its terms. The Separation and Distribution Agreement, dated as
of the date hereof (the "Spin Off Agreement"), by and between
Lennar and LPC, Inc. ("LPC") is in the form of Exhibit 4.1-B,
has been duly executed by Lennar and LPC and is a valid and
binding agreement of the parties thereto, enforceable against
the parties thereto in accordance with its terms.
(c) Except as set forth on Exhibit 4.1-C, nei-
ther the execution or delivery of this Agreement, the Spin Off
Agreement or the Partnership Agreement (the "Partnership Agree-
ment") between Lennar and LPC forming Lennar Land Partners (the
"Land Partnership") or any document to be delivered in ac-
cordance with this Agreement, the Spin Off Agreement or the
Partnership Agreement, nor the consummation of the transactions
contemplated by this Agreement, the Spin Off Agreement or the
Partnership Agreement or by any document to be delivered in
accordance with this Agreement, the Spin Off Agreement or the
Partnership Agreement will (i) 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 any of its
subsidiaries or (ii) violate, result in a breach of,
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constitute a default under, or result in the acceleration of
any obligation under, or the creation of a lien, pledge,
security interest or other encumbrance on the assets or
properties of Lennar or any of its subsidiaries or on the
assets or properties of the Surviving Corporation or any of its
subsidiaries (with or without the giving of notice, the lapse
of time or both) pursuant to, any provision of any agreement,
lease, contract, note, mortgage, indenture, arrangement or
other obligation of Lennar or any of its subsidiaries (the
"Lennar Contracts") or any law, rule, ordinance or regulation
or judgment, decree, order, award or governmental or
nongovernmental permit or license to which Lennar or any of its
subsidiaries is subject, or result in, or give rise to any
right to, any change in the rights or obligations of any party
under, or any rights of termination under, any of the Lennar
Contracts, except in the case of this clause (ii) for any of
the foregoing that individually or in the aggregate are not
reasonably likely to have a Material Adverse Effect (as defined
below) on Lennar.
(d) Lennar and each of its subsidiaries is
qualified to do business as a foreign corporation in each ju-
risdiction in which it is required to be qualified, except ju-
risdictions in which the failure to qualify, in the aggregate,
would not have a Material Adverse Effect upon Lennar. As used
in this Agreement, the term "Material Adverse Effect" upon a
company means a material adverse effect on (a) the business,
operations, results of operations, properties, assets, li-
abilities or condition (financial or otherwise) of the company
and its subsidiaries on a consolidated basis or (b) the ability
of the company to consummate the transactions contemplated by
this Agreement or the Spin Off Agreement in accordance with
their respective terms. Whenever the term Material Adverse
Effect (or another qualification as to materiality) is used
with respect to Lennar, that term will refer to Lennar and the
other companies referred to in the Separation Agreement as the
Lennar Companies (together the "Lennar Companies") rather than
to Lennar as constituted on the date of this Agreement.
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(e) The only authorized stock of Lennar is
100,000,000 shares of Lennar common stock, 30,000,000 shares of
Lennar class B stock, and 500,000 shares of preferred stock,
par value $10 per share. At the date of this Agreement, the
only outstanding stock of Lennar is 26,060,775 shares of Lennar
common stock and 9,966,631 shares of Lennar class B stock. All
outstanding shares of Lennar common stock and Lennar class B
stock are, and all shares which may be issued prior to the Ef-
fective Time upon exercise of any outstanding options will be
when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to any preemptive rights. Except
as set forth in Exhibit 4.1-E or expressly contemplated by this
Agreement, there are no outstanding options, warrants or rights
to purchase or acquire from Lennar any capital stock of Lennar,
there are no existing registration covenants or transfer or
voting restrictions with respect to outstanding shares of Len-
nar Stock, and there are no convertible or exchangeable securi-
ties or other contracts, commitments, agreements, understand-
ings, arrangements or restrictions by which Lennar is bound to
issue any additional shares of its capital stock or other secu-
rities.
(f) Except as shown on Exhibit 4.1-F, no no-
tices, reports or other filings are required to be made by Len-
nar or any of its subsidiaries with, nor are any consents, reg-
istrations, approvals, permits or authorizations required to be
obtained by Lennar from, any governmental or regulatory author-
ity, agency, court, commission or other entity, domestic or
foreign ("Governmental Entity"), in connection with the execu-
tion, delivery or performance of its obligations under this
Agreement, the Spin Off Agreement and the Partnership Agreement
and the consummation by Lennar of the transactions contemplated
by this Agreement, the Spin Off Agreement and the Partnership
Agreement, the failure to make or obtain any or all of which,
individually or in the aggregate, is reasonably likely to have
a Material Adverse Effect on Lennar or enable any person to
enjoin or prevent or materially delay consummation of the
transactions contemplated by this Agreement.
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(g) Except as shown on Exhibit 4.1-G, Lennar
owns all the outstanding shares of, or other equity interests
in, each of the corporations and other entities of which Lennar
owns directly or indirectly 50% or more of the equity (each
corporation or other entity of which a company owns directly or
indirectly 50% or more of the equity being a "subsidiary" of
the company). Each subsidiary of Lennar which is a corporation
is duly organized, validly existing and in good standing under
the laws of its state of incorporation. All outstanding shares
of stock of Lennar's subsidiaries owned by Lennar or any of its
subsidiaries are duly authorized, validly issued, fully paid
and nonassessable and not subject to any preemptive rights.
Except as shown on Exhibit 4.1-G hereto, there are no outstand-
ing options, warrants or rights to purchase or acquire from
Lennar or any of its subsidiaries any capital stock of any of
Lennar's subsidiaries, there are no existing registration cov-
enants or transfer or voting restrictions with respect to out-
standing securities of any of Lennar's subsidiaries, and there
are no convertible or exchangeable securities or other con-
tracts, commitments, agreements, understandings, arrangements
or restrictions by which any of Lennar's subsidiaries are bound
to issue any additional shares of their capital stock or other
equity securities.
(h) Since December 1, 1993, Lennar has filed
with the Securities and Exchange Commission (the "SEC") all
forms, statements, reports and documents (including all exhib-
its, post-effective amendments and supplements thereto) re-
quired to be filed by it under each of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Ex-
change Act of 1934, as amended (the "Exchange Act") and the
respective rules and regulations promulgated thereunder (the
"Lennar SEC Reports"), all of which, as amended if applicable,
complied when filed in all material respects with all ap-
plicable requirements of the appropriate act and the rules and
regulations thereunder. As of their respective dates, the Len-
nar SEC Reports did not contain any untrue statement of a mate-
rial fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the
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circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim
consolidated financial statements of Lennar included in the
Lennar SEC Reports have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present in all material respects the
financial position of Lennar and its subsidiaries at their
respective dates and the results of their operations and
changes in financial position for the periods to which they
relate, subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments and any other
adjustments described therein.
(i) Except as reflected on the balance sheet
contained in Lennar's Annual Report on Form 10-K for the year
ended November 30, 1996 (the "Lennar 1996 Balance Sheet"), or
the balance sheet summarized in Lennar's Report on Form 10-Q
for the period ended February 28, 1997 (the "Lennar Interim
Balance Sheet"), neither Lennar nor any of its subsidiaries
have any liabilities or obligations (whether known or unknown,
due or to become due, absolute, accrued, contingent or other-
wise) of any nature, except liabilities, obligations or contin-
gencies which (i) arose after the date of the Lennar Interim
Balance Sheet, would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect on Lennar,
and were incurred in the ordinary course of business consistent
with past practices, (ii) arose on or before the date of the
Lennar Interim Balance Sheet and were not required by GAAP to
be reflected on the Lennar 1996 Balance Sheet or the Lennar
Interim Balance Sheet, (iii) are liabilities of companies which
will be subsidiaries of LPC at the time of the Spin-Off and for
which neither Lennar nor any of its subsidiaries will be prima-
rily or contingently liable after the Spin-Off, or (iv) are
being assumed by LPC pursuant to the Assignment and Assumption
Agreement to be delivered by LPC in accordance with the Spin
Off Agreement (the "Assumption Agreement") and for which LPC
will indemnify Lennar and its subsidiaries under the Assumption
Agreement.
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Since February 28, 1997, Lennar has made all disclosures about
its activities and financial condition required by the
Securities Exchange Act of 1934 and the rules under that Act.
(j) Since February 28, 1997, there has not been
any material adverse change in the financial condition or re-
sults of operations of Lennar and its subsidiaries engaged in
the Homebuilding Business compared with the financial condition
of Lennar and those subsidiaries at February 28, 1997 or the
consolidated results of operations of Lennar and those subsid-
iaries for the same period of the prior year. Since November
30, 1996, the business of the Lennar Companies has been con-
ducted in the ordinary course consistent with past practice,
except that Lennar (i) has entered into the Spin Off Agreement
and as contemplated thereby has taken steps to prepare to di-
vide its businesses into (A) its homebuilding business (includ-
ing development of land for residential building and sale of
residential lots), its business of supplying security systems,
water, power, cable and other utilities and services to home-
buyers and homeowners, its business of maintaining common areas
for homeowners and the portion of its financial services busi-
ness relating to providing financing to residential home pur-
chasers (both of homes sold by Lennar subsidiaries and of homes
sold by others) and homeowners, servicing residential mort-
gages, providing or obtaining title insurance for homebuyers,
providing closing services to homebuyers and investing in secu-
rities backed by pools of residential mortgages (together the
"Homebuilding Business") and (B) its managed assets business
and the portion of its financial services business relating to
acquiring and managing commercial and multi-family rental real
estate, acquiring portfolios of commercial mortgage loans or of
real estate assets acquired through foreclosures of mortgage
loans, constructing office buildings and other commercial or
industrial buildings, purchasing mortgage backed securities and
real estate backed securities, acting as servicer or special
servicer with regard to commercial mortgage pools and providing
financing to homebuilders and land developers (the "Asset Man-
agement Business"), and distribute the Asset Management Busi-
ness to its stockholders (the division of
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Lennar's businesses into the Homebuilding Business and the
Asset Management Business and the distribution of the Asset
Management Business to Lennar's stockholders being the "Spin-
Off") and (ii) has taken steps to prepare to form the Land
Partnership pursuant to the Partnership Agreement, which will
be in the form of Exhibit 4.1-J(1) (except as otherwise
consented to by Greystone) and to transfer to the Land
Partnership all of the assets listed on Exhibit 4.1-J(2), other
than assets which have been disposed of in the ordinary course
of business. Since November 30, 1996, there have not been, and
there are not, any events, casualties, losses, circumstances or
occurrences, other than occurrences affecting the homebuilding
industry in the United States of America generally, which,
individually or in the aggregate, have resulted, or could
reasonably be expected to result, in a Material Adverse Effect
on Lennar.
(k) The pro forma balance sheet and statement
of income of Lennar and its subsidiaries at November 30, 1996
and for the year ended on that date which are included in Ex-
hibit 4.1-K (the "Pro Forma Lennar Financial Statements") were
prepared in accordance with GAAP consistently applied, based
upon the assumptions set forth in the notes to the Pro Forma
Lennar Financial Statements, and based upon those assumptions
fairly present the financial condition and results of opera-
tions of the Homebuilding Business at the dates, and for the
periods, to which they relate, subject to possible audit ad-
justments which will not materially reduce the total assets or
net assets shown on the balance sheet, or the total revenues or
net income shown on the statement of income, included in the
Pro Forma Lennar Financial Statements.
(l) The assets of Lennar and its subsidiaries
after the Spin-Off (the "Homebuilding Assets") will constitute,
in the aggregate, all of the assets, properties and rights used
in or necessary to the conduct of the Homebuilding Business
after the Spin-Off in a manner consistent with past practice,
as it is currently being conducted and as Lennar contemplates
that it will be conducted (except to the extent the Homebuild-
ing Business will in the future include the
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operations of Greystone). At the Effective Time, Lennar will
have good and valid title to a 50% general partner's interest
in the Land Partnership, which it will own free and clear of
any liens, charges, pledges, security interests or other
encumbrances or imperfections or defects in title. The fact
that after the Merger Date Lennar or its subsidiaries may be
primarily or contingently liable for indebtedness of or assumed
by LPC or its subsidiaries for which the Surviving Corporation
and its subsidiaries will be entitled to indemnification from
LPC will not prevent the Surviving Corporation from obtaining
the financing it will require to conduct the Homebuilding
Business of Lennar and the business of Greystone as they are
being conducted at the date of this Agreement and as Lennar
contemplates they will be conducted after the Merger.
(m) Lennar and its subsidiaries at all times
have complied, and currently do comply, in the conduct of their
respective businesses, with all applicable federal, state, lo-
cal and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees, except where the failure to com-
ply would not reasonably be expected, in the aggregate, to have
a Material Adverse Effect on Lennar. Each of Lennar and each
of its subsidiaries engaged in the Homebuilding Business (Len-
nar and those subsidiaries collectively being the "Homebuilding
Companies") has all permits, licenses, certificates of author-
ity, orders, and approvals of, and has made all filings, ap-
plications, and registrations with, federal, state, local, and
foreign governmental or regulatory bodies that are required in
order to permit Lennar or such subsidiary to carry on its busi-
ness as it is presently conducted, except for such permits,
licenses, certificates, orders, filings, applications and reg-
istrations, with respect to which the failure so to have or
make would not reasonably be expected, in the aggregate, to
have a Material Adverse Effect on Lennar.
(n) Lennar and its subsidiaries have (i) duly
filed with the appropriate governmental authorities all Tax
Returns (as defined below) required to be filed by them (taking
account of all extensions which have been obtained) other than
those Tax Returns the failure
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of which to file would not in the aggregate have a Material
Adverse Effect on Lennar, and such Tax Returns are true,
correct and complete in all material respects, except to the
extent of items which may be disputed by applicable taxing
authorities, but for which there is substantial authority to
support the positions taken by Lennar or its subsidiary, and
(ii) duly paid in full or made adequate provision in accordance
with GAAP for the payment of all Taxes (as defined below) for
all past and current periods. The liabilities and reserves for
Taxes reflected in the Lennar Interim Balance Sheet cover all
Taxes for all periods ending at or prior to the date of such
balance sheet and have been determined in accordance with GAAP
and there is no material liability for Taxes for any period
beginning after the date of the Interim Balance Sheet other
than Taxes arising in the ordinary course of business. There
are no material liens for Taxes upon any property or assets of
Lennar or any subsidiary thereof, except for liens for Taxes
not yet due or Taxes contested in good faith and adequately
reserved against in accordance with GAAP. There are no
unresolved issues of law or fact arising out of a notice of
deficiency, proposed deficiency or assessment from the Internal
Revenue Service (the "IRS") or any other governmental taxing
authority with respect to Taxes of Lennar or any of its
subsidiaries which, singly or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on
Lennar. Except as shown on Exhibit 4.1-N, neither Lennar nor
any of its subsidiaries has waived any statute of limitations
in respect of a material amount of Taxes or agreed to any
extension of time with respect to a material Tax assessment or
deficiency other than waivers and extensions which are no
longer in effect. Neither Lennar nor any of its subsidiaries
is a party to any agreement providing for the allocation or
sharing of Taxes with any entity that is not, directly or
indirectly, a wholly owned subsidiary of Lennar, other than the
Spin Off Agreement. Neither Lennar nor any of its subsidiaries
has, with regard to any assets or property held, acquired or to
be acquired by any of them, filed a consent to the application
of Section 341(f) of the Code. For purposes of this Agreement,
the term "Taxes" shall mean all taxes, including,
-14-
without limitation, income, gross receipts, excise, property,
sales, withholding, social security, occupation, use, service,
license, payroll, franchise, transfer and recording taxes, fees
and charges, windfall profits, severance, customs, import,
export, employment or similar taxes, charges, fees, levies or
other assessments imposed by the United States, or any state,
local or foreign government or subdivision or agency thereof,
whether computed on a separate, consolidated, unitary, combined
or any other basis, and such term shall include any interest,
fines, penalties or additional amounts and any interest in
respect of any additions, fines or penalties attributable or
imposed or with respect to any such taxes, charges, fees,
levies or other assessments. For purposes of this Agreement,
the term "Tax Return" shall mean any return, report or other
document required to be supplied to a taxing authority in
connection with Taxes.
(o) Except as set forth on Schedule 4.1-O,
there are no claims, actions, injunctions, suits, arbitration
proceedings, governmental investigations or other legal or ad-
ministrative proceedings, or any orders, decrees, writs, or
judgments ("Proceedings") pending, in progress or in effect or,
to the knowledge of Lennar, threatened (i) against or affecting
Lennar, any of its subsidiaries or any of their respective
properties or assets, or (ii) relating to or affecting the
transactions contemplated by this Agreement or the Spin-Off,
except to the extent such Proceedings, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on
Lennar.
(p) Exhibit 4.1-P(1) is a complete list of all
unions which represent any employees of Lennar or any of the
other Homebuilding Companies. No union is attempting to orga-
nize or otherwise become the bargaining representative for any
employees of Lennar or any of the other Homebuilding Companies.
Exhibit 4.1-P(2) is a complete list of (i) all written agree-
ments and plans, including written employment agreements (other
than employment agreements calling for salaries of less than
$100,000 per year with terms of not more than two years) and
including "employee benefit plans," as that term is defined in
the Employee
-15-
Retirement Income Security Act of 1974, as amended ("ERISA"),
to which Lennar or any of the other Homebuilding Companies is a
party under which it is providing compensation, retirement
benefits or other benefits to employees and (ii) all agreements
or other commitments by Lennar or any other of the Homebuilding
Companies to provide post-retirement medical benefits or other
post-employment benefits to employees or former employees.
Except as shown on Exhibit 4.1-P(2), (v) each employee benefit
plan listed on Exhibit 4.1-P(2) which is intended to be
qualified under Section 401 of the Code is qualified under that
Section, (w) each employee benefit plan listed on Exhibit
4.1-P(2) has been maintained in all material respects in
accordance with its terms and any applicable provisions of
ERISA or the Code, (x) no plan listed on Exhibit 4.1-P(2) is a
"defined benefit plan," as that term is defined in ERISA, (y)
neither Lennar nor any other of the Homebuilding Companies is
an "employer" or part of a "single employer," as those terms
are used in ERISA or the Code, with regard to any benefit plan
not listed on Exhibit 4.1-P(2) and (z) no plan listed on
Exhibit 4.1-P(2) has an unfunded benefit liability, as that
term is used in ERISA.
(q) Except as set forth on Exhibit 4.1-Q and
except for such matters that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect on Lennar, (i) Lennar and its subsidiaries are in com-
pliance with all applicable Environmental Laws (as defined be-
low), and (ii) neither Lennar nor any of its subsidiaries has
any outstanding notices, demand letters or requests for infor-
mation from any Governmental Entity or any third party indicat-
ing that Lennar or any of its subsidiaries may be in violation
of, or liable under, any Environmental Law, and none of Lennar,
its subsidiaries or its properties are subject to any court
order, administrative order or decree arising under any Envi-
ronmental Law. As used in this Agreement, "Environmental Law"
means (i) any federal, state, foreign or local law, statute,
ordinance, rule, regulation, code, license, permit, authoriza-
tion, approval, consent, common law legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any
government entity, (x) relating to the protection, preservation
or restoration of the
-16-
environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety, or (y) the
exposure to, or the use, storage,.recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in
each case as amended and as now in effect. "Hazardous
Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any substance
containing any such substance as a component.
(r) Each of the representations and warranties
of any party set forth in the Spin-Off Agreement are true and
correct in all material respects.
(s) Lennar has received commitments (the "Loan
Commitments") from First National Bank of Chicago relating to
the financing of the Surviving Corporation and the Land Part-
nership following the Effective Time, true and correct copies
of which have been delivered to Greystone prior to the date of
this Agreement.
4.2 Representations and Warranties of Greystone.
Greystone represents and warrants to Lennar as follows:
(a) Greystone is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware.
(b) Greystone has all corporate power and au-
thority necessary to enable it to enter into this Agreement and
carry out the transactions contemplated by this Agreement. All
corporate actions necessary to authorize Greystone to enter
into this Agreement and to carry out the transactions contem-
plated by it, other than approval by the stockholders of Grey-
stone, have been taken. The approval by the Board of Directors
of Greystone of this Agreement and a Miller Agreement Regarding
Merger dated the same day as this Agreement constitute approval
sufficient that neither Lennar nor any record or beneficial
owner of stock of
-17-
Lennar will be subject to the prohibitions of Section 203 of
the GCL with regard to Greystone or the Surviving Corporation.
This Agreement has been duly executed by Greystone and is a
valid and binding agreement of Greystone, enforceable against
Greystone in accordance with its terms.
(c) Except as set forth on Exhibit 4.2-C, nei-
ther 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 (i) violate, result in a breach of, or con-
stitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, the Certifi-
cate of Incorporation or by-laws of Greystone, or any of its
subsidiaries or (ii) violate, result in a breach of, constitute
a default under, or result in the acceleration of any obliga-
tion under, or the creation of a lien, pledge, security inter-
est or other encumbrance on the assets or properties of Grey-
stone or any of its subsidiaries or on the assets or properties
of the Surviving Corporation or any of its subsidiaries (with
or without the giving of notice, the lapse of time or both)
pursuant to, any provision of any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation of
Greystone or any of its subsidiaries (the "Greystone Con-
tracts") or any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or nongovernmental permit
or license to which Greystone or any of its subsidiaries is
subject, or result in, or give rise to any right to, any change
in the rights or obligations of any party under, or any rights
of termination under, any of the Greystone Contracts, except in
the case of this clause (ii) for any of the foregoing that in-
dividually or in the aggregate are not reasonably likely to
have a Material Adverse Effect on Greystone.
(d) Greystone and each of its subsidiaries is
qualified to do business as a foreign corporation in each ju-
risdiction in which it is required to be qualified, except
-18-
jurisdictions in which the failure to qualify, in the
aggregate, would not have a Material Adverse Effect on
Greystone.
(e) The only authorized stock of Greystone is
35,000,000 shares of Greystone common stock and 5,000,000
shares of preferred stock. At the date of this Agreement, the
only outstanding stock of Greystone is 14,959,741 shares of
Greystone common stock. All outstanding shares of Greystone
common stock are, and all shares which may be issued prior to
the Effective Time as a result of the Stock Dividend or upon
exercise of any outstanding options will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and
not subject to any preemptive rights. Except as set forth in
Exhibit 4.2-E, there are no outstanding options, warrants or
rights to purchase or acquire (other than through the Stock
Dividend) from Greystone any capital stock of Greystone, there
are no existing registration covenants or transfer or voting
restrictions with respect to outstanding shares of Greystone
stock, and there are no convertible or exchangeable securities
or other contracts, commitments, agreements, understandings,
arrangements or restrictions by which Greystone is bound to
issue any additional shares of its capital stock or other secu-
rities.
(f) Except as shown on Exhibit 4.2-F, no no-
tices, reports or other filings are required to be made by
Greystone or any of its subsidiaries with, nor are any con-
sents, registrations, approvals, permits or authorizations re-
quired to be obtained by Greystone from, any Governmental En-
tity in connection with the execution, delivery or performance
of its obligations under this Agreement or the consummation by
Greystone of the transactions contemplated by this Agreement,
the failure to make or obtain any or all of which, individually
or in the aggregate, is reasonably likely to have a Material
Adverse Effect on Greystone or enable any person to enjoin or
prevent or materially delay consummation of the transactions
contemplated by this Agreement.
-19-
(g) Except as shown on Exhibit 4.2-G, Greystone
owns all the outstanding shares of, or other equity interests
in, each of its subsidiaries. Each subsidiary of Greystone
which is a corporation is duly organized, validity existing and
in good standing under the laws of its state of incorporation.
All outstanding shares of stock of Greystone's subsidiaries
owned by Greystone or any of its subsidiaries are duly autho-
rized, validly issued, fully paid and nonassessable and not
subject to any preemptive rights. Except as shown on Exhibit
4.2-G, there are no outstanding options, warrants or rights to
purchase or acquire from Greystone or any of its subsidiaries
any capital stock of any of Greystone's subsidiaries, there are
no existing registration covenants or transfer or voting re-
strictions with respect to outstanding securities of any of
Greystone's subsidiaries, and there are no convertible or ex-
changeable securities or other contracts, commitments, agree-
ments, understandings, arrangements or restrictions by which
any of Greystone's subsidiaries are bound to issue any ad-
ditional shares of their capital stock or other equity securi-
ties.
(h) Since June 20, 1996, Greystone has filed
with the SEC all forms, statements, reports and documents (in-
cluding all exhibits, post-effective amendments and supplements
thereto) required to be filed by it under each of the Securi-
ties Act, the Exchange Act and the respective rules and regu-
lations promulgated thereunder (the "Greystone SEC Reports"),
all of which, as amended if applicable, complied when filed in
all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. As of
their respective dates, when the Greystone SEC Reports were
filed with the SEC, they did not contain any untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements
and unaudited interim consolidated financial statements of
Greystone included in the Greystone SEC Reports have been pre-
pared in accordance with GAAP applied on a consistent basis
(except as
-20-
may be indicated therein or in the notes thereto) and fairly
present in all material respects the financial position of
Greystone and its subsidiaries at their respective dates and
the results of their operations and changes in financial
position for the periods to which they relate, subject, in the
case of the unaudited interim financial statements, to normal
year-end audit adjustments and any other adjustments described
therein.
(i) Except as reflected on the balance sheet
contained in Greystone's Annual Report on Form 10-K for the
year ended December 31, 1996 (the "Greystone 1996 Balance
Sheet"), or the balance sheet summarized in Greystone's Report
on Form 10-Q for the period ended March 31, 1997 (the "Grey-
stone Interim Balance Sheet"), neither Greystone nor any of its
subsidiaries have any liabilities or obligations (whether known
or unknown, due or to become due, absolute, accrued, contingent
or otherwise) of any nature, except liabilities, obligations or
contingencies which (i) arose after the date of the Greystone
Interim Balance Sheet, would not, individually or in the ag-
gregate, be reasonably likely to have a Material Adverse Effect
on Greystone, and which were incurred in the ordinary course of
business consistent with past practices, or (ii) arose on or
before the date of the Greystone Interim Balance Sheet and were
not required by GAAP to be reflected on the Greystone 1996 Bal-
ance Sheet or the Greystone Interim Balance Sheet. Since March
31, 1997, Greystone has made all disclosures about its activi-
ties and financial condition required by the Exchange Act and
the rules under that Act.
(j) Since March 31, 1997, (i) there has not
been any material adverse change in the consolidated financial
condition or results of operations of Greystone and its subsid-
iaries compared with the consolidated financial condition of
Greystone and its subsidiaries at March 31, 1997, as shown in
the Greystone SEC Reports, or the consolidated results of op-
erations of Greystone and its subsidiaries for the same period
of the prior year, (ii) Greystone and its subsidiaries have
conducted their businesses in the ordinary course and in the
same
-21-
manner in which they were conducted prior to March 31, 1997 and
(iii) there have not been, and there are not, any events,
casualties, losses, circumstances or occurrences, other than
occurrences affecting the homebuilding industry in the United
States of America generally, which, individually or in
aggregate, have resulted, or could reasonably be expected to
result, in a Material Adverse Effect on Greystone.
(k) The assets of Greystone and its subsidiar-
ies on the Merger Date will constitute, in the aggregate, all
of the assets, properties and rights used in or necessary to
the conduct of their business as it is currently being con-
ducted or as Greystone contemplates that it will be conducted
(except to the extent it will incorporate Lennar's homebuilding
operations into its future conduct).
(l) Greystone and its subsidiaries at all times
have complied, and currently do comply, in the conduct of their
respective businesses, with all applicable federal, state, lo-
cal and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees, except where the failure to com-
ply would not reasonably be expected, in the aggregate, to have
a Material Adverse Effect on Greystone. Each of Greystone and
each of its subsidiaries has all permits, licenses, certifi-
cates of authority, orders, and approvals of, and has made all
filings, applications, and registrations with, federal, state,
local, and foreign governmental or regulatory bodies that are
required in order to permit Greystone or such subsidiary to
carry on its business as it is presently conducted, except for
such permits, licenses, certificates, orders, filings, applica-
tions and registrations, with respect to which the failure so
to have or make would not reasonably be expected, in the ag-
gregate, to have a Material Adverse Effect on Greystone.
(m) Greystone and its subsidiaries have (i)
duly filed with the appropriate governmental authorities all
Tax Returns required to be filed by them (taking account of all
extensions which have been obtained) other than those Tax Re-
turns the failure of which to file would not in the aggregate
have a Material Adverse Effect on Greystone, and such Tax
-22-
Returns are true, correct and complete in all material
respects, except to the extent of items which may be disputed
by applicable taxing authorities, but for which there is
substantial authority to support the positions taken by
Greystone or its subsidiary, and (ii) duly paid in full or made
adequate provision in accordance with GAAP for the payment of
all Taxes (as defined below) for all past and current periods.
The liabilities and reserves for Taxes reflected in the
Greystone Interim Balance Sheet cover all Taxes for all periods
ending at or prior to the date of such balance sheet and have
been determined in accordance with GAAP and there is no
material liability for Taxes for any period beginning after the
date of the Greystone Interim Balance Sheet other than Taxes
arising in the ordinary course of business. There are no
material liens for Taxes upon any property or assets of
Greystone or any subsidiary thereof, except for liens for Taxes
not yet due or Taxes contested in good faith and adequately
reserved against in accordance with GAAP. There are no
unresolved issues of law or fact arising out of a notice of
deficiency, proposed deficiency or assessment from the IRS or
any other governmental taxing authority with respect to Taxes
of Lennar or any of its subsidiaries which, singly or in the
aggregate, would reasonably be expected to have a Material
Adverse Effect on Greystone. Except as shown on Exhibit 4.2-M,
neither Greystone nor any of its subsidiaries has waived any
statute of limitations in respect of a material amount of Taxes
or agreed to any extension of time with respect to a material
Tax assessment or deficiency other than waivers and extensions
which are no longer in effect. Neither Greystone nor any of
its subsidiaries is a party to any agreement providing for the
allocation or sharing or Taxes with any entity that is not,
directly or indirectly, a wholly owned subsidiary of Greystone.
Neither Greystone nor any of its subsidiaries has, with regard
to any assets or property held, acquired or to be acquired by
any or them, filed a consent to the application of Section
341(f) of the Code.
(n) Except as set forth on Exhibit 4.2-N, there
are no Proceedings pending, in progress or in effect or, to the
knowledge of Greystone, threatened (i) against or
-23-
affecting Greystone, any of its subsidiaries or any of their
respective properties or assets, or (ii) relating to or
affecting the transactions contemplated by this Agreement,
except to the extent such Proceedings, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on
Greystone.
(o) Exhibit 4.2-O(1) is a complete list of all
unions which represent any employees of Greystone or any of its
subsidiaries. No union is attempting to organize or otherwise
become the bargaining representative for any employees of Grey-
stone or any of its subsidiaries. Exhibit 4.2-O(2) is a com-
plete list of (i) all written agreements and plans, including
written employment agreements (other than employment agreements
calling for salaries of less than $100,000 per year with terms
of not more than two years) and including "employee benefit
plans," as that term is defined in the ERISA, to which Grey-
stone or any of its subsidiaries is a party under which it is
providing compensation, retirement benefits or other benefits
to employees and (ii) all agreements or other commitments by
Greystone or any of its subsidiaries to provide post-retirement
medical benefits or other post-employment benefits to employees
or former employees. Except as shown on Exhibit 4.2-O(2), (v)
each employee benefit plan listed on Exhibit 4.2-O(2) which is
intended to be qualified under Section 401 of the Code is
qualified under that Section, (w) each employee benefit plan
listed on Exhibit 4.2-O(2) has been maintained in all material
respects in accordance with its terms and any applicable provi-
sions of ERISA or the Code, (x) no plan listed on Exhibit
4.2-O(2) is a "defined benefit plan," as that term is defined
in ERISA, (y) neither Greystone nor any of its subsidiaries is
an "employer" or part of a "single employer," as those terms
are used in ERISA or the Code, with regard to any benefit plan
not listed on Exhibit 4.2-O(2) and (z) no plan listed on Ex-
hibit 4.2-O(2) has an unfunded benefit liability, as that term
is used in ERISA.
(p) Except as set forth on Exhibit 4.2-P hereto
and except for such matters that, individually or in the ag-
gregate, would not reasonably be expected to have a
-24-
Material Adverse Effect on Greystone, (i) Greystone and its
subsidiaries are in compliance with all applicable
Environmental Laws, and (ii) neither Greystone nor any of its
subsidiaries has any outstanding notices, demand letters or
requests for information from any Governmental Entity or any
third party indicating that Greystone or any of its
subsidiaries may be in violation of, or liable under, any
Environmental Law, and none of Greystone, its subsidiaries or
their respective properties are subject to any court order,
administrative order or decree arising under any Environmental
Law.
4.3 Termination of Representations and Warranties.
The representations and warranties in Paragraphs 4.1, 4.2 and
8.1 will terminate at the Effective Time, and, except as may be
contemplated by the Separation Agreement, neither Lennar nor
Greystone, nor any of their respective stockholders will have
any rights or claims as a result of any of those representa-
tions and warranties (or any related certificates) after the
Effective Time.
ARTICLE V
ACTIONS PRIOR TO THE MERGER
5.1 Activities Until Effective Time. From the date
of this Agreement to the Effective Time, each of Lennar and
Greystone will, and will cause each of its subsidiaries to,
except with the written consent of the other of Lennar and
Greystone:
(a) Operate its business (or, as to Lennar, the
Homebuilding Business) in the ordinary course and in a manner
consistent with past practice, except to the extent Lennar
takes steps contemplated by the Spin Off Agreement, and except
to the extent Lennar transfers to the Land Partnership the as-
sets described on Exhibit 4.1-J(2), other than assets which
have been disposed of in the ordinary course of business.
(b) Take all reasonable steps available to them
to maintain the goodwill of Lennar's Homebuilding Business and
Greystone's business and the continued employment
-25-
of the executives and other employees engaged in those
businesses and to maintain good relationships with all vendors,
suppliers, contractors and others with which Lennar or
Greystone, as the case may be, conducts business.
(c) At its expense, maintain all its assets
(or, as to Lennar, all the Homebuilding Assets) in good repair
and condition, except to the extent of reasonable wear and use
and damage by fire or other unavoidable casualty (in which
cases replacement of such assets shall take place consistent
with past practice).
(d) Not make any borrowings other than (i) bor-
rowings in the ordinary course of business with respect to ac-
tivities in states in which it is doing business on the date of
this Agreement consistent in nature and amount with its past
practices, (ii) as to Lennar, borrowings under the arrangements
which are the subject of the Loan Commitments (or other ar-
rangements approved by Greystone) to refinance its current
credit lines and to effect the anticipated capitalization of
the Asset Management Business and the Land Partnership, (iii)
as to Lennar, liabilities which will be liabilities of the As-
set Management Business after the Spin-Off and with respect to
which neither the Surviving Corporation nor any of its subsid-
iaries will have any obligations after the Spin-Off and the
Merger and (iv) as to Greystone, refinancings of its existing
credit facilities.
(e) Not make, or enter into contractual commit-
ments to make, any capital expenditures, loans or advances,
except in each case (i) in the ordinary course of business with
respect to activities in states in which it is doing business
on the date of this Agreement consistent in nature and amount
with its past practices or (ii) as to Lennar, commitments which
will be obligations of the Asset Management Business after the
Spin-Off and as to which neither the Surviving Corporation nor
any of its subsidiaries will have any obligations after the
Spin-Off and the Merger.
-26-
(f) Not directly or indirectly redeem, pur-
chase, repurchase or otherwise acquire any shares of its capi-
tal stock, and not set aside, declare or pay any dividends, or
make any other distributions or repayments of debt to its
stockholders, other than (i) payments by wholly owned subsid-
iaries of Lennar to Lennar or other wholly owned subsidiaries
of Lennar, (ii) regular quarterly dividends on regularly sched-
uled payment dates by Lennar not higher than the per share
quarterly dividends it declared on April 8, 1997, (iii) distri-
butions by Lennar pursuant to the Spin Off Agreement, (iv) pay-
ments by subsidiaries of Greystone to Greystone or other sub-
sidiaries which are wholly owned by Greystone, (v) payments by
subsidiaries of Lennar to Lennar or other subsidiaries which
are wholly owned by Lennar and (vi) in the case of Greystone,
in connection with the Stock Dividend.
(g) Not make any loans or advances (other than
advances for travel and other normal business expenses) to, or
enter into any material agreements or arrangements with, stock-
holders, directors, officers or employees or to any "affiliate"
(other than a subsidiary) or "associate", of any of the forego-
ing (as such terms are defined in Rule 12(b)-2 promulgated un-
der the Exchange Act).
(h) Maintain its books of account and records
in the usual manner, in accordance with GAAP applied on a con-
sistent basis, subject to normal year-end adjustments and ac-
cruals and not make any change in any accounting methods or
systems of internal accounting controls, except as may be ap-
propriate to conform to changes in GAAP or as may be necessary
to give effect to the Spin Off.
(i) Comply in all material respects with all
applicable laws, rules and regulations of Governmental Enti-
ties.
(j) Not purchase, acquire, sell, dispose,
pledge, mortgage or otherwise encumber any property or assets
or engage in any activities or transactions, except in the or-
dinary course of business in states in which it is doing busi-
ness on the date of this Agreement
-27-
and consistent with past practice or, with respect to Lennar,
as is necessary to consummate the Spin-Off or create the Land
Partnership.
(k) Not enter into or amend any employment,
severance or similar agreements or arrangements with any of
its, or its subsidiaries, directors, officers or employees, or
grant any salary or wage increase or increase any employee ben-
efit (including incentive or bonus payments), except for (i)
normal individual increases in compensation to employees who
are not officers or directors in the ordinary course of busi-
ness consistent with past practice, (ii) other changes as are
provided for herein or as may be required by law or to satisfy
contractual obligations existing as of the date hereof, (iii)
additional grants of awards to newly hired employees consistent
with past practice, or (iv) as to Lennar, modifications to em-
ployee stock options and other changes to benefit plans which
are permitted by subparagraph (l) or (v) as to Greystone,
changes to benefit plans described on Exhibit 5.1-K.
(l) Except as contemplated hereby, not enter
into or amend (except as may be required by applicable law or
to satisfy contractual obligations existing as of the date
hereof) any pension, retirement, stock option, stock purchase,
savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers
or other employees, including without limitation taking any
action that accelerates the vesting or exercise of any benefits
payable thereunder, except, (i) as to Lennar, amendments to
employee stock options and other changes to plans or arrange-
ments which are necessary, or which Lennar deems advisable, to
take account of the Spin-Off and which, on the date the amend-
ments or other changes take place, do not increase the excess
of the aggregate market price of the shares to which they are
subject over the aggregate exercise price of all the outstand-
ing options or materially change the terms of any options (ex-
cept, possibly, to accelerate the time when they can be exer-
cised), and as to other plans, do not increase the total li-
abilities
-28-
of Lennar and its subsidiaries with regard to the plans and
arrangements on the day the amendments or other changes take
effect, and (ii) as to Greystone, the changes effected by
Paragraph 2.8 or reflected on Exhibit 5.1-l.
(m) Except as required or permitted by this
Agreement, contemplated by the Spin Off Agreement or otherwise
required to consummate the Spin-Off or to effect the Stock
Dividend, not (i) sell or pledge or agree to sell or pledge any
capital stock owned by it in any of its subsidiaries, (ii)
amend its Certificate of Incorporation or By-laws other than as
provided in this Agreement, (iii) split, combine or reclassify
its outstanding capital stock or sell issue or authorize or
propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock, or
(iv) except as set forth on Exhibit 5.1-M or pursuant to op-
tions outstanding as of the date of this Agreement, issue any
shares of its capital stock or any options, warrants or rights
to purchase or acquire from it any of its capital stock or is-
sue any securities which are convertible or exchangeable into
or for any of its capital stock or other equity securities or
enter into any other contracts, commitments, agreements, under-
standings, arrangements or restrictions by which it would be
bound to issue any additional shares of its capital stock or
other equity securities.
(n) Not knowingly take any action that would
prevent the Merger from qualifying as a "reorganization" within
the meaning of Section 368(a) of the Code, that would prevent
the Spin-Off from qualifying as a tax-free distribution under
Section 355 of the Code or that would cause any of its repre-
sentations and warranties herein to become untrue in any mate-
rial respect.
(o) Not authorize or enter into an agreement to
take any of the actions referred to in subparagraphs (a)
through (n) above, except that Lennar may make commitments and
incur contingent liabilities which will be obligations of the
Asset Management Business after
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the Spin Off and with respect to which neither the Surviving
Corporation nor its subsidiaries will have any obligations,
after the Spin Off.
5.2 HSR Act Filings. Greystone and Lennar will each
make as promptly as practicable any filings it is required to
make under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") with regard to the transac-
tions which are the subject of this Agreement and each of them
will take all reasonable steps within its control (including
providing any requested information to the Federal Trade Com-
mission and the Department of Justice) to cause the waiting
periods required by the HSR Act to be terminated or to expire
as promptly as practicable. Greystone and Lennar will each
provide information and cooperate in all other respects to as-
sist the other of them in making its filing under the HSR Act.
5.3 Registration Statement, Proxy Statements and
Stockholders' Meetings.
(a) Greystone will file as promptly as practi-
cable a registration statement (the "Registration Statement")
on Form S-4 (or whatever other form may be applicable) with the
Securities and Exchange Commission (the "SEC") with respect to
the issuance of the shares of Common Stock and Class B Common
Stock to be issued in the Merger and will use its best efforts
to cause the Registration Statement to become effective as
promptly as practicable.
(b) Greystone will give lawyers, accountants
and other representatives of Lennar reasonable access during
normal business hours to all the books, records and personnel
of Greystone and its subsidiaries which will be useful to as-
sure that the disclosures about Greystone in the Registration
Statement or in documents incorporated by reference into the
Registration Statement are complete and accurate.
(c) Lennar will (i) supply to Greystone all
information Greystone is required to include in the Registra-
tion Statement, including consolidated financial statements of
Lennar and its subsidiaries at November 30, 1996 and for the
three years ended on that date
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which give effect to the Spin Off and have been audited by
Deloitte & Touche and any other required financial statements
of Lennar and its subsidiaries, and in all other respects
cooperate with Greystone in its efforts to cause the
Registration Statement to become effective as promptly as
practicable, including giving lawyers, accountants and other
representatives of Greystone reasonable access during normal
business hours to all the books, records and personnel of
Lennar and its subsidiaries which will be useful to assure that
the disclosures about Lennar in the Registration Statement or
in documents incorporated by reference into the Registration
Statement are complete and accurate, (ii) recommend to its
stockholders that they vote in favor of the Merger and permit
that recommendation to be described in the Registration
Statement, except to the extent that, although Lennar's Board
of Directors does not withdraw its approval of the Merger or
take any other action which would prevent its stockholders from
voting upon the Merger or prevent the Merger from taking place
if this Agreement is adopted by Lennar's stockholders, it is
required by its fiduciary duties to state that it no longer
recommends the Merger, (iii) as promptly as practicable, and in
any event within 10 days after the Registration Statement
becomes effective, cause the proxy statement included in the
Registration Statement, to be mailed to its stockholders and
(iv) cause a meeting of its stockholders to be held not later
than the 45th day after the day on which the proxy statement is
mailed for the purpose of voting upon the Merger (subject to
any adjournments which may be required to comply with law or
with any order of a court or other governmental authority).
(d) Greystone represents and warrants to Lennar
that the information about Greystone included in the Registra-
tion Statement will be complete and accurate in all material
respects and will not include a misstatement of a material fact
or omit to state a fact necessary to make the statements about
Greystone included in the Registration Statement, in the light
of the circumstances under which they are made, not mislead-
ing.
-31-
(e) Lennar represents and warrants to Greystone
that the information about Lennar which Lennar provides to
Greystone for inclusion in the Registration Statement will be
complete and accurate in all material respects and will not
include a misstatement of a material fact or omit to state a
fact necessary to make the statements included in the informa-
tion provided by Lennar, in the light of the circumstances un-
der which they are made, not misleading.
(f) Greystone will (i) file with the SEC as
promptly as practicable a proxy statement (which may be a joint
proxy statement included in the Registration Statement) relat-
ing to a meeting of its stockholders at which they will be
asked to vote upon the Merger, (ii) use its best efforts to
cause review of that proxy statement by the SEC staff to be
completed as promptly as practicable, (iii) recommend to its
stockholders that they vote in favor of the Merger and permit
that recommendation to be described in the proxy statement,
except to the extent that, although Greystone's Board of Direc-
tors does not withdraw its approval of the Merger or take any
other action which would prevent its stockholders from voting
upon the Merger or prevent the Merger from taking place if this
Agreement is adopted by Greystone's stockholders (other than as
permitted in Paragraph 7.1(d) or (e)), it is required by its
fiduciary duties to state that it no longer recommends the
Merger, (iv) as promptly as practicable, and in any event
within 10 days after the SEC completes its review of the proxy
statement and informs Greystone that it has no further comments
about the proxy statement (or, if the proxy statement is in-
cluded in the Registration Statement, within 10 days after the
Registration Statement becomes effective), cause the proxy
statement to be mailed to its stockholders and (v) cause a
meeting of its stockholders to be held not later than the 45th
day after the day on which the proxy statement is mailed for
the purpose of voting upon the Merger (subject to any adjourn-
ments which may be required to comply with law or with any or-
der of a court or other governmental authority).
5.4 No Solicitation of Offers; Notice of Indications
of Interest. (a) Lennar and Greystone each agrees that nei-
ther it nor any of its subsidiaries nor any of the officers or
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directors of it or its subsidiaries shall, and that it shall
direct and use its best efforts to cause its and its subsidiar-
ies' employees, agents and representatives (including any in-
vestment banker, attorney or accountant retained by it or any
of its subsidiaries) not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries or the
making of any proposal or offer with respect to a merger, reor-
ganization, share exchange, consolidation or similar transac-
tion involving it or any other person or entity, or any pur-
chase of, or tender offer for, all or any significant portion
of any equity securities of it or any other person or entity or
of all or any significant portion of the assets of it or any
other person or entity on a consolidated basis (with respect to
each of Lennar and Greystone, any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). Lennar
and Greystone each agrees that it will promptly advise the
other of the receipt of any Acquisition Proposal and of any
determination by its Board of Directors regarding such pro-
posal. Nothing herein shall prevent any disclosure of any de-
termination of the Board of Directors pursuant to Rule 14e-2
under the Exchange Act.
(b) Notwithstanding subparagraph (a), Greystone
may, without breaching this Agreement, in response to an Acqui-
sition Proposal which Greystone's Board of Directors deter-
mines, in good faith and after consultation with its indepen-
dent financial advisor, would result (if consummated pursuant
to its terms) in a transaction (an "Acquisition Transaction")
which (i) would result in Greystone's stockholders receiving
consideration (without taking account of the Warburg Voting
Agreement) with a fair value of more than $18.50 per share, and
(ii) is more favorable to Greystone's stockholders than the
Merger, furnish confidential or non-public information to the
person, entity or group (a "Potential Acquiror") making such
Acquisition Proposal and enter into discussions and negotia-
tions with such Potential Acquiror.
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5.5 Lennar's Efforts to Fulfill Conditions. (a)
Lennar will, and will cause each of its subsidiaries to, use
its best efforts to cause all the conditions set forth in Para-
graph 6.1 and the condition set forth in Paragraph 6.2(h) to be
fulfilled prior to or on the Merger Date, including, without
limitation, the consummation of the Spin-Off, except that noth-
ing in this Agreement will require Lennar to complete the Spin-
Off unless Lennar receives a private letter ruling from the
Internal Revenue Service to the effect that the Spin-Off will
not result in taxes to Lennar or to its stockholders (except
that the ruling may exclude from its coverage whether any taxes
would be payable with respect to any payments made by LPC to
Lennar pursuant to Section 10.1 of the Spin Off Agreement) (the
"Tax Ruling"). Notwithstanding the foregoing, Lennar will use
its best efforts to obtain the Tax Ruling and, if initially the
IRS issues a negative private letter ruling, Lennar will take
all reasonable steps to cause the IRS subsequently to issue a
Tax Ruling.
(b) Without limiting what is said in subpara-
graph (a), Lennar will use its best efforts to cause all hold-
ers of obligations which will be assumed by LPC under the As-
sumption Agreement with regard to which Lennar or any subsid-
iary which will continue to be a subsidiary of Lennar after the
Spin-Off has any primary or contingent liability to be released
from that primary or contingent liability following the Spin-
Off. In order to obtain that release with regard to an obliga-
tion, Lennar will, if necessary, cause LPC directly to assume
or guarantee the obligation. However, Lennar will not take any
actions in order to be released from an obligation which will
interfere in any material respect with, or be adverse in any
material respect to, the Homebuilding Business after the Spin-
Off.
(c) Lennar will keep Greystone advised, and
will consult with Greystone, about Lennar's efforts to obtain,
and its success in obtaining, the releases described in sub-
paragraph (b) and in obtaining the consents described on Ex-
hibit 6.1-C.
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5.6 Greystone's Efforts to Fulfill Conditions.
Greystone will, and will cause each of its subsidiaries to, use
its best efforts to cause all the conditions set forth in Para-
graph 6.2 and the condition set forth in Paragraph 6.1(p) to be
fulfilled prior to or on the Merger Date.
5.7 Merger Date Audit.
(a) The Surviving Corporation will prepare, as
promptly as practicable after the Effective Time, a consoli-
dated balance sheet of Lennar and its subsidiaries as of the
Effective Time, giving effect to the Spin-Off (including the
assignment to LPC of any amount by which the assets of Lennar's
limited purpose finance subsidiaries exceed the liabilities of
those subsidiaries, with the effect of eliminating that excess
as an asset of Lennar (the "Finance Assignment") and reflecting
Lennar's interest in the Land Partnership, but not giving ef-
fect to the Merger (the "Effective Time Balance Sheet"), and
will cause the Effective Time Balance Sheet to be audited by
Deloitte & Touche. The Surviving Corporation will cause De-
loitte & Touche to permit Ernst & Young to observe all material
aspects of the audit of the Effective Time Balance Sheet and to
review the work papers prepared by Deloitte & Touche in the
course of its audit of the Effective Time Balance Sheet (other
than aspects of those work papers which Deloitte & Touche deems
to be proprietary to it). The customary fees and expenses of
Deloitte & Touche and Ernst & Young shall be paid by the Sur-
viving Corporation.
(b) Promptly after the Effective Time Balance
Sheet is available to it, the Surviving Corporation will de-
liver a copy of the Effective Time Balance Sheet to Ernst &
Young accompanied by a letter in which Deloitte & Touche states
that if the Effective Time Balance Sheet were not changed as a
result of subparagraph (c), Deloitte & Touche would issue a
report, in the form attached to its letter, with regard to the
Effective Time Balance Sheet. Sixty days after that Effective
Time Balance Sheet, accompanied by the letter from Deloitte &
Touche, is delivered to Ernst & Young, it will be deemed to be
the final Effective Time Balance Sheet unless, prior to such
date, Ernst & Young delivers to the directors of the Surviving
Corporation
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who are not employees or officers of the Surviving Corporation
or any of its subsidiaries and are not employees, officers or
directors of LPC or any of its subsidiaries (the "Independent
Directors"), with copies to the principal financial officers of
the Surviving Corporation and of LPC, a report (an "Exception
Report") stating that, (i) the Effective Time Balance Sheet was
not prepared in accordance with GAAP applied in a manner
consistent with the way it was applied in preparing the
financial statements included in the Lennar SEC Reports
(including the Lennar 1996 Balance Sheet) with allocations made
in a manner consistent with the way they were made in preparing
the Pro Forma Lennar Financial Statements, and specifying each
item in the Effective Time Balance Sheet which, in Ernst &
Young's opinion, failed so to be in accordance with GAAP or
(ii) factual errors were made in the preparation of the Effec-
tive Time Balance Sheet and identifying the alleged errors and
(iii) because of the failure to be in accordance with GAAP or
the factual errors, the Lennar Effective Time Net Worth (de-
fined below) was less than that shown on the Effective Time
Balance Sheet, specifying the amount by which Ernst & Young
believes the Lennar Effective Time Net Worth was less than that
shown on the Effective Time Balance Sheet.
(c) If an Exception Report is delivered to the
Independent Directors, the Surviving Corporation will cause
Ernst & Young and Deloitte & Touche to attempt to reach an
agreement within 30 days after the Exception Report is deliv-
ered to the Independent Directors with regard to each item
specified in the Exception Report. If Ernst & Young and De-
loitte & Touche fail to agree within that 30 day period as to
any item, the Independent Directors will retain Arthur Andersen
or another nationally recognized firm of accountants agreed
upon by the Independent Directors and LPC (the "Accountants"),
at the equal expense of the Surviving Corporation and LPC, to
resolve the dispute as to that item, and the determination of
the Accountants as to the item will be final, binding and con-
clusive on the parties. If issues in dispute are submitted to
the Accountants for resolution, LPC and the Surviving Corpora-
tion
-36-
(under the direction of the Independent Directors) will furnish
to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants
may request and are available to that party or its
subsidiaries (directly or through its independent public ac-
countants), and each party will be afforded the opportunity to
present to the Accountants any material relating to the deter-
mination and to discuss the Accountants' proposed determination
with the Accountants. All determinations with respect to the
foregoing on behalf of the Surviving Corporation shall require
the approval of, and be made under the direction and control
of, the Independent Directors. The final Effective Time Balance
Sheet will reflect all adjustments to the original Effective
Time Balance Sheet agreed upon by Ernst & Young and Deloitte &
Touche or determined by the Accountants.
(d) If the consolidated net worth of Lennar and
its subsidiaries as of the Effective Time, giving effect to the
Spin-Off (including the Finance Assignment) and reflecting
Lennar's interest in the Land Partnership, but not giving ef-
fect to the Merger, and net of any costs or expenses arising
from the Spin Off or the Merger, whether or not capitalized as
reflected on the final Effective Time Balance Sheet (the "Len-
nar Effective Time Net Worth"), was less than (i) $200 million
and (ii) if the Effective Time is after August 31, 1997, the
sum per day between September 1, 1997 and the day on which the
Effective Time occurs calculated as provided in Exhibit 5.7
(the total of (i) and (ii) being the "Minimum Lennar Net
Worth"), the Surviving Corporation will enforce the requirement
in Paragraph 10.1 of the Spin Off Agreement.
5.8 Indemnification for Prior Acts. (a) The Sur-
viving Corporation shall honor in accordance with their respec-
tive terms and maintain in full force and effect without limi-
tation as to time all indemnification, contribution or similar
rights with respect to matters occurring on or prior to the
Effective Time existing in favor of those individuals who were
directors, officers or employees of Greystone or any of its
subsidiaries at any time at or prior to the Effective Time
(collectively, the "Covered Parties") as provided in the cer-
tificate of
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incorporation or by-laws of Greystone or the Surviving
Corporation or any of its subsidiaries or in any of the
indemnification agreements with Greystone or any of its subsid-
iaries or otherwise listed on Exhibit 5.8-A(1). The Surviving
Corporation shall maintain in effect for not less than six
years after the Effective Time Greystone's policies of direc-
tors and officers liability insurance in effect at the date of
this Agreement, which are listed on Exhibit 5.8-A(2) (notwith-
standing any provision of such policies that such policies ter-
minate as a result of the Merger), and from and after the Ef-
fective Time shall continue to include as insureds thereunder
on the terms thereof the current and former officers, directors
and employees of Greystone or any of its subsidiaries who are
covered by those policies at the date of this Agreement with
respect to all matters occurring on or prior to the Effective
Time. For a period of six years after the Effective Time, the
Surviving Corporation will not amend, alter or modify Article X
of the Surviving Corporation's certificate of incorporation.
The Surviving Corporation will also maintain in effect for at
least three years after the Effective Time, directors and of-
ficers liability insurance comparable to that maintained by
Greystone as of the date hereof with respect to matters occur-
ring after the Effective Time (notwithstanding any provision of
such policies that such policies terminate as a result of the
Merger). The Surviving Corporation will notify each Covered
Person of each change in insurance coverage and each amendment
to the Surviving Corporation's Certificate of Incorporation,
whether or not permitted by this Paragraph, which may affect
that Covered Person.
(b) Without limiting clause (a), from and after
the Effective Time, the Surviving Corporation shall indemnify
and hold harmless each present and former director and officer
of Lennar or Greystone, or any of their respective subsidiar-
ies, (when acting in such capacity) ("Indemnified Party"),
against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil,
criminal,
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administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective
Time relating to acts or omissions, or alleged acts or
omissions, of the Indemnified Party in his or her capacity as a
director or officer of Lennar or Greystone, or any of their
respective subsidiaries, whether asserted or claimed prior to,
at or after the Effective Time, to the fullest extent permitted
by law (and the Surviving Corporation shall also advance
expenses as incurred to the fullest extent permitted under
applicable law, provided the Indemnified Party to whom expenses
are advanced signs and delivers to the Surviving Corporation an
undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to
advancement of such expenses).
(c) Any Indemnified Party wishing to claim in-
demnification under subparagraph (b) of this Paragraph 5.8,
upon learning of the claim, action, suit, proceeding or inves-
tigation as to which indemnification is sought, shall promptly
notify the Surviving Corporation thereof, but the failure to so
notify shall not relieve the Surviving Corporation of any li-
ability it may have to such Indemnified Party if such failure
does not materially prejudice the Surviving Corporation. In
the event of any such claim, action, suit, proceeding or inves-
tigation (whether arising before or after the Effective Time),
(i) the Surviving Corporation shall have the right to assume
the defense thereof and the Surviving Corporation shall not be
liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense
thereof, except that if the Surviving Corporation elects not to
assume such defense or counsel for the Surviving Corporation or
for an Indemnified Party advises in good faith that there are
issues which raise conflicts of interest between the Surviving
Corporation and the Indemnified Party, the Indemnified Party
may retain separate counsel satisfactory to the Indemnified
Party, and the Surviving Corporation shall pay all reasonable
fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received, provided that the
Surviving Corporation will not be required to
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pay fees and expenses of more than one separate counsel for all
the Indemnified Parties with respect to any matter or group of
related matters.
(d) If the Surviving Corporation or any of its
successors or assigns (i) shall consolidate with or merge into
any other corporation or entity and shall not be the continuing
or surviving corporation or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other
entity, then and in each such case, proper provisions shall be
made so that the successors and assigns of the Surviving Corpo-
ration shall assume all of the obligations set forth in this
Paragraph 5.8.
(e) The provisions of this Paragraph 5.8 are
intended to be for the benefit of, and shall be enforceable by,
each of the Covered Parties and the Indemnified Parties, their
heirs and their representatives.
5.9 Amendments to the Spin Off Agreement and Part-
nership Agreement. Without the prior written consent of Grey-
stone, Lennar will not, and will cause LPC not to, modify,
amend, supplement (by separate agreement or otherwise) or waive
prior to the Effective Time any provision of the Spin Off
Agreement or the Partnership Agreement.
5.10 Compensation, Benefits. (a) Except as may
otherwise be provided in any existing employment or other
agreement disclosed on Exhibit 4.2-O(2) between Greystone or
any of its subsidiaries and any employee or retired employee of
Greystone or any of its subsidiaries (the "Greystone Employ-
ees"), (i) following the Effective Time and through December
31, 1997, the Surviving Corporation will provide, or will cause
to be provided, for all Greystone Employees incentive compensa-
tion, benefits and base compensation which in the aggregate are
no less favorable than that provided by Greystone or its sub-
sidiaries to such Greystone Employees immediately prior to the
Effective Time and (ii) it is Lennar's current intention (al-
though Lennar will not be under a legal obligation) to provide,
or cause to be provided, during the year ending December 31,
1998, incentive compensation, benefits and base compensation
-40-
to Greystone Employees which, in aggregate, is at least equal
to that in the year ending December 31, 1997. For all purposes
under all compensation and benefit plans and policies ap-
plicable to Greystone Employees after the Effective Time, all
service by Greystone Employees with Greystone and its subsid-
iaries before the Effective Time shall be treated in the same
manner as service with Lennar and its subsidiaries, except to
the extent such treatment would result in duplication of ben-
efits. Except as contemplated by the amendments to employment
agreements listed on Exhibit 4.2-O(2), the Surviving Corpora-
tion shall honor all employment agreements and individual sev-
erance and individual supplemental retirement arrangements in
effect immediately prior to the Effective Time with respect to
all Greystone Employees.
ARTICLE VI
CONDITIONS PRECEDENT TO MERGER
6.1 Conditions to Greystone's Obligations. The ob-
ligations of Greystone to complete the Merger are subject to
satisfaction of the following conditions (any or all of which
may be waived by Greystone):
(a) All representations and warranties of Len-
nar contained in this Agreement, and all representations and
warranties of Lennar and LPC contained in the Spin Off Agree-
ment shall have been true and correct in all material respects
(except that representations and warranties which are qualified
or limited as to materiality shall have been true and correct
in their entirety) on the date hereof, and shall be true and
correct in all material respects (except that representations
and warranties which are qualified or limited as to materiality
shall be true and correct in their entirety) on the Merger Date
with the same force and effect as though made again on, at and
as of the Merger Date (except to the extent such representa-
tions and warranties are expressly made as of a specified date)
and Lennar will have delivered to Greystone a
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certificate dated that date and signed by the President or a
Vice President of Lennar to that effect.
(b) Each of Lennar and LPC will have fulfilled
in all material respects all its obligations under this Agree-
ment and under the Spin Off Agreement required to have been
fulfilled prior to or on the Merger Date.
(c) No order will have been entered by any
court or governmental authority and be in force which invali-
dates this Agreement or the Spin Off Agreement or restrains
Greystone, Lennar or LPC from completing the transactions which
are the subject of this Agreement or the Spin Off Agreement and
no action will be pending against Greystone or Lennar relating
to the transactions which are the subject of this Agreement
which presents a reasonable likelihood of resulting in an award
of damages against the Surviving Corporation which would be
material after the Merger to the Surviving Corporation and its
subsidiaries taken as a whole.
(d) The consents described on Exhibits 4.1-C
and 4.2-C, will have been obtained (except to the extent one of
those Exhibits indicates particular consents will not be
sought).
(e) The waiting periods under the HSR Act with
regard to the Merger will have expired or been terminated.
(f) The Merger will have been approved by the
holders of a majority of the outstanding shares of Greystone
common stock.
(g) The Spin-Off will have been completed in
accordance with the terms of the Spin off Agreement and, im-
mediately prior to such completion, all conditions contained in
Paragraph 3.1 of the Spin Off Agreement will have been satis-
fied (except that the condition in Paragraph 3.1(a) of the Spin
Off Agreement may be waived by Lennar) and each party to any
such agreement shall have complied in all material respects
with its respective obligations thereunder. If Lennar enters
into a Shared Facilities Agreement, an Employee Matters
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Agreement or a Tax Sharing Agreement as contemplated by
Paragraph 11.2 of the Spin-Off Agreement or any other agreement
relating to the Spin Off (other than agreements which do not
alter or supplement any of the terms of the Spin-Off
Agreement), those agreements (or such of them as are entered
into) will be on terms reasonably satisfactory as to form and
substance to Greystone.
(h) Lennar and Warburg, Pincus Investors, L.P.
("Warburg") will have entered into a Registration Rights Agree-
ment substantially in the form of Exhibit 6.1-H(1).
(i) As of the Merger Date, Greystone will have
received a certificate dated as of the Merger Date and signed
by the principal accounting officer of Lennar to the effect
that, based upon the most recent available monthly consolidated
financial statements of Lennar and its subsidiaries and all
information of which the principal accounting officer is aware
concerning activities or results of operations of Lennar and
its subsidiaries after the date of those financial statements,
the principal accounting officer believes that the stockholders
equity of Lennar and its subsidiaries at the Merger Date is at
least equal to the Minimum Lennar Net Worth.
(j) The financings contemplated by the Loan
Commitments shall be the subject of agreements which have been
executed and are in full force and effect and are consistent
with the terms of the Loan Commitments, and all conditions to
availability of the financing contemplated by those agreements
shall have been satisfied or waived in writing by the providers
of the financing.
(k) Lennar, through a wholly owned subsidiary,
will have good and valid title to a 50% general partner's in-
terest in the Land Partnership, free and clear of any liens,
charges, pledges, security interests or other encumbrances or
imperfections or defects in title and the Land Partnership will
own the assets described on Exhibit 4.1-J(2), other than assets
which have been disposed of in the ordinary course of business,
(and no other properties or
-43-
assets (including cash) without the consent of Greystone),
which have the current book values that have been disclosed to
Greystone as described on Exhibit 4.1-J(2). The assets listed
on Exhibit 4.1-J(2) which are contributed to Lennar Land
Partners will constitute the Initial Capital Contribution, as
that term is used in the Partnership Agreement relating to the
Land Partnership.
(l) The indebtedness of LPC or its subsidiaries
for which the Surviving Corporation or its subsidiaries will be
primarily or contingently liable after the Spin-Off (whether or
not they are indemnified by LPC with regard to the indebted-
ness) will not exceed $50 million in aggregate.
(m) The documents by which Lennar and its sub-
sidiaries engaged in the Homebuilding Business transfer assets
to the Land Partnership and receive options to purchase assets
back from the Land Partnership, and any other material agree-
ments executed in connection with the Land Partnership, will be
in form and substance reasonably satisfactory to Greystone,
which Greystone will confirm without unreasonable delay. The
prices at which Lennar or its subsidiaries will have the option
to purchase properties from the Land Partnership will be as
shown on Exhibit 6.1-M(1) and the terms on which a subsidiary
of Lennar will receive payments for acting as Manager with re-
gard to Lennar Land Partners will be as shown on Exhibit
6.1-M(2), in each case unless altered with the consent of Grey-
stone. Without limiting the foregoing, such documents provid-
ing for the transfer or contribution of assets and properties
to the Land Partnership shall provide in form and substance
reasonably satisfactory to Greystone that all liabilities or
obligations of any nature whatsoever (whether known or unknown,
due or to become due, absolute, accrued, contingent or other-
wise) relating to, arising out of or resulting from such assets
and properties will be assumed by the Land Partnership, that
the Land Partnership will indemnify the Surviving Corporation
and its subsidiaries with respect thereto and that such assump-
tion and indemnification obligations shall survive any exercise
of any option to purchase such property or asset.
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(n) Neither Lennar nor any of its subsidiaries
will have any primary or contingent liabilities with regard to
indebtedness secured by properties which are owned by the Land
Partnership (other than the contingent liability of Lennar's
subsidiary which is a general partner of the Land Partnership
resulting from its status as a general partner).
(o) If the Spin-Off has taken place but the Tax
Ruling has not been obtained, Greystone will have received an
opinion of Rogers & Wells, counsel to Lennar, to the effect
that (i) the distribution of stock of LPC to stockholders of
Lennar in the Spin-Off qualified as a distribution within the
meaning of Section 355(a) of the Internal Revenue Code of 1986,
as amended (the "Code") and (ii) no gain or loss will be recog-
nized to Lennar as a result of the distribution of stock of LPC
to Lennar's stockholders in connection with the Spin-Off, ex-
cept that Rogers & Wells may except from its opinion the pos-
sibility that Lennar will realize income or gain as a result of
any payment required by Paragraph 10.1 of the Spin Off Agree-
ment.
(p) Greystone will have received an opinion of
Wachtell, Lipton, Rosen & Katz, counsel to Greystone, to the
effect that the Merger constitutes a reorganization within the
meaning of Section 368(a)(1)(A) of the Code and that the Merger
will not result in gain or loss to Greystone's stockholders.
6.2 Conditions to Lennar's Obligations. The obliga-
tions of Lennar to complete the Merger are subject to the fol-
lowing conditions (any or all of which may be waived by Len-
nar):
(a) All representations and warranties of Grey-
stone contained in this Agreement, shall have been true and
correct in all material respects (except that representations
and warranties which are qualified or limited as to materiality
shall have been true and correct in their entirety) on the date
hereof, and shall be true and correct in all material respects
(except that representations which are qualified or limited as
to materiality shall be true and correct in their entirety) on
the Merger Date with the same force and effect as though made
again on, at and as of the Merger Date (except to the extent
such representations and warranties are
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expressly made as of a specified date) and Greystone will have
delivered to Lennar a certificate dated that date and signed by
the President or a Vice President of Greystone to that effect.
(b) Greystone will have fulfilled in all mate-
rial respects all its obligations under this Agreement required
to have been fulfilled prior to or on the Merger Date.
(c) No order will have been entered by any
court or governmental authority and be in force which invali-
dates this Agreement or restrains Lennar from completing the
transactions which are the subject of this Agreement and no
action will be pending against Greystone or Lennar relating to
the transactions which are the subject of this Agreement which
presents a reasonable likelihood of resulting in an award of
damages against the Surviving Corporation which would be mate-
rial after the Merger to the Surviving Corporation and its sub-
sidiaries.
(d) The consents described on Exhibits 4.1-C
and 4.2-C will have been obtained (except to the extent one of
those Exhibits indicates particular consents will not be
sought).
(e) The waiting periods under the HSR Act with
regard to the Merger will have expired or been terminated.
(f) The Merger will have been approved by the
holders of a majority of the outstanding shares of Lennar com-
mon stock and Lennar class B common stock voting as a single
class (with the Lennar class B common stock being entitled to
10 votes per share).
(g) The Tax Ruling will have been obtained and
the Spin-Off will have taken place as contemplated in the Spin
Off Agreement.
(h) Lennar will have received an opinion of
Rogers & Wells, counsel to Lennar, to the effect that the
Merger constitutes a reorganization within the meaning of Sec-
tion 368(a)(1)(A) of the Code and that the Merger will not re-
sult in gain or loss to Lennar's stockholders.
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ARTICLE VII
TERMINATION
7.1 Right to Terminate. This Agreement may be ter-
minated at any time prior to the Effective Time (whether or not
the stockholders of one or both of Greystone and Lennar have
adopted this Agreement and approved the Merger):
(a) By mutual consent of Greystone and Lennar.
(b) By either Greystone or Lennar if the Effec-
tive Time is not on or before December 31, 1997; provided how-
ever that the right to terminate this Agreement under this
Paragraph 7.1(b) will not be available to any party whose fail-
ure to fulfill any obligation under this Agreement has been the
cause of the failure of the Effective Time to occur on or be-
fore that date.
(c) At any time prior to the Effective Time, by
Lennar or Greystone, in the event of either (i) a breach by the
other party of any representation or warranty contained herein,
which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of
such breach, other than any such breaches that, in the ag-
gregate, would not reasonably be expected to have a Material
Adverse Effect on Greystone or Lennar, as the case may be, or
(ii) a material breach by the other party of any of the cov-
enants or agreements contained herein, which breach cannot be
or has not been cured within 30 days after the giving of writ-
ten notice to the breaching party of such breach.
(d) By Greystone, if it receives a Superior
Proposal on or before August 9, 1997, and its Board of Direc-
tors resolves to accept such Superior Proposal, and Greystone
shall have given Lennar ten business days' prior notice of its
intention to terminate this Agreement pursuant to this provi-
sion; provided, however, that such termination shall not be
-47-
effective until such time as Lennar shall have received a pay-
ment from Greystone of $7.5 million (it being understood that
not more than one such payment shall be required even if Grey-
stone is entitled to terminate this Agreement pursuant to this
subparagraph (d) and subparagraph (e)). A "Superior Proposal"
is an Acquisition Proposal which (i) would result in
Greystone's receiving consideration with a fair value deter-
mined in good faith by Greystone's Board of Directors to be
more than $18.50 per share, and (ii) is determined in good
faith by Greystone's Board of Directors to be more favorable to
Greystone's stockholders than the Merger. A notice of inten-
tion to terminate given pursuant to this subparagraph will be
irrevocable (unless Lennar consents in writing to its being
withdrawn by Greystone) and will result in this Agreements'
being terminated on the date specified in the notice of inten-
tion, which will be not earlier than the day after the expira-
tion of the ten business day period. When Greystone delivers a
notice of intention to terminate pursuant to this Paragraph,
Lennar's obligations under Paragraphs 5.1, 5.2, 5.3 and 5.9
will terminate.
(e) By Greystone, if (A) a tender or exchange
offer is commenced by a Potential Acquiror on or before August
9, 1997, for all outstanding shares of Greystone common stock
for a consideration having a value of at least $18.50 per
share, (B) Greystone's Board of Directors determines in good
faith and after consultation with an independent financial ad-
visor, that such offer constitutes a Superior Proposal and re-
solves to accept such Superior Proposal or recommend to
Greystone's stockholders that they tender their shares in re-
sponse to such tender or exchange offer and (C) Greystone shall
have given Lennar ten business days' prior notice of its inten-
tion to terminate pursuant to this provision; provided, how-
ever, that such termination shall not be effective until such
time as Lennar shall have received a payment from Greystone of
$7.5 million (it being understood that not more than one such
payment shall be required even if Greystone is entitled to ter-
minate this Agreement pursuant to this subparagraph (e) and
subparagraph (d)). A notice of intention to terminate given
pursuant to this subparagraph
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will be irrevocable (unless Lennar consents in writing to its
being withdrawn by Greystone) and will result in this
Agreements' being terminated on the date specified in the
notice of intention, which will be not earlier than day after
the expiration of the ten business day period. When Greystone
delivers a notice of intention to terminate pursuant to this
Paragraph, Lennar's obligations under Paragraphs 5.1, 5.2, 5.3
and 5.9 will terminate.
7.2 Manner of Terminating Agreement. If at any time
Lennar or Greystone has the right under Paragraph 7.1 to termi-
nate this Agreement, it can terminate this agreement by a no-
tice to the other of them that it is terminating this Agree-
ment.
7.3 Effect of Termination. (a) Except as provided
in subparagraph (b) of this Paragraph, if this Agreement is
terminated pursuant to Paragraph 7.1, after this Agreement is
terminated, neither party will have any further rights or obli-
gations under this Agreement, other than the parties' respec-
tive obligations under Paragraph 9.1 and the second sentence of
Paragraph 9.2(a) and (b). Nothing in this Paragraph will, how-
ever, relieve either party of liability for any wilful or in-
tentional breach of any covenant contained in this Agreement
which occurs before this Agreement is terminated.
(b) If the Tax Ruling is not obtained by Decem-
ber 31, 1997 and this Agreement is terminated by Lennar or
Greystone under Paragraph 7.1 (b) at a time when (i) the Tax
Ruling has not been obtained, (ii) the Spin-Off has not oc-
curred and (iii) all the conditions in Paragraph 6.2, other
than those in Paragraphs 6.2(d), 6.2(f), 6.2(g) and 6.2(h) have
been fulfilled (or would be fulfilled upon delivery of ap-
propriate certificates by officers of the parties), Lennar will
pay Greystone the sum of $5 million within 20 days after this
Agreement is terminated.
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ARTICLE VIII
ABSENCE OF BROKERS
8.1 Representations and Warranties Regarding Brokers
and Others. Greystone and Lennar each represents and warrants
to the other of them 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 (i) Smith
Barney Inc. acted as financial advisor to Greystone and (ii) BT
Securities Corporation acted as financial advisor to Lennar.
All fees of Smith Barney Inc. will be paid by Greystone and all
fees of BT Securities Corporation will be paid by Lennar.
Greystone and Lennar 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 lim-
ited to, reasonable fees and expenses of counsel and costs of
investigation) incurred because of any claim by anyone for com-
pensation as a broker, a finder or in any similar capacity by
reason of services allegedly rendered to the indemnifying party
in connection with the transactions which are the subject of
this Agreement.
ARTICLE IX
GENERAL
9.1 Expenses. Greystone and Lennar will each pay
its own expenses in connection with the transactions which are
the subject of this Agreement, including legal fees.
9.2 Access to Properties, Books and Records.
(a) From the date of this Agreement until the
Merger Date or such earlier date as this Agreement is termi-
nated, Lennar will, and will cause each of its subsidiaries to,
give representatives of Greystone reasonable access during nor-
mal business hours to all of their respective management, prop-
erties, books and records. Until the Effective Time, Greystone
will,
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and will cause its representatives to, hold all information its
representatives receive as a result of their access to the
management, properties, books and records of Lennar or its
subsidiaries in confidence, except to the extent that informa-
tion (i) is or becomes available to the public (other than
through a breach of this Agreement), (ii) becomes available to
Greystone from a third party which, insofar as Greystone is
aware, is not under an obligation to Lennar, or to a subsidiary
of Lennar, to keep the information confidential, (iii) was
known to Greystone before it was made available to Greystone or
its representative by Lennar or a subsidiary, or (iv) otherwise
is independently developed by Greystone. If this Agreement is
terminated prior to the Effective Time, Greystone will, at the
request of Lennar, deliver to Lennar all documents and other
material obtained by Greystone from Lennar or a subsidiary in
connection with the transactions which are the subject of this
Agreement or evidence that that material has been destroyed by
Greystone.
(b) From the date of this Agreement until the
Merger Date or such earlier date as this Agreement is termi-
nated, Greystone will, and will cause each of its subsidiaries
to, give representatives of Lennar reasonable access during
normal business hours to all of their respective management,
properties, books and records. Lennar will, and will cause its
representatives to, hold all information its representatives
receive as a result of their access to the management, proper-
ties, books and records of Greystone 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 Lennar from a third
party which, insofar as Lennar is aware, is not under an obli-
gation to Greystone, or to a subsidiary of Greystone, to keep
the information confidential, (iii) was known to Lennar before
it was made available to Lennar or its representative by Grey-
stone or a subsidiary, or (iv) otherwise is independently de-
veloped by Lennar. If this Agreement is terminated prior to
the Effective Time, Lennar will, at the request of Greystone,
deliver to Greystone all documents and other material obtained
by
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Lennar from Greystone or a subsidiary in connection with the
transactions which are the subject of this Agreement or evi-
dence that that material has been destroyed by Lennar.
9.3 Plan of Reorganization. This Agreement is in-
tended to be a plan of reorganization for the purposes of Sec-
tion 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended.
9.4 Press Releases. Greystone and Lennar will con-
sult with each other before issuing any press releases or oth-
erwise making any public statements with respect to this Agree-
ment or the transactions contemplated by it, except that noth-
ing in this Paragraph will prevent either 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 an affiliate are listed,
quoted or traded.
9.5 Entire Agreement. This Agreement, the Spin Off
Agreement and the documents expressly required or contemplated
by this Agreement and the Spin Off Agreement contain the entire
agreement between Greystone and Lennar relating to the transac-
tions which are the subject of this Agreement and those other
documents, and all prior negotiations, understandings and
agreements between Greystone and Lennar are superseded by this
Agreement and those other documents, and there are no represen-
tations, 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.
9.6 Survival of Obligations. The obligations of the
Surviving Corporation under this Agreement, (including but not
limited to in its capacity as successor to Greystone and Len-
nar), including but not limited to its, obligations under Para-
graphs 5.7, 5.8 and 5.10, will survive the Effective Time and
the Merger.
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9.7 Effect of Disclosures. Any information dis-
closed by a party in connection with any representation or war-
ranty contained in this Agreement (including exhibits to this
Agreement) will be treated as having been disclosed in connec-
tion with each representation and warranty made by that party
in this Agreement as to which it is reasonably apparent that
the information applies.
9.8 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.
9.9 Prohibition Against Assignment. Neither this
Agreement nor any right of any party under it may be assigned
by operation of law or otherwise.
9.10 Modification or Amendment. Subject to the pro-
visions of the applicable law, at any time prior to the Effec-
tive Time, the parties hereto may modify or amend this Agree-
ment, by written agreement executed and delivered by duly au-
thorized officers of the respective parties, whether or not the
stockholders of one or both of Greystone and Lennar have
adopted this Agreement and approved the Merger.
9.11 Waiver of Conditions. The conditions to each
of the parties' obligations to consummate the Merger are for
the sole benefit of such party and may be waived by such party
in whole or in part to the extent permitted by applicable law.
9.12 No Third Party Beneficiaries. Except as pro-
vided in Paragraph 2.8 (Greystone Options) or Paragraph 8 (In-
demnification; Directors' and Officers' Insurance), this Agree-
ment is not intended to confer upon any person or entity other
than Lennar and Greystone any rights or remedies hereunder.
9.13 Notices and Other Communications. Any notice
or other communication under this Agreement must be in writing
and will be deemed given when delivered in person or sent by
facsimile (with proof of receipt at the number to which it is
required to be sent), or on the third business day after the
day on which mailed by first class mail from within the United
States
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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:
Lennar Corporation
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: President
Facsimile No.: (305) 227-7115
with a copy to:
David W. Bernstein, Esq.
Rogers & Wells
200 Park Avenue
New York, New York 10166
Facsimile No.: (212) 878-8375
If to Greystone:
Pacific Greystone Corporation
6767 Forest Lawn Drive
Los Angeles, CA 90068-1027
Attention: Jack Harter
Facsimile No.: (213) 876-3866
with a copy to:
Andrew Brownstein, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Facsimile No.: (212) 403-2000
9.14 Governing Law. This Agreement will be governed
by, and construed under, the laws of the State of Delaware ap-
plicable to contracts executed and to be performed in that
state.
9.15 Counterparts. This Agreement may be executed
in two or more counterparts, some of which may contain the sig-
natures of some, but not all, the parties. Each of those coun-
terparts will be deemed an original, but all of them together
will constitute one and the same agreement.
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IN WITNESS WHEREOF, Greystone and Lennar have ex-
ecuted this Agreement, intending to be legally bound by it, on
the day shown on the first page of this Agreement.
LENNAR CORPORATION
By: /s/ Stuart Miller
Title: President
PACIFIC GREYSTONE CORPORATION
By: /s/ Jack R. Harter
Title: President