1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Lennar Corporation*
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
* The Proxy Statement also contains the Prospectus of Pacific Greystone
Corporation. Accordingly, Pacific Greystone is the Registrant with respect to
the Form S-4 Registration Statement filed under the Securities Act of 1933 on
September 16, 1997 to register the shares of Greystone Common Stock to be
issued pursuant to the Plan and Agreement of Merger to which the Proxy
Statement relates.
2
LENNAR CORPORATION
SEVEN HUNDRED N.W. 107TH AVENUE
MIAMI, FLORIDA 33172
September 30, 1997
DEAR LENNAR STOCKHOLDER:
You are being asked to vote on one of two very exciting steps Lennar
Corporation proposes to take. As has been announced, Lennar is placing its real
estate investment and management business into a separate company, LNR Property
Corporation, and will be distributing the shares of LNR to its stockholders.
Immediately after that, if the Lennar stockholders approve the proposal being
presented to them, Lennar expects to merge with Pacific Greystone Corporation, a
major homebuilder in the western part of the United States.
The transfer of Lennar's real estate investment and management business to
LNR and distribution of LNR's stock will result in two entities, each of which
will be focused on a single business. Lennar will be involved in homebuilding
and related activities. LNR will be involved in acquiring and managing a variety
of real estate related assets, such as commercial properties, commercial
mortgages and commercial mortgage backed securities. We believe this will help
investors understand each of the two businesses. Also, it will let them invest
in one or both of those businesses if they choose to do so. In addition, it will
enable each of the companies to operate and finance its business in the manner
most appropriate for that business.
As an immediate benefit of the separation of Lennar into two companies,
Lennar proposes to acquire Pacific Greystone Corporation in a stock merger.
Pacific Greystone is a significant force in the homebuilding market both in
Northern and Southern California. It also builds homes in the Las Vegas, Nevada
and Phoenix, Arizona areas.
Pacific Greystone is an ideal fit for Lennar. Lennar has only been in the
California market for approximately a year. Combining Pacific Greystone with
Lennar will immediately make Lennar a significant factor in the California
homebuilding market. Pacific Greystone's activities in the Phoenix area will fit
very well with Lennar's homebuilding operations in that area. Also, Pacific
Greystone will bring Lennar into the rapidly growing Las Vegas area. Thus, the
addition of Pacific Greystone will make Lennar a significant factor all across
the nation's sunbelt.
Because of Leonard Miller's shareholdings, if there is a quorum present at
the Special Meeting of Stockholders, the proposal regarding the Pacific
Greystone merger will be approved. However, it is important that as many as
possible of the stockholders be present or represented at that meeting. I look
forward to seeing all of you who attend in person.
Sincerely,
STUART A. MILLER
President
3
LENNAR CORPORATION
SEVEN HUNDRED N.W. 107TH AVENUE
MIAMI, FLORIDA 33172
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 31, 1997
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of the stockholders of Lennar
Corporation
("Lennar") will be held at 1:00 P.M., local time, on October 31, 1997, at the
Doral Park Golf and Country Club, 5001 N.W. 104 Avenue, Miami, Florida for the
following purposes:
1. To consider and vote upon a proposal to adopt the Plan and
Agreement of Merger, dated as of June 10, 1997, between Lennar and Pacific
Greystone Corporation, and approve the Merger of Lennar with Pacific
Greystone Corporation; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement of the Special Meeting.
The meeting may be postponed or adjourned from time to time. Only
stockholders of record at the close of business on September 2, 1997 will be
entitled to notice of or to vote at the Special Meeting or any adjournment or
postponement of that meeting.
Enclosed is a Joint Proxy Statement/Prospectus describing the matters to be
voted upon at the Special Meeting. Please read it carefully and then sign,
complete and return your Proxy as promptly as possible. If you receive more than
one Proxy because your shares are registered in different names or addresses,
each Proxy should be signed and returned to assure that all your shares will be
voted.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY. AN ABSTENTION OR
FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT
AND THE MERGER.
September 30, 1997
BY ORDER OF THE BOARD OF DIRECTORS
ALLAN J. PEKOR,
SECRETARY
4
JOINT PROXY STATEMENT/PROSPECTUS
PROXY STATEMENT OF LENNAR CORPORATION
AND PACIFIC GREYSTONE CORPORATION
REGARDING SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON OCTOBER 31, 1997
PROSPECTUS OF PACIFIC GREYSTONE CORPORATION
REGARDING 26,097,675 SHARES OF COMMON STOCK AND
9,966,631 SHARES OF CLASS B COMMON STOCK
This Joint Proxy Statement/Prospectus is being furnished to the
stockholders of Lennar Corporation, a Delaware corporation ("Lennar"), and the
stockholders of Pacific Greystone Corporation, a Delaware corporation
("Greystone"), for use at special meetings of the stockholders of Lennar (the
"Lennar Special Meeting") and of the stockholders of Greystone (the "Greystone
Special Meeting" and together with the Lennar Special Meeting, the "Special
Meetings"), at which stockholders of each corporation will be asked to vote on a
proposal to adopt a Plan and Agreement of Merger, dated as of June 10, 1997,
between Lennar and Greystone (the "Merger Agreement"), and to approve the merger
(the "Merger") of Lennar with Greystone (the "Surviving Corporation") which is
the subject of the Merger Agreement.
Leonard Miller, Lennar's Chairman of the Board, who owns, through family
partnerships, 99.6% of Lennar's Class B common stock, $.10 par value per share,
("Lennar Class B Stock") which entitles him to 79% of the votes which may be
cast with regard to the Merger, has agreed to vote all of his Lennar Class B
Stock in favor of adopting the Merger Agreement and approving the Merger.
Therefore, if there is a quorum present at the Lennar Special Meeting, the
proposal regarding the Merger will be approved even if no other Lennar
Stockholders vote in favor of it. Warburg, Pincus Investors, L.P. ("Warburg"),
which owns 8,411,854 shares (approximately 56%) of Greystone's Common Stock, has
agreed, subject to certain conditions, to vote at least 50% of the outstanding
Greystone common stock, $.01 par value per share, ("Greystone Common Stock") in
favor of adopting the Merger Agreement and approving the Merger. If even one
additional share of Greystone Common Stock is voted in favor of adopting the
Merger Agreement and approving the Merger, those actions will have been approved
by the Greystone Stockholders. Lennar owns 1,000 shares of Greystone Common
Stock, which Lennar has the right to vote in favor of the proposal regarding the
Merger. Therefore, unless the Merger Agreement is terminated, the Merger is
expected to be approved by the Greystone Stockholders.
Prior to the Merger, Greystone intends to pay a special dividend of .138 of
a share of Greystone Common Stock upon each share of Greystone Common Stock (the
"Stock Dividend"). After the Merger, each share of Greystone Common Stock
outstanding at the Effective Time of the Merger (including the shares issued in
the Stock Dividend) will continue to be one share of Common Stock, $.10 par
value per share, of the Surviving Corporation ("Surviving Corporation Common
Stock"). Therefore, after the Merger, Greystone stockholders will hold 1.138
shares of Surviving Corporation Common Stock for each currently outstanding
share of Greystone Common Stock. As a result of the Merger, each share of Common
Stock, $.10 par value per share, of Lennar ("Lennar Common Stock") will be
converted into one share of Surviving Corporation Common Stock and each share of
Lennar Class B Stock will be converted into one share of the Class B Common
Stock, $.10 par value per share, of the Surviving Corporation ("Surviving
Corporation Class B Stock"). Lennar stockholders will not receive the Stock
Dividend. This Joint Proxy Statement/Prospectus constitutes a prospectus of
Greystone with respect to the shares of Surviving Corporation Common Stock and
Surviving Corporation Class B Stock to be issued in connection with the Merger.
Although Greystone will be the Surviving Corporation, immediately after the
Merger former Lennar stockholders will own approximately 68% of the outstanding
capital stock of the Surviving Corporation, the Surviving Corporation will be
named Lennar Corporation, six of its eight directors will be pre-Merger Lennar
directors, and the principal executive officers of Lennar before the Merger will
become the principal executive officers of the Surviving Corporation. For
accounting and consolidated tax reporting purposes, the Merger will be treated
as an acquisition of Greystone by Lennar.
5
Prior to the Merger, Lennar intends to distribute to its stockholders all
the stock of LNR Property Corporation ("LNR"), to which Lennar will have
transferred its real estate investment and management business (the "Spin-Off").
Greystone stockholders will not receive any interest in LNR or its subsidiaries
as a result of the Merger. At the time of the Merger, Lennar's only business
will be homebuilding and related activities. See "Business of Lennar" and
"Relationships Between Lennar and LNR -- The Spin-Off; The Separation and
Distribution Agreement."
THE RESPECTIVE BOARDS OF DIRECTORS OF LENNAR AND GREYSTONE HAVE UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE MERGER AND RECOMMEND THAT THEIR RESPECTIVE
STOCKHOLDERS VOTE FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AND APPROVE THE
MERGER.
SEE "RISK FACTORS" ON PAGE 13 FOR INFORMATION ABOUT PARTICULAR RISKS WITH
REGARD TO LENNAR, GREYSTONE AND THE MERGER.
Greystone Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "GRY." On September 29, 1997, the closing price for Greystone
Common Stock as reported on the NYSE Composite Tape was $20.125 per share, and
the closing price for Lennar Common Stock as reported on the NYSE Composite Tape
was $41.25 per share. The closing price of the Lennar Common Stock does not
reflect the Spin-Off, because it has not yet occurred. The closing price of the
Greystone Common Stock does not reflect the Stock Dividend, because it has not
yet occurred. See "Risk Factors -- Absence of a Prior Public Market for
Surviving Corporation Common Stock." After the Merger, the Surviving
Corporation's Common Stock will be listed on the New York Stock Exchange and
traded under the symbol "LEN."
Holders of record of shares of Greystone Common Stock ("Greystone
Stockholders") at the close of business on September 9, 1997, are entitled to
notice of and to vote at the Greystone Special Meeting. Holders of record of
shares of Lennar Common Stock and Lennar Class B Stock ("Lennar Stockholders")
at the close of business on September 2, 1997, are entitled to notice of and to
vote at the Lennar Special Meeting. The consummation of the Merger is subject to
various conditions, including the completion of the Spin-Off. Lennar has
received a ruling from the Internal Revenue Service to the effect that the
Spin-Off will not be a taxable event for Lennar or Lennar's stockholders. The
Merger is also conditioned, among other things, upon the approval of the Merger
by holders of a majority of the outstanding shares of Greystone Common Stock and
by holders of a majority in voting power of the shares of Lennar Common Stock
and Lennar Class B Stock, voting together as a single class.
All information contained in this Joint Proxy Statement/Prospectus with
respect to Greystone has been provided by Greystone. All information contained
in this Joint Proxy Statement/Prospectus with respect to Lennar and LNR has been
provided by Lennar.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST FROM: ROBERT W. GARCIN, PACIFIC GREYSTONE CORPORATION,
6767 FOREST LAWN DRIVE, LOS ANGELES, CALIFORNIA 90068, AS TO GREYSTONE; AND CORY
BOYDSTON, LENNAR CORPORATION, 700 N.W. 107TH AVENUE, MIAMI, FLORIDA 33172, AS TO
LENNAR. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD
BE MADE BY OCTOBER 24, 1997.
------------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Joint Proxy Statement/Prospectus and the accompanying form of proxy
are first being mailed to stockholders on or about October 1, 1997.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS SEPTEMBER 30, 1997.
(ii)
6
TABLE OF CONTENTS
PAGE
----
SUMMARY............................................................................... 1
General............................................................................. 1
The Terms of the Merger............................................................. 1
The Parties to the Merger........................................................... 1
The Special Meetings................................................................ 2
Required Vote....................................................................... 2
Recommendations of the Boards of Directors.......................................... 3
Interests of Certain Persons in the Merger.......................................... 3
Opinion of Greystone's Financial Advisor............................................ 3
Lennar's Financial Advisors......................................................... 4
The Spin-Off........................................................................ 4
The Land Partnership................................................................ 4
The Merger and the Merger Agreement................................................. 5
Certain Federal Income Tax Consequences............................................. 6
Appraisal Rights.................................................................... 6
Comparative Rights of Stockholders.................................................. 6
Stock Certificates.................................................................. 6
Market Price and Dividend Data...................................................... 7
Risk Factors........................................................................ 7
Selected Historical Financial Data.................................................. 8
Unaudited Pro Forma Selected Financial Data......................................... 12
Comparative Per Share Data.......................................................... 13
RISK FACTORS.......................................................................... 14
Limited Relevance of Historical Financial Information............................... 14
Pro Forma Dilution Compared with Greystone Earnings and Book Value.................. 14
Absence of a Prior Public Market for Surviving Corporation Common Stock............. 14
Concentration of Ownership and Voting Power......................................... 14
Antitakeover Effects of Class B Stock............................................... 15
Possible Anti-Takeover Effect of Certain Charter Provisions......................... 15
Dependence on Key Personnel......................................................... 15
Guarantee of LNR Debt............................................................... 15
Guaranty of Lennar Effective Time Net Worth......................................... 15
Shares Available for Future Sale.................................................... 16
Limitation on Borrowing............................................................. 16
GENERAL INFORMATION................................................................... 17
Vote Required at Lennar Special Meeting............................................. 17
Vote Required at Greystone Special Meeting.......................................... 18
Solicitation of Proxies............................................................. 18
Other Matters....................................................................... 19
BACKGROUND OF THE MERGER.............................................................. 19
(iii)
7
PAGE
----
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS AND REASONS FOR THE MERGER................. 22
Lennar.............................................................................. 22
Greystone........................................................................... 23
OPINION OF GREYSTONE'S FINANCIAL ADVISOR.............................................. 26
THE MERGER............................................................................ 31
General............................................................................. 31
Effective Time and Effect of the Merger............................................. 31
Greystone Stock Dividend............................................................ 31
Conditions to Consummation of the Merger............................................ 32
Lennar Net Worth.................................................................... 32
Representations and Warranties...................................................... 33
Conduct of Business Prior to the Merger............................................. 33
Indemnification and Insurance....................................................... 33
Exclusivity......................................................................... 34
Amendment, Termination and Waiver................................................... 34
Stock Options, Compensation and Benefits............................................ 34
Voting Agreements................................................................... 35
Registration Rights................................................................. 37
Litigation.......................................................................... 38
Interests of Certain Persons in the Merger.......................................... 38
Anticipated Accounting Treatment.................................................... 40
Regulatory Approvals................................................................ 40
Resale of Lennar Common Stock; Affiliates........................................... 40
New York Stock Exchange Listing..................................................... 40
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS........................... 41
BUSINESS OF LENNAR.................................................................... 46
BUSINESS OF GREYSTONE................................................................. 47
BUSINESS OF THE COMBINED COMPANIES.................................................... 48
Competition......................................................................... 48
New Financing....................................................................... 48
RELATIONSHIPS BETWEEN LENNAR AND LNR.................................................. 50
The Spin-Off; The Separation and Distribution Agreement............................. 50
The Land Partnership................................................................ 53
Other Relationships................................................................. 54
MANAGEMENT OF THE SURVIVING CORPORATION............................................... 55
Additional Director................................................................. 56
DESCRIPTION OF THE CAPITAL STOCK OF THE SURVIVING CORPORATION......................... 56
General............................................................................. 56
Preferred Stock..................................................................... 56
Common Stock and Class B Common Stock............................................... 56
Staggered Board of Directors........................................................ 57
Transfer Agent...................................................................... 57
(iv)
8
PAGE
----
COMPARATIVE RIGHTS OF STOCKHOLDERS.................................................... 58
Capitalization...................................................................... 58
Voting Rights....................................................................... 58
Number, Election, Vacancy and Removal of Directors.................................. 59
Amendments to Certificates of Incorporation......................................... 60
Amendments to Bylaws................................................................ 60
Stockholder Action.................................................................. 60
Notice of Certain Stockholder Actions............................................... 61
Special Stockholder Meetings........................................................ 61
Limitation of Personal Liability of Directors....................................... 61
Dividends........................................................................... 62
Conversion.......................................................................... 62
APPRAISAL RIGHTS...................................................................... 62
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................... 65
Federal Income Tax Consequences of the Merger....................................... 65
New Tax Legislation Not Applicable.................................................. 65
LEGAL MATTERS......................................................................... 66
EXPERTS............................................................................... 66
STOCKHOLDER PROPOSALS................................................................. 66
ANNEXES
I. Plan and Agreement of Merger, as amended
II. Opinion of Greystone's Financial Advisor
III. Separation and Distribution Agreement
IV. Section 262 of the Delaware General Corporation Law
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS ESTIMATES, PROJECTIONS AND
OTHER FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE SUBJECT TO RISKS AND
UNCERTAINTIES, INCLUDING THOSE DISCUSSED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THOSE DESCRIBED IN OTHER FILINGS OF LENNAR AND
GREYSTONE, THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THOSE
PROJECTED. STOCKHOLDERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
FORWARD-LOOKING STATEMENTS, WHICH ARE BASED ONLY ON CURRENT JUDGMENTS AND
CURRENT KNOWLEDGE.
(v)
9
AVAILABLE INFORMATION
Greystone and Lennar are each subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Greystone and Lennar with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission
located at 7 World Trade Center, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
information also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The Commission's web site can be accessed at
http://www.sec.gov. Greystone Common Stock and Lennar Common Stock are listed on
the NYSE. Reports, proxy statements and other information filed by Greystone and
Lennar can be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
Greystone has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments or supplements, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), of which
this Joint Proxy Statement/Prospectus is a part, with respect to the shares of
Greystone Common Stock and Greystone Class B Stock to be issued pursuant to the
Merger Agreement. This Joint Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement. Reference is made to the
Registration Statement for further information regarding Lennar, Greystone and
the Merger.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED OR DELIVERED WITH THIS JOINT PROXY STATEMENT/PROSPECTUS.
THOSE DOCUMENTS (OTHER THAN EXHIBITS TO THE DOCUMENTS, UNLESS EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE, UPON WRITTEN OR ORAL
REQUEST, WITHOUT CHARGE, BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS,
WITHIN ONE BUSINESS DAY OF RECEIPT OF A REQUEST, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER OF LENNAR STOCK OR GREYSTONE STOCK, TO WHOM THIS JOINT PROXY
STATEMENT/PROSPECTUS IS DELIVERED. REQUESTS FOR COPIES SHOULD BE DIRECTED TO:
ROBERT W. GARCIN, IN THE CASE OF DOCUMENTS RELATING TO GREYSTONE, AND CORY J.
BOYDSTON, IN THE CASE OF DOCUMENTS RELATING TO LENNAR. IN ORDER TO ENSURE
DELIVERY OF THE REQUESTED DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY REQUESTS
SHOULD BE MADE PRIOR TO OCTOBER 24, 1997.
The following documents previously filed by Greystone with the Commission
under the File Number 1-11749 are incorporated by reference in this Joint Proxy
Statement/Prospectus:
(a) Greystone's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by the Form 10-K/A dated September 26, 1997
(the "Greystone 10-K");
(b) Greystone's Quarterly Reports on Form 10-Q for the calendar
quarters ended March 31, 1997, as amended by the Form 10-Q/A dated
September 26, 1997 and June 30, 1997, as amended by the Form 10-Q/A dated
September 26, 1997 (the "Greystone 10-Qs");
(c) Greystone's Current Report on Form 8-K, dated June 17, 1997; and
(d) the description of Greystone Common Stock contained in Greystone's
Registration Statement on Form 8-A, dated May 20, 1996.
The following documents previously filed by Lennar with the Commission
under the File Number 1-6643 are incorporated by reference in this Joint Proxy
Statement/Prospectus:
(a) Lennar's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996, as amended by the Form 10-K/A dated September 26, 1997
(the "Lennar 10-K"); and
(vi)
10
(b) Lennar's Quarterly Reports on Form 10-Q for the quarters ended
February 28, 1997 and May 31, 1997 (the "Lennar 10-Qs").
All documents and reports filed by Greystone or Lennar pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Special Meetings will also be
deemed to be incorporated by reference in this Joint Proxy Statement/Prospectus
and to be part of it from the date of filing of each document or report. Any
statement contained in a document incorporated or deemed to be incorporated by
reference in this Joint Proxy Statement/Prospectus will be deemed to be modified
or superseded for purposes of this Joint Proxy Statement/Prospectus to the
extent that a statement contained in this Joint Proxy Statement/Prospectus or in
any other document subsequently filed with the Commission which also is or is
deemed to be incorporated by reference in this Joint Proxy Statement/Prospectus
modifies or supersedes the statement in the earlier document. Any statement so
modified or superseded will not, except as modified, be deemed to constitute a
part of this Joint Proxy Statement/Prospectus.
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE BY THIS JOINT PROXY STATEMENT/PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY GREYSTONE, LENNAR OR ANY OTHER PERSON ON THEIR BEHALF. THIS
JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES TO WHICH IT
RELATES WILL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF GREYSTONE OR LENNAR SINCE THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS OR THAT THE INFORMATION IN IT IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
(vii)
11
SUMMARY
The following is a brief summary of certain information contained in this
Joint Proxy Statement/Prospectus. This Summary is qualified in its entirety by
the more detailed information and financial statements and notes to them
contained, or incorporated by reference, in this Joint Proxy
Statement/Prospectus and the Annexes. Stockholders are urged to read this Joint
Proxy Statement/Prospectus and the Annexes in their entirety.
GENERAL
This Joint Proxy Statement/Prospectus relates to the proposed Merger of
Lennar with Greystone pursuant to the Merger Agreement.
THE TERMS OF THE MERGER
After the Merger, each share of Greystone Common Stock will remain
outstanding as one share of Surviving Corporation Common Stock and each share of
Lennar Common Stock or Lennar Class B Stock will become one share of Surviving
Corporation Common Stock or Surviving Corporation Class B Common Stock,
respectively. However, before the Effective Time of the Merger, Greystone will
distribute in the Stock Dividend, .138 shares of Greystone Common Stock upon
each outstanding share of Greystone Common Stock. Therefore, after the Merger,
Greystone Stockholders will hold 1.138 shares of Surviving Corporation Common
Stock for each currently outstanding share of Greystone Common Stock.
THE PARTIES TO THE MERGER
Lennar. At the time of the Merger (after the Spin-Off), Lennar will be
engaged entirely in homebuilding and related activities, primarily in Florida,
Arizona, Texas and California. Lennar's homebuilding operations include the
construction and sale of homes, as well as the purchase, development and sale of
residential land, the provision of financing to homebuyers and homeowners and
the provision of closing services, title insurance and other services to
homebuyers and homeowners. At the date of this Joint Proxy Statement/Prospectus,
Lennar also is engaged in real estate investment and management activities.
However, before the Merger, all the shares of LNR, the parent of the group of
Lennar subsidiaries which conduct real estate investment and management
activities, will be distributed to Lennar's Stockholders in the Spin-Off.
Greystone Stockholders will not receive any interest in LNR or its subsidiaries
as a result of the Merger. As used in this Joint Proxy Statement/Prospectus, the
term Lennar refers to Lennar Corporation and its subsidiaries following the
Spin-Off, unless the context otherwise requires. The principal executive offices
of Lennar are located at 700 Northwest 107th Avenue, Miami, Florida 33172, and
its telephone number is (305) 559-4000.
Greystone. Greystone is a regional builder of high quality, single family
homes primarily targeted to first time and move-up homebuyers in markets located
throughout Northern and Southern California, as well as in the Las Vegas and
Phoenix areas. As used in this Joint Proxy Statement/Prospectus, the term
Greystone refers to Pacific Greystone Corporation and its subsidiaries, unless
the context otherwise requires. The principal executive offices of Greystone are
located at 6767 Forest Lawn Drive, Suite 300, Los Angeles, California
90068-1027, and its telephone number is (213) 436-6300.
The Surviving Corporation. The Surviving Corporation will succeed to the
combined operations of Lennar (following the Spin-Off) and Greystone. Although
the Merger is being structured as a merger of Lennar into Greystone, following
the Merger, Lennar Stockholders will own approximately 68% of the outstanding
Surviving Corporation stock and Greystone Stockholders will own approximately
32% of the outstanding Surviving Corporation stock. The name of the Surviving
Corporation will be Lennar Corporation, six of its eight directors will be
former Lennar directors, its executive officers will be the pre-Merger Lennar
officers, its principal executive offices will be located at 700 Northwest 107th
Avenue, Miami, Florida 33172, and its telephone number will be (305) 559-4000.
For accounting and consolidated tax reporting purposes, the Merger will be
treated as an acquisition of Greystone by Lennar.
12
THE SPECIAL MEETINGS
Times, Dates and Places. The Lennar Special Meeting will be held on
October 31, 1997 at 1:00 P.M. (local time), at the Doral Park Golf and Country
Club, 5001 N.W. 104 Avenue, Miami, Florida 33172.
The Greystone Special Meeting will be held on October 31, 1997 at 10:00
A.M. (local time), at 6767 Forest Lawn Drive, Suite 300, Los Angeles, California
90068-1027.
Purpose of the Special Meetings. At the Special Meetings, stockholders
will be asked to consider and vote on proposals to adopt the Merger Agreement
and approve the Merger. The Special Meetings may be adjourned or postponed from
time to time.
Record Dates, Quorums and Shares Entitled to Vote. Only holders of record
of shares of Lennar Common Stock and Lennar Class B Stock at the close of
business on September 2, 1997 are entitled to notice of and to vote at the
Lennar Special Meeting or any adjournments of that meeting. At that date, there
were 26,097,675 shares of Lennar Common Stock held of record by 788 holders and
9,966,631 shares of Lennar Class B Stock outstanding held of record by 18
holders. Each share of Lennar Common Stock is entitled to one vote at the Lennar
Special Meeting. Each share of Lennar Class B Stock is entitled to ten votes at
the Lennar Special Meeting.
Only holders of record of shares of Greystone Common Stock at the close of
business on September 9, 1997 are entitled to notice of and to vote at the
Greystone Special Meeting or any adjournments or postponements of that meeting.
At that date, there were 14,967,229 shares of Greystone Common Stock outstanding
held of record by approximately 30 holders, each of which is entitled to one
vote at the Greystone Special Meeting.
The presence either in person or by properly executed proxy of the holders
of record of a majority in voting power, but not less than one-third in number,
of the outstanding shares of Lennar stock, and a majority of the outstanding
shares of Greystone Common Stock, are necessary to constitute quorums at the
respective Special Meetings.
REQUIRED VOTE
The affirmative vote of holders of a majority in voting power of the
outstanding shares of Lennar Common Stock and Lennar Class B Stock, voting as a
single class, is required for the adoption of the Merger Agreement and approval
of the Merger. Leonard Miller, who, through family partnerships, owns 99.6% of
the Lennar Class B Stock, and therefore is entitled to 79% of all the votes
which may be cast at the Lennar Special Meeting, has agreed to vote those shares
in favor of the Merger. Therefore, if there is a quorum present at the Lennar
Special Meeting, the proposal regarding the Merger will be approved even if no
other Lennar Stockholders vote in favor of it. See "The Merger -- Voting
Agreements."
At September 2, 1997, Lennar's directors and officers, as a group,
beneficially owned 554,577 shares of Lennar Common Stock and 9,930,030 shares of
Lennar Class B Stock, which together represent 79.4% in voting power of the
outstanding Lennar stock entitled to vote at the Lennar Special Meeting.
The affirmative vote of holders of a majority of the outstanding shares of
Greystone Common Stock is required for adoption of the Merger Agreement and
approval of the Merger. Warburg, which owns approximately 56% of the outstanding
Greystone Common Stock, has agreed, subject to certain conditions, to vote at
least 50% of the outstanding Greystone Common Stock in favor of the Merger.
Although Warburg holds more than 50% of the outstanding Greystone Common Stock,
pursuant to a prior agreement between Warburg and Greystone, Warburg may vote
shares representing up to 50% of the aggregate voting power of Greystone Common
Stock on any matter in its discretion and must vote any additional shares in the
same proportion as the shares voted by the other Greystone Stockholders on that
matter. Lennar owns 1,000 shares of Greystone Common Stock, which Lennar has the
right to vote in favor of the proposal regarding the Merger. Therefore, unless
the Merger Agreement is terminated, the Merger is expected to be approved by the
Greystone Stockholders. See "The Merger -- Voting Agreements."
2
13
At September 9, 1997, Greystone's directors and officers, as a group,
beneficially owned approximately 9,243,000 shares of Greystone Common Stock
representing 61.8% of the outstanding Greystone Common Stock entitled to vote at
the Greystone Special Meeting.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Boards of Directors of Lennar and Greystone have each determined that
the terms of the Merger are fair to and in the best interests of the applicable
corporation and its stockholders and each of them has unanimously recommended
that its stockholders vote for the proposal to adopt the Merger Agreement and
approve the Merger. See "Recommendations of the Boards of Directors and Reasons
for the Merger" and "Background of the Merger."
The Lennar Board believes the Merger will make Lennar a stronger
homebuilding company, and in particular will (i) continue Lennar's strategy of
becoming a significant participant in the California homebuilding market, in
which it was not present until 1996, (ii) enhance Lennar's presence in Phoenix,
where it has been building homes for over 25 years, and (iii) give Lennar a
presence in Las Vegas, a market which Lennar believes is currently strong and
provides opportunities for growth.
The Greystone Board believes the Merger achieves Greystone's strategic
objective of becoming a larger, more geographically diversified and strongly
capitalized homebuilder in a shorter time and with less risk than it could on
its own, and that such strategic objective will enhance value for Greystone
Stockholders.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the Greystone Board and the Lennar
Board with respect to the Merger and the Merger Agreement, stockholders should
be aware that certain members of the Greystone Board and the Lennar Board and
management of each company may have interests in the Merger that are in addition
to or different from the interests of stockholders generally. See "The
Merger -- Interests of Certain Persons in the Merger."
In particular, employment agreements with four officers of Greystone will
be terminated effective at the Effective Time and in lieu of payments to which
those officers would or might have become entitled under those employment
agreements or in payment of bonuses which previously had been deferred under
Greystone's Management Incentive Compensation Plan, they will receive a total of
$3,670,000 (of which $1,750,000 will be paid to Jack R. Harter, Greystone's
Chairman, President and Chief Executive Officer, $1,200,000 will be paid to
Antonio B. Mon, Greystone's Vice Chairman and Chief Financial Officer, $400,000
will be paid to Peter Kiesecker, Greystone's Senior Vice
President -- Homebuilding Operations (and president of Greystone Homes, Inc.)
and $320,000 will be paid to Bruce Gross, a Senior Vice President, the
Controller and the Treasurer of Greystone). In addition, Mr. Harter and Mr. Mon
will be entitled to their salaries and bonuses through December 31, 1997 under
the terminated employment agreements and therefore will receive, respectively,
$45,833 and $41,667 per month in salary and bonuses of $825,000 and $750,000.
Messrs. Harter and Mon also have entered into new employment agreements with
Greystone Homes, Inc. under which they each will receive $600,000 for working
full time through March 31, 1998 and part time through June 30, 1998, and Mr.
Mon will receive an additional $400,000 for agreeing not to compete with
Greystone Homes, Inc. through March 31, 1999.
No directors or officers of Lennar will receive payments related to the
Merger. However, directors and officers of Lennar may benefit from the Merger
through stock options held by them (of which options to purchase a total of
857,000 shares were outstanding on September 2, 1997), but only if, as a result
of the Merger, there is an increase in the value of the stock underlying those
options.
OPINION OF GREYSTONE'S FINANCIAL ADVISOR
Smith Barney Inc. ("Smith Barney") has acted as financial advisor to
Greystone in connection with the Merger and has delivered to the Greystone Board
a written opinion dated June 10, 1997 to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the number
of shares of
3
14
Surviving Corporation Common Stock and Surviving Corporation Class B Stock into
which each share of Lennar Common Stock and Lennar Class B Stock will be
converted in the Merger (the "Exchange Ratio") was fair, from a financial point
of view, to the holders of Greystone Common Stock. The full text of the written
opinion of Smith Barney dated June 10, 1997, which sets forth the assumptions
made, matters considered and limitations on the review undertaken, is attached
as Annex II to this Joint Proxy Statement/Prospectus and should be read
carefully in its entirety. The opinion of Smith Barney is directed to the
Greystone Board and relates only to the fairness of the Exchange Ratio from a
financial point of view, does not address any other aspect of the Merger or
related transactions and does not constitute a recommendation to any stockholder
as to how such stockholder should vote at the Greystone Special Meeting. See
"Opinion of Greystone's Financial Advisor."
LENNAR'S FINANCIAL ADVISORS
Lennar views the Merger as an acquisition of Greystone that will expand the
homebuilding business in which Lennar already is engaged. Additionally, Lennar
personnel have substantial experience in valuing homebuilding assets. For these
reasons, although Lennar and its Board were advised by BT Securities Corporation
(including its BT Wolfensohn Division) ("BT") and, insofar as the Merger affects
the Spin-Off, by Morgan Stanley & Co. Incorporated ("Morgan Stanley"), Lennar's
Board did not feel it was necessary for Lennar to obtain a fairness opinion with
regard to the Merger.
THE SPIN-OFF
Prior to the Merger, Lennar will (i) split into two companies: Lennar,
which will continue to engage in homebuilding and related activities, and LNR,
which will engage in the real estate investment and management business
previously conducted by Lennar and (ii) distribute all the shares of LNR to
Lennar's stockholders (the "Distribution"). Therefore, at the time of the
Merger, Lennar will own only its homebuilding and related businesses. It will
not own any interest in LNR.
The completion of the Spin-Off is a condition to the obligations of
Greystone and Lennar to consummate the Merger. Lennar has received a ruling from
the Internal Revenue Service ("IRS") to the effect that the Spin-Off will not be
a taxable event for Lennar or its stockholders (the "Tax Ruling").
Lennar and LNR have entered into noncompetition agreements with each other
covering specified matters in connection with the Spin-Off. They have also
agreed that if the consolidated net worth of Lennar and its subsidiaries at the
Effective Time of the Merger, after giving effect to the Spin-Off, is not equal
to $200 million, plus an additional amount approximating the anticipated
earnings of Lennar and its homebuilding subsidiaries from August 31, 1997 to the
Effective Time (the "Lennar Effective Time Net Worth"), then (i) LNR will pay
the Surviving Corporation an amount equal to the deficiency or (ii) the
Surviving Corporation will pay LNR an amount equal to the excess. LNR has also
agreed to indemnify Lennar and the Surviving Corporation for any tax or other
related costs Lennar may incur if, even though Lennar received the Tax Ruling,
the Spin-Off is ultimately determined to be a taxable event. Lennar and LNR also
will have certain other indemnification obligations to one another. See
"Relationships Between Lennar and LNR -- The Spin-Off; The Separation and
Distribution Agreement" and Annex III hereto.
THE LAND PARTNERSHIP
Prior to the Merger, subsidiaries of Lennar and LNR will form a general
partnership (the "Land Partnership") to acquire, develop, and sell land. Lennar
and LNR will contribute properties and other assets to the Land Partnership in
exchange for 50% general partner interests in the Land Partnership. Lennar will
manage the Land Partnership under a Management Agreement and Lennar will have
options to purchase properties which are contributed to the Land Partnership.
See "Relationships Between Lennar and LNR -- The Land Partnership."
The properties and other assets to be contributed to the Land Partnership
will consist of parcels of land or interests in land which had a total book
value on Lennar's books at May 31, 1997 of approximately $341 million. This land
was acquired by Lennar primarily to be used for residential home development. It
consists
4
15
of approximately 34,000 potential home sites in 40 communities, of which 19
communities with 19,400 potential home sites are in Florida, two communities
with 900 potential home sites are in Arizona, five communities with 5,000
potential home sites are in Texas, and 14 communities with 8,700 potential home
sites are in California. Approximately 10% of the land is developed and ready to
be built upon, 45% of the land is in various stages of development and 45% of
the land is totally undeveloped. The parcels of land or interests in land being
contributed by LNR were or will be contributed by Lennar to LNR so that LNR can
contribute them to the Land Partnership and receive its 50% interest in the Land
Partnership. Lennar is expected to be the principal (but not the only) purchaser
of lots from the Land Partnership.
THE MERGER AND THE MERGER AGREEMENT
Conversion of Shares. At the Effective Time of the Merger, each
outstanding share of Lennar Common Stock and Lennar Class B Stock will be
converted into one share of Surviving Corporation Common Stock or Surviving
Corporation Class B Stock, as the case may be. After the Effective Time, each
share of Greystone Common Stock will continue to be one share of Surviving
Corporation Common Stock. Because of the Stock Dividend to Greystone
Stockholders, the Merger will, in effect, give Greystone Stockholders 1.138
shares of Surviving Corporation Common Stock for each share of Greystone Common
Stock currently outstanding. For a summary of various differences between the
rights of Lennar Stockholders and Greystone Stockholders and the rights of
holders of Surviving Corporation Common Stock and Surviving Corporation Class B
Stock, see "Comparative Rights of Stockholders."
Effective Time of the Merger. The Merger will be consummated after the
requisite approvals of Greystone Stockholders and Lennar Stockholders have been
obtained and all other conditions to the Merger have been satisfied or waived.
It is anticipated that, assuming all conditions are met, the Merger will occur
in the fourth calendar quarter of 1997. See "The Merger -- Effective Time and
Effect of the Merger."
Conditions to the Merger. The obligations of Greystone and Lennar to
effect the Merger are subject to certain conditions, including, among other
things, that the Merger is approved by the Greystone Stockholders and by the
Lennar Stockholders, that the Spin-Off is completed, and that the Surviving
Corporation have certain financing arrangements in place. See "The
Merger -- Conditions to Consummation of the Merger." Any condition to the
obligations of Lennar or Greystone to consummate the Merger may be waived.
Benefit Plans and Stock Options. Options to purchase Lennar Common Stock
or Greystone Common Stock granted under existing employee and director option
plans ("Lennar Options" and "Greystone Options," respectively) outstanding as of
the Effective Time will become options to acquire shares of Surviving
Corporation Common Stock. Some Lennar Options will also entitle holders to
receive shares of LNR Common Stock (which LNR will provide to the Surviving
Corporation without cost). All unexercised Greystone Options will become fully
vested and exercisable as of the Effective Time and all outstanding Greystone
Options will be adjusted to take account of the Stock Dividend.
Pursuant to the Merger Agreement, from the Effective Time through at least
December 31, 1997, the Surviving Corporation will provide to all Greystone
employees who remain employed, incentive compensation, base compensation and
benefits which in the aggregate are no less favorable than that provided by
Greystone to its employees immediately prior to the Effective Time.
Exclusivity. With certain exceptions, each of Lennar and Greystone has
agreed that it will not, directly or indirectly, initiate, or otherwise
facilitate, any merger or similar transaction involving a third party. See "The
Merger -- Exclusivity."
Amendment, Termination and Waiver. The Merger Agreement may be amended at
any time, whether prior to or after approval by the Stockholders of Lennar and
Greystone, provided that after the Merger Agreement has been approved and
adopted by the Stockholders, it may be amended only as permitted by applicable
law. Under certain conditions, the Merger Agreement may be terminated prior to
the Effective Time, whether prior to or after approval by the Lennar or
Greystone Stockholders. See "The Merger -- Amendment, Termination and Waiver."
5
16
Anticipated Accounting Treatment. The Merger will be accounted for as a
purchase of Greystone by Lennar for financial reporting purposes.
Business and Management After the Merger; Warburg Nominees. After the
Effective Time, the Surviving Corporation Board of Directors (the "Surviving
Corporation Board") will consist of eight directors. Two members of the current
Greystone Board will continue as members of the Surviving Corporation Board and
six members of the current Lennar Board will become members of the Surviving
Corporation Board. It is anticipated that at some point after the Effective
Time, a ninth member will be added to the Surviving Corporation Board. However,
that ninth member has not been selected. At the Effective Time, current
executive officers of Lennar will become the executive officers of the Surviving
Corporation. See "Recommendations of the Boards of Directors and Reasons for the
Merger" and "Management of the Surviving Corporation." For as long as Warburg
owns at least 10% of the Surviving Corporation common stock of both classes,
Warburg will have the right to designate up to two directors to the Surviving
Corporation Board. For as long as Warburg owns at least 5% of the Surviving
Corporation common stock of both classes, (i) Warburg will have the right to
designate one director to the Surviving Corporation Board and (ii) any issuance
of more than 20% of the outstanding stock of the Surviving Corporation in a
three year period, or acquisition in a transaction or series of related
transactions of assets or properties with a fair market value of more than $100
million (other than acquisitions in the ordinary course of business consistent
with past practice in states in which the Surviving Corporation operates as of
the Effective Time) will require Warburg's prior approval. Immediately following
the Merger, Warburg will own approximately 17.9% of the outstanding Surviving
Corporation common stock of both classes. Warburg currently has three
representatives on the Greystone Board. See "The Merger -- Voting Agreements."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a tax-free reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
(the "Code"). All stockholders should carefully read the section of this Joint
Proxy Statement/Prospectus entitled "Certain Federal Income Tax Consequences"
for a discussion of the anticipated tax consequences of the Merger.
APPRAISAL RIGHTS
Holders of shares of Greystone Common Stock and Lennar Common Stock are not
entitled to dissenters' appraisal rights under the Delaware General Corporation
Law (the "DGCL") in connection with the Merger. Holders of shares of Lennar
Class B Stock are entitled to appraisal rights. However, Leonard Miller and two
family partnerships, who own all but 36,601 of the outstanding shares of Lennar
Class B Stock, have agreed to vote for the proposal regarding the Merger, which
will eliminate their appraisal rights. See "Appraisal Rights."
COMPARATIVE RIGHTS OF STOCKHOLDERS
The rights of the Lennar Stockholders are currently governed by the DGCL
and by Lennar's Certificate of Incorporation and Bylaws. The rights of the
Greystone Stockholders are currently governed by the DGCL and by Greystone's
Certificate of Incorporation and Bylaws. At the Effective Time, Lennar
Stockholders and Greystone Stockholders will become stockholders of the
Surviving Corporation, a Delaware corporation, and their rights as Surviving
Corporation stockholders will be governed by the DGCL and by the Surviving
Corporation's Certificate of Incorporation and Bylaws. There are various
differences between the Surviving Corporation's Certificate of Incorporation and
Bylaws and those of Greystone and Lennar. See "Comparative Rights of
Stockholders."
STOCK CERTIFICATES
At the Effective Time, all the Lennar Common Stock and the 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 same number of shares of Surviving Corporation Common Stock or
Surviving
6
17
Corporation Class B Stock, respectively. LENNAR STOCKHOLDERS SHOULD NOT
SURRENDER CERTIFICATES REPRESENTING SHARES OF LENNAR COMMON STOCK OR LENNAR
CLASS B STOCK FOR EXCHANGE FOLLOWING THE EFFECTIVE TIME OF THE MERGER.
Although Greystone will be the Surviving Corporation, and certificates
which represented Greystone Common Stock before the Merger will automatically
represent Surviving Corporation Common Stock after the Merger, because the
Surviving Corporation will be named "Lennar Corporation," promptly after the
Effective Date, the Surviving Corporation will mail to the former Greystone
Stockholders materials with which to exchange their Greystone stock certificates
for Surviving Corporation stock certificates. CERTIFICATES FOR SHARES OF
GREYSTONE COMMON STOCK SHOULD NOT BE SURRENDERED FOR EXCHANGE (OTHER THAN IN
CONNECTION WITH TRANSFERS TO OTHER PERSONS) UNTIL THOSE MATERIALS ARE RECEIVED.
MARKET PRICE AND DIVIDEND DATA
The shares of Lennar Common Stock and the shares of Greystone Common Stock
are listed on the NYSE. The following table sets forth for the periods indicated
the high and low sale prices of Lennar Common Stock and Greystone Common Stock,
as reported on the New York Stock Exchange Composite Tape and the cash dividends
paid per share. Greystone, whose shares were initially sold in an underwritten
public offering on June 20, 1996 at $13.00 per share, has not paid dividends to
date.
GREYSTONE
LENNAR COMMON STOCK COMMON STOCK
--------------------------- ---------------
HIGH LOW DIVIDENDS HIGH LOW
--- --- --------- --- ------
1995..................................... 23 3/4 15 1/8 .10 -- --
1996..................................... 27 21 5/8 .10 12 5/8 9 3/4
1997
First Quarter.......................... 27 3/4 25 .025 15 1/4 11
Second Quarter......................... 27 1/2 24 .025 18 1/4 12 1/2
Third Quarter, through September 29.... 42 3/8 26 -- 21 3/4 15 1/2
On June 10, 1997, the last trading day prior to public announcement of the
Merger and the Spin-Off, the last reported sale price of Greystone Common Stock
on the NYSE Composite Tape was $17 1/8 per share and the last reported sale
price of Lennar Common Stock on the NYSE Composite Tape was $26 3/8 per share.
On September 29, 1997, the last reported sale price of Greystone Common
Stock on the NYSE Composite Tape was $20.125 per share and the last reported
sale price of Lennar Common Stock on the NYSE Composite Tape was $41.25 per
share.
The closing prices of the Lennar Common Stock reported above do not reflect
the Spin-Off, because it has not yet occurred. The closing prices of the
Greystone Common Stock reported above do not reflect the Stock Dividend, because
it has not yet occurred. See "Risk Factors -- Absence of a Prior Public Market
for Surviving Corporation Common Stock." No determination has yet been made as
to the dividend policy of the Surviving Corporation.
RISK FACTORS
Lennar, Greystone and the Merger are subject to certain risk factors which
should, in particular, be considered in evaluating whether to adopt the Merger
Agreement and approve the Merger. They are discussed under the caption "Risk
Factors." They include (1) the limited relevance of financial information about
Lennar because it relates to periods when LNR and its subsidiaries were part of
Lennar, (2) pro forma dilution compared with Greystone's earnings and book
value, (3) absence of a prior public market for Surviving Corporation Common
Stock, (4) concentration of ownership and voting power with regard to the
Surviving Corporation in Leonard Miller due to his ownership of 99.6% of its
Class B Stock, (5) anti-takeover effects of Mr. Miller's ownership of Class B
Stock, (6) possible anti-takeover effects of the fact that the Board of
Directors of the Surviving Corporation is divided into three classes which are
elected for staggered terms,
7
18
(7) the Surviving Corporation's dependence on its senior management, (8)
continuing Surviving Corporation guarantees of LNR indebtedness, (9) the fact
that Lennar will be required to pay to LNR an amount by which Lennar's net worth
at the Effective Time of the Merger (without giving effect to the Merger)
exceeds $200 million plus an amount intended to approximate the anticipated
earnings of Lennar and its homebuilding subsidiaries from August 31, 1997 to the
Effective Time, (10) the fact that most of the Surviving Corporation Common
Stock outstanding upon consummation of the Merger will not be subject to any
restrictions on resale, and (11) the fact that the Surviving Corporation's
by-laws will limit the amount it can borrow without approval of an Independent
Directors Committee of its Board of Directors.
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected historical financial data of Lennar
and Greystone for each of their respective fiscal years from 1992 through 1996
and selected interim unaudited historical financial data. The selected
historical financial data for, and as of the end of, each of the five fiscal
years from 1992 through 1996 have been derived from the consolidated financial
statements of Lennar and Greystone. The selected historical financial data for
Lennar and Greystone for, and as of the end of, the interim periods, have been
derived from Lennar's or Greystone's unaudited financial statements and reflect
all adjustments and accruals, consisting only of normal, recurring adjustments
and accruals, which are, in the opinion of management of Lennar or Greystone, as
applicable, necessary for a fair statement of the results for the interim
periods presented. These historical data are not necessarily indicative of
results to be expected after the Merger is consummated and should be read in
conjunction with the information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Lennar and Greystone 10-Ks and 10-Qs and in the consolidated financial
statements of Lennar and Greystone, and notes to them, incorporated by reference
in this Joint Proxy Statement/Prospectus.
8
19
LENNAR CORPORATION AND SUBSIDIARIES(1)
AS OF AND FOR THE
SIX MONTHS ENDED
MAY 31, AS OF AND FOR THE YEARS ENDED NOVEMBER 30,
---------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS:
Revenues:
Homebuilding................. $ 455,271 $ 377,102 $ 952,648 $ 665,510 $ 647,750 $ 532,150 $308,983
Investment................... $ 78,437 $ 65,071 $ 139,500 $ 139,482 $ 106,343 $ 58,955 $ 40,164
Financial services........... $ 46,404 $ 39,275 $ 82,577 $ 57,787 $ 54,348 $ 59,204 $ 56,723
Limited-purpose finance
subsidiaries............... $ 2,704 $ 3,329 $ 6,436 $ 7,689 $ 9,485 $ 14,355 $ 21,164
Total revenues.......... $ 582,816 $ 484,777 $1,181,161 $ 870,468 $ 817,926 $ 664,664 $427,034
Operating earnings -- business
segments:
Homebuilding................. $ 32,580 $ 29,441 $ 91,066 $ 58,530 $ 70,645 $ 60,207 $ 38,063
Investment................... $ 37,003 $ 33,958 $ 67,952 $ 67,688 $ 51,904 $ 28,497 $ 16,992
Financial services........... $ 20,409 $ 14,182 $ 28,653 $ 19,013 $ 14,844 $ 15,104 $ 16,411
Corporate general and
administrative expenses...... $ 6,610 $ 5,980 $ 12,396 $ 10,523 $ 10,309 $ 8,670 $ 8,833
Earnings before income taxes
and cumulative effect of
changes in accounting
principles................... $ 67,920 $ 58,190 $ 144,239 $ 115,455 $ 111,746 $ 82,054 $ 45,363
Net earnings................... $ 41,431 $ 35,496 $ 87,986 $ 70,427 $ 69,126 $ 52,511 $ 29,146
Per share amounts:
Net earnings................. $ 1.14 $ .98 $ 2.43 $ 1.95 $ 1.92 $ 1.51 $ .95
Cash dividends -- common
stock...................... $ .05 $ .05 $ .10 $ .10 $ .095 $ .08 $ .08
Cash dividends -- Class B
common stock............... $ .045 $ .045 $ .09 $ .09 $ .084 $ .067 $ .067
FINANCIAL POSITION:
Total assets................... $1,925,837 $1,669,402 $1,766,026 $1,442,362 $1,293,223 $1,195,490 $980,261
Total debt..................... $ 959,735 $ 829,324 $ 837,498 $ 635,761 $ 566,312 $ 531,480 $496,205
Stockholders' equity........... $ 742,517 $ 641,061 $ 695,456 $ 607,794 $ 534,088 $ 467,473 $319,330
Shares outstanding (000's)..... 36,027 35,904 35,928 35,864 35,768 35,716 30,440
Stockholders' equity per common
share........................ $ 20.61 $ 17.85 $ 19.36 $ 16.95 $ 14.93 $ 13.09 $ 10.49
DELIVERY AND BACKLOG INFORMATION:
Number of homes delivered...... 2,661 2,531 5,968 4,680 4,965 4,634 3,039
Backlog of home sales
contracts(2)................. 2,822 2,720 1,929 1,802 1,703 2,105 1,788
Dollar value of backlog........ $ 500,456 $ 428,144 $ 312,000 $ 255,141 $ 247,006 $ 264,342 $190,722
- ---------------
(1) The selected financial data presented is historical financial information of
Lennar and does not give effect to the Spin-Off, the formation of the Land
Partnership or the Merger.
(2) Backlog is the number of homes subject to pending sales contracts, some of
which are subject to contingencies. Although contracts relating to these
homes were executed, there can be no assurance that the sales will be
completed.
9
20
During the three months ended August 31, 1997, Lennar had revenues of
$364,347,000 and net earnings of $28,281,000 ($.78 per share), compared with
revenues of $316,643,000 and net earnings of $23,884,000 ($.66 per share) for
the same period of the prior year. As a result, Lennar's revenues and net
earnings for the nine months ended August 31, 1997 were $935,267,000 and
$69,712,000 ($1.92 per share), compared with revenues of $798,638,000 and net
earnings of $59,380,000 ($1.64 per share) in the same period of the prior year.
Lennar's revenues from sales of homes were $290,687,000 and $708,992,000
for the three and nine months ended August 31, 1997, compared with revenues of
$248,798,000 and $609,939,000 for the same three and nine month periods of the
prior year. Lennar's operating earnings from its homebuilding activities were
$32,676,000 and $65,256,000 for the three and nine month periods ended August
31, 1997, compared with operating earnings from homebuilding activities of
$26,474,000 and $55,915,000 for the same periods of the prior year.
During the three and nine month periods ended August 31, 1997, Lennar sold
1,850 and 5,404 homes, respectively, compared with 1,379 and 4,625 homes in the
same periods of the prior year. At August 31, 1997, Lennar had a backlog of
2,908 home sales, with a dollar value of $537,928,000, compared with a backlog
of 2,504 home sales, with a dollar value of $404,474,000, at August 31, 1996.
10
21
PACIFIC GREYSTONE CORPORATION AND SUBSIDIARIES
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Revenues..................... $ 250,079 $ 155,015 $ 420,021 $ 293,921 $ 260,185 $ 172,830 $ 26,209
Cost of sales................ (206,571) (129,062) (345,666) (247,827) (215,437) (144,395) (25,816)
--------- --------- --------- --------- --------- --------- ---------
Gross margin................. 43,508 25,953 74,355 46,094 44,748 28,435 393
Equity in pre-tax income
(loss) of unconsolidated
joint ventures............. -- (234) (227) 1,742 2,581 1,096 608
Selling, general and
administrative expenses.... (24,619) (17,749) (42,726) (31,468) (29,059) (19,521) (7,133)
Interest and other, net...... 847 362 1,858 1,162 388 32 435
--------- --------- --------- --------- --------- --------- ---------
Pretax income (loss)......... 19,736 8,332 33,260 17,530 18,658 10,042 (5,697)
Provision for income taxes... (8,052) (3,399) (13,570) (2,512) -- (3,966) --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............ $ 11,684 $ 4,933 $ 19,690 $ 15,018 $ 18,658 $ 6,076 $ (5,697)
========= ========= ========= ========= ========= ========= =========
Earnings per share........... $ 0.78 $ 0.33(1) 1.32(1) 0.69(1) -- -- --
Dividends per share.......... -- -- -- -- -- -- --
BALANCE SHEET DATA:
Housing inventories.......... $ 321,389 $ 274,803 $ 301,934 $ 215,043 $ 207,900 $ 136,178 $ 142,794
Total assets................. 378,469 329,487 350,469 289,970 275,179 191,994 204,896
Notes payable................ 56,144 41,274 165,254 137,337 139,899 81,487 102,710
Total liabilities............ 214,102 191,561 197,786 164,075 164,340 100,085 119,193
Total shareholders' equity... 164,367 137,926 152,683 125,895 110,839 91,909 85,702
Shares outstanding (000's)... 14,960 14,960(1) 14,960(1) 14,955(1) -- -- --
Book value per common
share...................... 10.99 -- 10.21 -- -- -- --
DELIVERY AND BACKLOG
INFORMATION(2):
Number of homes closed....... 1,088 727 1,961 1,374 1,331 717 135
Backlog (at period end)...... 921 734 583 325 202 202 112
Sales value of backlog(3).... $ 234,075 $ 147,807 $ 134,496 $ 60,219 $ 50,388 $ 53,677 $ 33,811
- ---------------
(1) Earnings per share for 1995 and 1996 are pro forma assuming that Greystone's
initial public offering and recapitalization (which is described in the
Greystone 10-K) occurred at the beginning of the periods presented.
(2) Includes results from unconsolidated joint ventures.
(3) Backlog is the number of homes subject to pending sales contracts, some of
which are subject to contingencies. Although contracts relating to these
homes were executed, there can be no assurance that the sales will be
completed.
11
22
UNAUDITED PRO FORMA SELECTED FINANCIAL DATA
The following table presents unaudited pro forma selected financial data
for the Surviving Corporation after giving effect to the Spin-Off, the formation
of the Land Partnership, the Stock Dividend and the Merger. These pro forma data
are presented for illustrative purposes only and are not necessarily indicative
of the results that would have been obtained if the Spin-Off, the formation of
the Land Partnership, the Stock Dividend and the Merger had been consummated at
the beginning of the periods presented (in the case of income statement items)
or at the dates of the balance sheet (in the case of balance sheet items), or
that may be obtained in the future. These pro forma data are derived from the
Unaudited Pro Forma Combined Condensed Financial Statements appearing elsewhere
herein and should be read in conjunction with those statements and the notes
thereto. The unaudited pro forma selected financial data presented below reflect
the operations of Lennar and Greystone for the six months ended May 31, and June
30, 1997, respectively, and for the years ended November 30, and December 31,
1996, respectively.
SIX MONTHS
ENDED YEAR ENDED
MAY 31,/ NOVEMBER 30,/
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS DATA:
Revenues....................................................... $ 706,205 $ 1,404,403
Net Earnings................................................... $ 24,316 $ 57,490
Net Earnings per Common Share (Fully Diluted).................. $ 0.46 $ 1.08
Common Shares Used in Calculation of above per Common Share
Amount....................................................... 53,000 53,000
MAY 31,/
JUNE 30, 1997
----------------------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
PRO FORMA COMBINED CONDENSED BALANCE SHEET DATA:
Assets.................................................................... $1,226,155
Mortgage Notes and Other Debts Payable.................................... $ 524,590
Stockholders' Equity...................................................... $ 413,543
Book Value per Common Share............................................... $ 7.80
Common Shares used in Calculation of above per Common Share Amount........ 53,000
12
23
COMPARATIVE PER SHARE DATA
The following table sets forth (i) the net income per share of Common
Stock, and the book value per share of Common Stock data for Lennar, after
giving effect to the Spin-Off and the formation of the Land Partnership, and the
historical net income, book value and market value per share of Common Stock of
Greystone; (ii) the unaudited pro forma combined net income per share of Common
Stock, and the unaudited pro forma combined book value per share of Common Stock
data after giving effect to the Spin-Off, the formation of the Land Partnership,
the Stock Dividend and the Merger; and (iii) the unaudited pro forma equivalent
combined net income, and the unaudited pro forma equivalent combined book value,
per 1.138 historical shares of Greystone Common Stock. No information is
presented below with regard to dividends paid because Greystone did not pay
dividends, and Pre-Merger Lennar did not exist, during the periods presented.
The information presented in the table should be read in conjunction with the
Unaudited Pro Forma Combined Condensed Financial Statements appearing elsewhere
herein and the notes thereto and the separate historical consolidated financial
statements and the notes thereto of Lennar and Greystone incorporated herein by
reference. The comparative data presented below reflect the operations of Lennar
and Greystone for the six months ended May 31, and June 30, 1997, respectively,
and for the years ended November 30, and December 31, 1996, respectively.
SIX MONTHS
ENDED YEAR ENDED
MAY 31,/ NOVEMBER 30,/
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
(UNAUDITED)
NET INCOME:
Primary and Fully Diluted Earnings per Common Share
Pre-Merger Lennar(a)......................................... $ .37 $1.10
Historical Greystone......................................... 0.78 1.32(b)
Pro Forma Combined........................................... 0.46 1.08
Pro Forma Combined per pre-Stock Dividend Share of Greystone
Common Stock(c)........................................... 0.52 1.23
BOOK VALUE PER SHARE MARKET VALUE PER
OF COMMON STOCK SHARE OF COMMON
MAY 31,/ STOCK
JUNE 30, 1997 SEPTEMBER 29, 1997
-------------------- ------------------
(UNAUDITED)
Pre-Merger Lennar(a)..................................... $ 5.55 N.A.
Historical Greystone..................................... 10.99 $ 20.125
Pro Forma Combined....................................... 7.80 N.A.
Pro Forma Combined per pre-Stock Dividend Share of
Greystone Common Stock(c).............................. 8.88 N.A.
- ---------------
(a) "Pre-Merger Lennar" refers to Lennar after giving effect to the Spin-Off and
the formation of the Land Partnership, but before the Merger.
(b) Earnings per share are pro forma assuming that Greystone's initial public
offering and recapitalization (which is described in the Greystone 10-K)
occurred on January 1, 1996.
(c) Pro forma combined earnings per 1.138 currently outstanding shares of
Greystone Common Stock.
N.A. = Not applicable
13
24
RISK FACTORS
THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED BY STOCKHOLDERS TOGETHER
WITH THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE IN THIS JOINT
PROXY STATEMENT/PROSPECTUS IN EVALUATING WHETHER TO ADOPT THE MERGER AGREEMENT
AND APPROVE THE MERGER. SEE "AVAILABLE INFORMATION."
LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION
The historical financial information about Lennar in this Joint Proxy
Statements/Prospectus relates to periods when LNR and its subsidiaries and their
assets and operations were part of Lennar. At the Effective Time, as a result of
the Spin-Off, LNR and its subsidiaries will no longer be part of Lennar.
Lennar's results of operations during those periods are not the same as they
would have been if, during the periods to which that historical financial
information relates, Lennar had not conducted the activities which currently are
being conducted by LNR and its subsidiaries. Accordingly, such historical
financial statements may have limited historical relevance. See "Unaudited Pro
Forma Combined Condensed Financial Statements."
PRO FORMA DILUTION COMPARED WITH GREYSTONE EARNINGS AND BOOK VALUE
On a pro forma basis, without taking account of any cost savings or revenue
benefits which might result from the Merger, the Surviving Corporation would
have had earnings per share of approximately $1.08 for its fiscal year ended in
1996, compared with Greystone's earnings per share of $1.32 in the year ended
December 31, 1996, and the Surviving Corporation would have had earnings per
share of $.46 in the first six months of its 1997 fiscal year, compared with
Greystone's earnings per share of $.78 in the six months ended June 30, 1997.
Also, the pro forma book value per share of the Surviving Corporation at the end
of the first six months of its 1997 fiscal year would have been $414 million,
compared with Greystone's June 30, 1997 book value per share of $164 million.
See "Summary -- Comparative Per Share Data" and "Unaudited Pro Forma Combined
Condensed Financial Statements." Whether the Merger will in fact be accretive or
dilutive to Greystone Stockholders with respect to earnings per share will
depend on the actual results achieved by the Surviving Corporation in the future
as compared to the results that could have been achieved by Greystone on a
stand-alone basis.
ABSENCE OF A PRIOR PUBLIC MARKET FOR SURVIVING CORPORATION COMMON STOCK
The Surviving Corporation will consist of Lennar, after giving effect to
the Spin-Off and the formation of the Land Partnership, and Greystone. Because
there is no historical trading market for Lennar Common Stock after giving
effect to the Spin-Off and the formation of the Land Partnership, there is no
historical basis for predicting the prices at which the Surviving Corporation
Common Stock will trade or how actively it will be traded.
The prices at which the Surviving Corporation Common Stock trades will be
determined by the marketplace and may be influenced by many factors, including,
among others, the Surviving Corporation's performance and prospects, investor
perception of the Surviving Corporation and of the homebuilding industry, the
Surviving Corporation's dividend policy, general financial and other market
conditions, and United States economic conditions generally.
Because of the limitations on transfers of Surviving Corporation Class B
Stock, no trading market in Surviving Corporation Class B Stock should develop.
Any owner of the Surviving Corporation Class B Stock who wants to dispose of
that stock (other than to close relatives or in similar transactions), will have
to convert the stock into Surviving Corporation Common Stock and dispose of the
Surviving Corporation Common Stock.
CONCENTRATION OF OWNERSHIP AND VOTING POWER
Immediately after consummation of the Merger, Leonard Miller through family
partnerships, will own 99.6% of the Surviving Corporation's Class B Stock,
representing 69.6% of the voting power of all classes of Surviving Corporation
capital stock. Accordingly, Leonard Miller may elect the members of the Board of
14
25
Directors of the Surviving Corporation, and will have substantial influence over
its management, operations and affairs.
ANTITAKEOVER EFFECTS OF CLASS B STOCK
Because Surviving Corporation Class B Stock has substantially greater
voting rights than the Surviving Corporation Common Stock, as long as Leonard
Miller owns a substantial portion of the Surviving Corporation Class B Stock he
receives in the Merger, his ownership of Surviving Corporation Class B Stock
would make it impossible for anyone to acquire enough shares to obtain voting
control of the Surviving Corporation. Therefore, Mr. Miller's ownership of
Surviving Corporation Class B Stock probably would discourage any non-negotiated
tender offers or other non-negotiated efforts to take over the Surviving
Corporation, if any were contemplated, even if such transactions were desired by
other stockholders.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
Upon the completion of the Merger, the Board of Directors of the Surviving
Corporation will be divided into three classes. Generally, each director (other
than those directors elected to fill vacancies on the Board of Directors) will
serve until the date of the third annual meeting following the annual meeting at
which the director is elected. Even if Leonard Miller did not have voting
control of the Surviving Corporation, the staggered Board provision might
discourage certain types of transactions involving an actual or potential change
in control of the Surviving Corporation, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices. This might deprive the stockholders of an opportunity to
approve transactions they might deem to be in their best interest.
DEPENDENCE ON KEY PERSONNEL
The success of the Surviving Corporation depends to a significant degree on
the efforts of the Surviving Corporation's senior management, especially its
Chief Executive Officer and other officers. The Surviving Corporation's
operations may be adversely affected if one or more members of senior management
cease to be active in the Surviving Corporation. Stuart Miller, the Chief
Executive Officer of the Surviving Corporation also will be the Chairman of the
Board (but not the chief executive officer) of LNR. However, Mr. Miller has
informed Greystone that he expects that for at least three years after the
Effective Time he will devote at least 75% of his working time to the affairs of
the Surviving Corporation. See "Management of the Surviving Corporation."
GUARANTEE OF LNR DEBT
Lennar has guaranteed much of the indebtedness of LNR and its subsidiaries.
At September 15, 1997, this guaranteed indebtedness totaled approximately $200
million. It is a condition to Greystone's obligation to carry out the Merger
(which Greystone will have the right to waive) that the indebtedness of LNR and
its subsidiaries for which the Surviving Corporation is primarily or
contingently liable after the Spin-Off will not exceed $50 million. Lennar
expects to satisfy this condition by having some of its lenders agree that LNR
will become the principal obligor on some indebtedness after the Spin-Off, and
by repaying other indebtedness. Also, LNR would be obligated to reimburse the
Surviving Corporation for any payments it was required to make as a guarantor of
indebtedness of LNR or a subsidiary, and LNR and its subsidiaries are expected
to have a consolidated net worth of more than $550 million at the time of the
Spin-Off. Nonetheless, the Surviving Corporation's obligations as guarantor of
indebtedness of LNR and its subsidiaries at the time of the Spin-Off will
constitute a substantial contingent liability.
GUARANTY OF LENNAR EFFECTIVE TIME NET WORTH
It is contemplated that the assets of Lennar and its subsidiaries will be
divided between LNR and its subsidiaries and Lennar and its homebuilding
subsidiaries so that (i) Lennar and its homebuilding subsidiaries will, at the
time of the Merger, have an Effective Time Net Worth (with specified
adjustments) of $200 million plus an amount intended to approximate the
anticipated earnings of Lennar and its homebuilding
15
26
subsidiaries from August 31, 1997 to the Effective Time (although actual results
could be greater or less by a material amount), and (ii) the remaining net worth
of Lennar and its subsidiaries (which is expected to exceed $550 million) will
be transferred to LNR and its subsidiaries. The Merger Agreement provides for an
audit of the balance sheet of Lennar immediately before the Effective Time of
the Merger, and the Separation and Distribution Agreement between Lennar and LNR
(which governs the Spin-Off) provides that to the extent it is determined that
Lennar's Effective Time Net Worth is more or less than the required amount,
Lennar will make a payment to LNR equal to the excess amount or LNR will make a
payment to Lennar equal to the deficiency. While Lennar will attempt to divide
its assets between LNR and its subsidiaries and Lennar and its homebuilding
subsidiaries so that Lennar's Effective Time Net Worth will be very close to the
required amount, if, because of period end adjustments or otherwise, it
eventually is determined that the Effective Time Net Worth was substantially
greater than the required amount, Lennar could be required to make a significant
payment to LNR.
SHARES AVAILABLE FOR FUTURE SALE
Upon consummation of the Merger, there will be approximately 43.13 million
outstanding shares of Surviving Corporation Common Stock and 9.97 million
outstanding shares of Surviving Corporation Class B Stock (which is convertible
into Surviving Corporation Common Stock on a one-for-one basis). All of the
shares of Surviving Corporation Common Stock held by the former Lennar and
Greystone Stockholders will be freely transferable, except that shares held by
persons who are deemed to be affiliates of Lennar or Greystone prior to the
Merger will be deemed "restricted shares" and may be resold only in transactions
permitted by Rule 144 or 145 under the Securities Act or as otherwise permitted
under the Securities Act. In the case of Greystone, except for Warburg's shares,
there will be no Rule 144 volume limits restricting sales. The Surviving
Corporation has entered into a Registration Rights Agreement with Warburg and
certain executive officers of Greystone with respect to an aggregate of 10.6
million shares of Surviving Corporation Common Stock. See "The
Merger -- Registration Rights." Upon consummation of the Merger, approximately
43.13 million shares will be eligible for sale in the public market, of which
approximately 9.6 million shares will be subject to volume and other resale
restrictions imposed by Rule 145. Depending upon market conditions and other
factors, sales of a substantial number of shares of Surviving Corporation Common
Stock, or the perception that such sales could occur, could adversely affect
prevailing market prices of the Surviving Corporation Common Stock.
LIMITATION ON BORROWING
Although Lennar has arranged for financing for the Surviving Corporation,
the Surviving Corporation's Bylaws provide that without the approval of the
Independent Directors Committee established under the Bylaws, the Surviving
Corporation may not incur, or permit any of its subsidiaries to incur, guarantee
or otherwise become obligated with regard to, any indebtedness which will cause
the Surviving Corporation and its subsidiaries to have a consolidated ratio of
debt to tangible net worth which is more than 2.5:1. See "Business of the
Combined Companies -- New Financing" and "Comparative Rights of Stockholders."
16
27
GENERAL INFORMATION
This Joint Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the respective Boards of Directors of Lennar and
Greystone for use at the Special Meetings to be held on October 31, 1997, and at
any adjournments of those meetings. This Joint Proxy Statement/Prospectus also
constitutes the Prospectus of Greystone with respect to the shares of Greystone
Common Stock and Greystone Class B Stock to be issued in the Merger.
The Special Meetings have been called for the purpose of considering and
voting upon a proposal to adopt the Merger Agreement and approve the Merger, in
which Lennar will be merged with Greystone, and such other matters as may be
properly brought before the Special Meetings. The Merger will be accomplished
pursuant to the Merger Agreement by a statutory merger of Lennar with Greystone
in which each outstanding share of Lennar Common Stock and Lennar Class B Stock
will be converted into one share of Surviving Corporation Common Stock or Class
B Stock, as the case may be. Each outstanding share of Greystone Common Stock
will continue to be one share of Surviving Corporation Common Stock. However,
before the Effective Time of the Merger Greystone will declare a Stock Dividend
of .138 shares upon each outstanding share of Greystone Common Stock. Therefore,
after the Merger, the Greystone Stockholders will hold 1.138 shares of Surviving
Corporation Common Stock for each currently outstanding share of Greystone
Common Stock.
VOTE REQUIRED AT LENNAR SPECIAL MEETING
The affirmative vote of holders of a majority in voting power of the
outstanding shares of Lennar Common Stock and Lennar Class B Stock, voting as a
single class, is required for the adoption of the Merger Agreement and approval
of the Merger. At the Lennar Special Meeting, although abstentions and broker
non-votes will be counted for purposes of determining the presence of a quorum,
abstentions and broker non-votes will have the same effect as votes against the
Merger and the Merger Agreement in determining whether the Merger and the Merger
Agreement have received the requisite number of affirmative votes.
The Board of Directors of Lennar (the "Lennar Board") has fixed the close
of business on September 2, 1997 as the record date for the determination of
stockholders entitled to vote at the Lennar Special Meeting or any adjournments
of that meeting. At that date 26,097,675 shares of Lennar Common Stock and
9,966,631 shares of Lennar Class B Stock were outstanding. The holders of Lennar
Common Stock will be entitled to one vote for each share of Lennar Common Stock
and the holders of Lennar Class B Stock will be entitled to ten votes for each
share of Lennar Class B Stock held by them.
Leonard Miller, who, through family partnerships, owns 99.6% of the Lennar
Class B Stock, and therefore is entitled to 79% of all the votes which may be
cast at the Lennar Special Meeting, has agreed to vote those shares in favor of
the Merger. Therefore, if there is a quorum present at the Lennar Special
Meeting, the proposal regarding the Merger will be approved even if nobody other
than Mr. Miller votes in favor of it. See "The Merger -- Voting Agreements."
The presence in person or by proxy of the holders of a majority in voting
power, but not less than one-third in number, of the outstanding shares of
Lennar capital stock is required to constitute a quorum at the Lennar Special
Meeting. Shares represented by proxies which indicate the stockholders want to
abstain will be treated as being present for the purpose of determining the
presence of a quorum, but will not be voted with regard to the Merger or any
other matter submitted for a vote. If a broker indicates on a proxy that it does
not have authority to vote certain shares, those shares will not be considered
as present.
If a quorum is not present at the Lennar Special Meeting, the stockholders
present, by vote of a majority of the votes cast by stockholders who are
present, may adjourn the meeting, and at any adjourned meeting at which a quorum
is present, any business may be transacted which might have been transacted at
the meeting as originally called.
For information with respect to the beneficial ownership of Lennar Common
Stock and Lennar Class B Stock by each of Lennar's directors and certain of its
executive officers, by all directors and executive officers of Lennar as a group
and by each person known to Lennar to be the beneficial owner of more than 5% of
the
17
28
outstanding shares of Lennar Common Stock or Lennar Class B Stock, see Item 12
of the Lennar 10-K (which incorporates certain portions of the proxy statement
for Lennar's 1997 Annual Meeting of Stockholders).
VOTE REQUIRED AT GREYSTONE SPECIAL MEETING
The affirmative vote of holders of a majority in voting power of the
outstanding shares of Greystone Common Stock is required for the adoption of the
Merger Agreement and approval of the Merger. At the Greystone Special Meeting,
although abstentions and broker non-votes will be counted for purposes of
determining the presence of a quorum, abstentions and broker non-votes will have
the same effect as a vote against the Merger and the Merger Agreement in
determining whether the Merger and the Merger Agreement have received the
requisite number of affirmative votes.
The Board of Directors of Greystone (the "Greystone Board") has fixed the
close of business on September 9, 1997 as the record date for the determination
of stockholders entitled to vote at the Greystone Special Meeting or any
adjournments. At that date 14,967,229 shares of Greystone Common Stock were
outstanding. Holders of Greystone Common Stock on that date will be entitled to
one vote for each share of Greystone Common Stock held by them.
Warburg, which is the beneficial owner of 8,411,854 shares of Greystone
Common Stock, representing approximately 56% of the outstanding Greystone Common
stock, has agreed, subject to certain conditions, to vote at least 50% of the
outstanding Greystone Common Stock in favor of adopting the Merger Agreement and
approving the Merger. Although Warburg holds more than 50% of the outstanding
Greystone Common Stock, pursuant to a prior agreement between Warburg and
Greystone, Warburg may vote shares representing up to 50% of the aggregate
voting power of Greystone Common Stock on any matter in its discretion and must
vote any additional shares in the same proportion as the shares voted by the
other Greystone Stockholders on that matter. If even one additional share of
Greystone Common Stock is voted in favor of adopting the Merger Agreement and
approving the Merger by any Greystone Stockholder, those actions will have been
approved by the Greystone Stockholders. Lennar owns 1,000 shares of Greystone
Common Stock, and has the right to vote those shares in favor of the proposal
regarding the Merger. Therefore, unless the Merger Agreement is terminated, the
Merger is expected to be approved by the Greystone Stockholders. See "The
Merger -- Voting Agreements."
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Greystone Common Stock is required to constitute a quorum
to transact business at the Greystone Special Meeting. Shares represented by
proxies which indicate the stockholders want to abstain will be treated as being
present for the purpose of determining the presence of a quorum, but will not be
voted with regard to the Merger or any other matter submitted for a vote. If a
broker indicates on the proxy that it does not have authority to vote certain
shares, those shares will not be considered as present.
For information with respect to the beneficial ownership of Greystone
Common Stock by each of Greystone's directors and certain of its executive
officers, by all directors and executive officers of Greystone as a group and by
each person known by Greystone to be the beneficial owner of more than 5% of the
outstanding shares of Greystone Common Stock, see item 12 of the Greystone 10-K
(which incorporates certain portions of the proxy statement for Greystone's 1997
Annual Meeting of Stockholders).
If a quorum is not present at the Greystone Special Meeting, the
stockholders present, by vote of a majority of the votes cast by stockholders
who are present, may adjourn the meeting, and at any adjourned meeting at which
a quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
SOLICITATION OF PROXIES
Directors, officers and employees of Lennar and Greystone may solicit
proxies from their respective stockholders by personal interview, special
letter, telephone or facsimile transmission. Each company will bear the expenses
of any solicitation on its behalf. Directors, officers and other employees of
Lennar and Greystone
18
29
will not be specifically compensated for the solicitation of proxies. Brokerage
houses and other custodians, nominees and fiduciaries will be requested to
forward soliciting materials to the beneficial owners of Lennar Common Stock,
Lennar Class B Stock and Greystone Common Stock owned of record by those
organizations, and Lennar and Greystone will pay the reasonable expenses of
forwarding the materials.
A proxy relating to the Lennar Special Meeting or Greystone Special Meeting
may be revoked by the stockholder at any time before it is voted. However, mere
attendance at the applicable Special Meeting will not itself have the effect of
revoking the proxy. A stockholder may revoke a proxy at any time before it is
voted by delivery of a written instrument of revocation to the applicable one of
Lennar or Greystone, or in open meeting, without, however, affecting any vote
previously taken, or by casting a ballot in person at the applicable Special
Meeting. A proxy will not be revoked by the death or incapacity of a
stockholder, unless written notice of the death or incapacity is given to the
applicable one of Lennar or Greystone by the fiduciary having control of the
shares represented by the proxy.
A proxy in the accompanying form, when properly executed and returned, will
be voted in accordance with the instructions shown on it. A proxy on which no
instruction has been indicated will be voted for adoption of the Merger
Agreement and approval of the Merger.
OTHER MATTERS
At the date of this Joint Proxy Statement/Prospectus, the respective Boards
of Directors of Lennar and Greystone do not know of any business to be presented
at either Special Meeting other than the proposal to adopt the Merger Agreement
and approve the Merger. If any other matters properly come before either of the
Special Meetings, the shares represented by proxies will be voted with respect
to those matters in accordance with the judgment of the persons voting the
proxies.
BACKGROUND OF THE MERGER
Greystone, since its inception in 1991, has sought to expand its operations
through selective acquisitions and other business combinations and by commencing
start-up projects in new and existing markets. Its goal has been to become
larger and more diversified. In the pursuit of this goal, the Board of Directors
and the management of Greystone have held discussions with other homebuilders
from time to time in the course of business over the past several years. In
addition, in pursuit of this goal of growth and diversification, in recent years
Greystone has also been exploring strategic alternatives, including strategic
business combinations, with a number of homebuilding companies.
Lennar had for some time been considering separating its homebuilding
business from its real estate investment and management business. One reason for
this was that Lennar believed the market price of its stock did not reflect the
full value of its real estate investment and management business. Because of
that, it had been unwilling to use stock to make acquisitions. Early in December
1996, Lennar decided to proceed with the Spin-Off.
A representative of BT Securities Corporation ("BT"), then with another
firm, had discussed the possibility of Lennar's acquiring Greystone with the
Chairman of Lennar and a representative of Warburg as early as 1993. However, it
was not until Lennar decided to proceed with the Spin-Off that such a
transaction was seriously considered.
In December 1996, BT, a financial adviser to Lennar, contacted a
representative of Greystone and advised Greystone that Lennar intended to spin
off to its shareholders its investment management business and that Lennar
desired immediately after the Spin-Off to merge Lennar with another homebuilding
company. BT stated that Lennar, which had strong operations in Florida, Texas
and Arizona and some presence in California, was seeking to strengthen
significantly its operations in California. BT stated that Lennar had acquired
valuable undeveloped land assets in California, but lacked the infrastructure to
develop effectively those assets. Because of Greystone's significant presence in
California, and Greystone's desire to diversify geographically and continue its
expansion, BT maintained that a merger of the two companies satisfied both
companies' needs.
19
30
In January 1997, representatives of Lennar met with representatives of
Greystone. The parties discussed certain issues, such as the nature of the
operations of the respective companies, their relative sizes and certain
integration issues. The parties determined to evaluate the possibility of a
business combination. On January 15, 1997, Lennar and Greystone entered into a
confidentiality agreement.
Greystone determined that in addition to pursuing a possible business
combination with Lennar, it was advisable to explore the availability of
possible business combinations with other third parties. About January 15, 1997,
Greystone contacted Smith Barney, which had previously been working with
Greystone in the exploration of strategic business combinations. Greystone
requested that Smith Barney provide Greystone with financial advice in
connection with a possible business combination involving Greystone and that
Smith Barney contact third parties regarding their interest in such a business
combination. Thereafter, Greystone sought alternative candidates other than
Lennar for a strategic business combination, and a number of companies in the
homebuilding industry other than Lennar were contacted regarding their possible
interest in a business combination involving Greystone. Two of such companies
expressed verbal, non-binding indications of interest. Such other parties were
provided with confidential information regarding Greystone. Nonetheless, neither
of such other two bidders indicated a willingness to pursue a transaction at the
level of value represented by the proposed transaction with Lennar. After
consultation between Greystone's management and Smith Barney, Greystone
determined that the proposed transaction with Lennar would be superior from a
financial and strategic point of view to either such transaction, based upon an
analysis of, among other things, the financial terms of the proposed transaction
with Lennar, the potential for growth that the Surviving Corporation would have
and the estimated synergies and similar benefits contemplated as a result of the
proposed transactions with Lennar. In particular, Greystone believed that the
financial consideration offered by Lennar was higher than that proposed in
either indication of interest received from the other parties. The foregoing
matters were discussed at meetings of the Board of Directors held throughout
this period and among the members of the Board of Directors during this period.
In April 1997, representatives of Lennar and Greystone commenced business,
financial and legal due diligence investigations in order to evaluate a
potential transaction. Additionally, counsel to Lennar delivered drafts of the
Merger Agreement and Separation and Distribution Agreement to Greystone. Over
the next several weeks, the parties negotiated the basic terms of the
agreements. Lennar proposed a minimum net worth of Lennar as of the time of the
Merger (giving effect to the Spin-Off but not the Merger) of $190 million
(subject to increase in the event the Merger was consummated after August 31,
1997). At the request of Greystone, after a review of the due diligence process
and other matters, Lennar agreed to increase the proposed guaranteed minimum net
worth of Lennar to $200 million.
In valuing Greystone, Lennar looked primarily at Greystone's properties,
earnings history and book value. Based on its analysis of these factors, Lennar
determined the relative percentages of the value of a merged Lennar and
Greystone which it believed would be attributable to each of them.
Initially, Lennar proposed that Greystone's stockholders receive 30% of the
stock of the Surviving Corporation and said it would assure Greystone that the
net worth of Lennar and its subsidiaries following the Spin-Off would be at
least $130 million. Greystone sought to have its stockholders receive 40% of the
Surviving Corporation. Eventually, tentative agreement was reached that
Greystone's stockholders would receive 32% of the Surviving Corporation and
Lennar and its subsidiaries would have a net worth of $190 million following the
Spin-Off. However, Greystone subsequently requested that the minimum Lennar net
worth be increased to $200 million. After negotiations with regard to various
items, principally including the "fiduciary out" provision described below and
the guarantee of LNR indebtedness described under "Risk Factors -- Guarantee of
LNR Debt," Lennar agreed to Greystone's proposal that the minimum Lennar net
worth be increased to $200 million.
At a meeting of Lennar's Board of Directors held on April 8, 1997, there
were discussions of the Spin-Off and of a possible acquisition of Greystone by
Lennar. No formal action was taken at that meeting with regard to either of
those transactions.
On May 28, 1997, the Lennar Board met to consider both the Merger and the
Spin-Off. Representatives of BT made a presentation regarding the Merger and
representatives of Morgan Stanley & Co. Incorporated
20
31
("Morgan Stanley") made a presentation about the Spin-Off, which included the
expected effects of the Merger. As noted above, a representative of BT had been
involved in initiating the discussions regarding a possible transaction between
Lennar and Greystone and BT was acting as the financial advisor to Lennar in
connection with that transaction. A representative of Lennar's legal advisors
was present at the meeting and told the directors that there were still points
that had to be resolved. Principal among these were (i) Lennar's reluctance to
permit Greystone to terminate the Merger Agreement if it received a proposal it
considered superior to the agreed upon Merger, (ii) how options would be taken
into account in computing the number of Surviving Corporation shares to be
issued per Greystone share, (iii) whether LNR would indemnify Lennar for effects
of any Internal Revenue Service determination after the Spin-Off takes place
that the Spin-Off was not tax-free, and (iv) whether, if the consolidated net
worth of Lennar and its subsidiaries at the Effective Time exceeds the agreed
upon minimum amount, Lennar would be required to pay an amount equal to the
excess to LNR (i.e., to reduce Lennar's consolidated net worth to the agreed
upon minimum amount). The Lennar Board did not act upon either the Merger or the
Spin-Off at that meeting. However, the directors were asked to be available to
meet by conference telephone to act upon both the Merger and the Spin-Off when
and if Lennar and Greystone resolved the open points.
On May 30, 1997, the Greystone Board met to review the terms of the
proposed transaction in detail. Additionally, the Greystone Board, Greystone's
management and Greystone's advisors reviewed certain strategic and financial
considerations relating to the proposed transaction. The strategic and financial
considerations included principally the matters discussed under "Recommendations
of the Board of Directors and Reasons for the Merger -- Greystone" and "Opinion
of Greystone's Financial Advisor." At this meeting, the Greystone Board
authorized representatives of Greystone's legal and financial advisors to
continue negotiations with respect to a possible business combination and
requested that such representatives seek from Lennar a "fiduciary out" pursuant
to which Greystone would be able to terminate the Merger Agreement under certain
conditions in the event a third party approached Greystone with a superior
business combination proposal.
During the week of June 2, 1997, Lennar and Greystone continued
negotiations with respect to the potential business combination. These
negotiations resulted in a proposed transaction structure in which, prior to the
Merger, Greystone would issue a 13.8% stock dividend and the Lennar Stockholders
would receive one share of Surviving Corporation Common Stock for each share of
Lennar Class A Common Stock and one share of Surviving Corporation Class B Stock
for each share of Lennar Class B Common Stock. Each share of Greystone Common
Stock would remain outstanding as a share of Surviving Corporation Common Stock.
Additionally, the proposed transaction included a "fiduciary out" pursuant to
which, in the event a third party made an unsolicited, bona fide acquisition
proposal to Greystone valued at greater than $18.50 per share of Greystone
Common Stock prior to August 9, 1997, Greystone could terminate the Merger
Agreement upon payment to Lennar of $7.5 million. Additionally, upon
consummation of such a superior transaction with a third party within one year
of the termination of the Merger Agreement, Warburg would pay to Lennar all the
profits it received from such transaction in excess of $17.50 per share.
On June 10, 1997, the Lennar Board met, with several members participating
by conference telephone, and approved both the Merger and the Spin-Off.
On June 10, 1997, the Greystone Board met to consider the Merger, the
Merger Agreement and the other transactions contemplated thereby. Smith Barney
delivered to the Greystone Board an oral opinion (subsequently confirmed by
delivery of a written opinion dated June 10, 1997) to the effect that, as of
such date and based upon and subject to certain matters stated in such opinion,
the Exchange Ratio was fair, from a financial point of view, to the holders of
Greystone Common Stock, and reviewed with the Greystone Board the financial
analyses performed by Smith Barney in connection with such opinion. See "Opinion
of Greystone's Financial Advisor." The Greystone Board considered this and other
factors (see "Recommendations of the Boards of Directors and Reasons for the
Merger -- Greystone"), and unanimously approved the Merger, the Merger Agreement
and the other transactions contemplated thereby.
On June 10, 1997, the parties entered into the Merger Agreement, the Miller
Agreement and the Warburg Agreement.
21
32
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS AND
REASONS FOR THE MERGER
LENNAR
The Lennar Board believes the terms of the Merger are fair to, and in the
best interests of, Lennar and Lennar's Stockholders. Accordingly, the Lennar
Board has unanimously approved the Merger Agreement and the Merger and
unanimously recommends that holders of Lennar Common Stock and Lennar Class B
Stock vote for adoption of the Merger Agreement and approval of the Merger.
The Lennar Board believes that the Merger will make Lennar a stronger
homebuilding company. In particular, the Merger will (i) continue Lennar's
strategy of becoming a significant participant in the California homebuilding
market, a market in which Lennar was not present until 1996; (ii) enhance
Lennar's presence in Phoenix, where it has been building homes for over 25 years
and (iii) give Lennar a presence in Las Vegas, a market which Lennar believes is
currently strong and provides opportunities for growth. According to
homebuilding industry publications, as a result of the Merger, the Surviving
Corporation will become the nation's fifth largest homebuilder based on 1996
homebuilding revenues and homes closed, and the largest homebuilder in the
nation based on 1996 homebuilding earnings before interest and taxes. Also,
because Greystone's net worth substantially exceeds the minimum needed for its
operations, and that excess will be available after the Merger to support the
combined homebuilding operations of Lennar and Greystone, the combination of
Lennar and Greystone will enable Lennar to increase the portion of its net worth
which Lennar will contribute to LNR, which should increase the value of the LNR
shares Lennar Stockholders will receive in the Spin-Off.
Prior to recommending action on the Merger, the Lennar Board reviewed
various materials regarding the businesses, operations and financial condition
of Greystone.
The Merger was considered by the Lennar Board at meetings held on April 8,
1997, May 28, 1997 and June 10, 1997. In addition, on May 9, 1997, directors
were sent a memorandum from Lennar's financial advisor, BT, regarding the
proposed terms of the Merger and a draft of the Merger Agreement. Directors were
sent an additional draft of the Merger Agreement prior to the June 10 meeting.
At its meetings, the Lennar Board reviewed the terms and conditions of the
transactions contemplated by the Merger Agreement and related agreements with
Lennar's senior management, legal counsel and BT. In particular, Lennar's legal
counsel discussed the terms of the Merger Agreement and the fiduciary duties of
the Lennar Board with respect to the Merger. Senior management of Lennar
discussed with the Lennar Board their belief, based on certain assumptions, that
the Merger's effect on fully diluted operating earnings per share would be
modestly accretive in the near term. In considering the Merger, the Lennar Board
assumed for purposes of their consideration that there would be no benefit of
operating synergies as a result of the Merger.
During the May 28, 1997 meeting of the Lennar Board, BT made a detailed
presentation regarding the proposed transaction. Representatives of Morgan
Stanley also made a presentation to the Board about the Spin-Off which included
the expected effects on the Merger. Representatives of BT discussed, among other
things: (i) analyses of certain financial information of Greystone; (ii)
historical price and trading information for Greystone Common Stock; (iii) a
comparison of Lennar's and Greystone's businesses and historical results with
those of other comparable publicly traded homebuilding companies; (iv) potential
benefits to Lennar of the proposed Merger; (v) a pro forma analysis of the
combined entity after the Merger, including share ownership, income statement
items and balance sheet data; and (vi) the potential effect of the Merger on
Lennar's earnings and the book value of its assets. Among the benefits of the
Merger to Lennar which BT identified were that (a) it springboards the combined
company to a pre-eminent market position, (b) it forms a diversified homebuilder
focused on what BT called the nation's most attractive and fastest growing
markets, (c) it creates significant presence in California for Lennar, (d)
Lennar's future growth would be enhanced by increased size, access to capital
and management depth, (e) Lennar would be better positioned to maintain value
and act opportunistically in a cyclical downturn and (f) the transaction would
provide significant liquidity for Lennar's common equity by increasing its
market capitalization and making possible large institutional holders. BT was
not asked to give its specific views as to the fairness of the transaction.
Also,
22
33
Lennar did not request, and neither Morgan Stanley nor BT delivered, a formal
opinion as to the fairness, from a financial point of view, of the terms of the
Merger to Lennar Stockholders.
BT's presentation included management projections of fiscal 1997 and 1998
revenues and net income both for Lennar's homebuilding and related operations
and for Greystone. The projected revenues and net income of Lennar's
homebuilding and related operations were revenues of $1.15 billion in 1997 and
$1.34 billion in 1998 and net income of $52.3 million in 1997 and $62.8 million
in 1998. The projected revenues and net income of Greystone were revenues of
$617.6 million in 1997 and $669.9 million in 1998 and net income of $27.7
million in 1997 and $33.8 million in 1998. BT's presentation also included
several analysts' estimates of Greystone's future per share earnings, including
consensus estimates of $1.85 per share in 1997 and $2.24 per share in 1998 and
of 5-year projected earnings per share growth of 18%. Although these projections
were included in materials BT gave the directors, they are forward-looking
statements and, like virtually all projections, are subject to a variety of
uncertainties. As to both Lennar and Greystone, these include uncertainties
because of the cyclical nature of the homebuilding business, both nationally and
regionally, because of the sensitivity of the homebuilding business to changes
in interest rates, and because of items discussed under "Risk Factors" and
factors discussed in Lennar's and Greystone's filings under the Exchange Act.
The projections were not a focal point of the directors' discussion of the
Merger. The separate projections of net income of Lennar's homebuilding and
related operations and of Greystone cannot be combined to form projections of
the net income of the Surviving Corporation, because the separate projections do
not take account of amortization of goodwill, the effects of purchase accounting
or other changes which will or may result from the Merger. Further, the Lennar
projections did not take account of restructuring charges which will result from
the Spin-Off (which will be material) and included only preliminary allocations
of 1997 overhead between Lennar and LNR. BT's presentation did not include
analysts' estimates of Lennar's per share earnings. However, at September 25,
1997, analysts' consensus estimates (which did not take account of either the
Spin-Off or the Merger) were that Lennar would have earnings per share of $2.84
in 1997 and $3.12 in 1998.
In deciding to approve the Merger Agreement, the Lennar Board considered
the items set forth above and a number of other factors, including, but not
limited to (i) the current and historical market price of, and dividends on,
Lennar Common Stock; (ii) the continued expansion of Lennar's homebuilding
business in the California and Phoenix markets and its expansion into the Las
Vegas market; (iii) the effect of the Merger upon the Spin-Off and the
capitalization of LNR at the time of the Spin-Off (i.e., the fact that Lennar's
acquiring Greystone's net worth would enable Lennar to transfer a greater
portion of its net worth to LNR); (iv) the expected accounting treatment of the
Merger; (v) the terms and conditions of the Merger Agreement; (vi) the tax
treatment of the Merger; and (vii) the presentations and advice of its financial
advisors and legal counsel, as discussed above. The Lennar Board did not assign
any relative or specific weights to these factors and individual directors may
have given different weights to different factors.
BASED ON THE FOREGOING, THE LENNAR BOARD UNANIMOUSLY RECOMMENDS THAT LENNAR
STOCKHOLDERS VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
MERGER.
GREYSTONE
The Board of Directors of Greystone believes that the Merger achieves
Greystone's strategic objective of becoming a larger, more geographically
diversified and strongly capitalized homebuilder in a shorter period of time and
with less risk than it could on its own. The Greystone Board believes that such
strategic objective will enhance value for Greystone Stockholders.
In reaching its determination to approve the Merger Agreement and recommend
approval of the Merger by Greystone Stockholders, the Greystone Board considered
a number of factors, including, without limitation, the following:
(i) its knowledge of the historical and prospective business,
operations, properties, assets, financial condition and operating results
of Greystone;
(ii) its belief that the Merger presented a unique growth and
strategic opportunity for Greystone and Greystone Stockholders and its
belief that such opportunity could be available only in the immediate time
frame in connection with the proposed Lennar restructuring;
23
34
(iii) the annual synergies and similar benefits contemplated to be
obtained in the Merger, estimated to be between approximately $9.7 and
$16.6 million (although there can be no assurance of realizing those
synergies and the actual amount of those synergies can vary materially from
this estimate), and the likely impact thereof on prospects of the combined
entity for growth; in this regard, the Board also considered that the
Merger was expected to result in synergies attributable to, among other
things, consolidation of operations, mortgage and title synergies,
additional leverage with subcontractors, cost of capital, and general
overhead and public company expenses;
(iv) its knowledge and review of the management team of Lennar and its
belief that the Merger would provide Greystone Stockholders with an
opportunity for smooth management succession;
(v) its assessment of certain matters regarding the historical and
prospective business, operations, properties, assets, financial condition
and operating results of Lennar's homebuilding operations;
(vi) its assessment of the prospects for the combined entity and its
belief that the businesses of the two companies were complementary and that
the growth potential of the combined entity was greater than that of
Greystone alone;
(vii) its belief that the prospects for the California homebuilding
market were strong, its belief that access to Lennar's desirable
undeveloped land assets in California would enhance Greystone's growth
prospects in the California market, and its belief that the geographic
diversification and size of the combined entity would protect the combined
company in the event of regional downturns in the future;
(viii) its assessment, based upon, among other things, the process
undertaken on behalf of Greystone in contacting third parties regarding
their potential interest in a business combination involving Greystone, of
the likely strategic alternative business combinations available to
Greystone and the Board's belief that a transaction with Lennar represented
the best opportunity for realizing the highest value for Greystone
Stockholders;
(ix) the terms of the Merger Agreement, the Miller Agreement and the
Warburg Agreement (see "The Merger" and "The Merger -- Voting Agreements"),
including the prohibition on the solicitation of other offers and the
circumstances and conditions under which Greystone would be able to pursue
unsolicited alternative proposals;
(x) the matters set forth herein under "The Merger -- Interests of
Certain Persons in the Merger;"
(xi) its belief that the combined entity would be well-capitalized and
have lower costs of capital than Greystone alone;
(xii) its belief that Lennar's mortgage operations would complement
Greystone's mortgage brokerage business and enhance the combined company's
prospects;
(xiii) the historical trading prices for Greystone Common Stock, on
the one hand, and estimates of trading prices for the Surviving Corporation
Common Stock under a series of assumptions, on the other; in this regard,
the Greystone Board considered that larger, geographically diverse
homebuilding companies had historically traded at greater price to earnings
multiples than smaller, regional homebuilders and that, as a result,
although there could be no assurance, the Merger enhanced the prospects for
a higher trading multiple;
(xiv) the opportunity for Greystone Stockholders to participate, after
the Merger, in a larger, stronger, more geographically diversified company
of which Greystone would become a significant part;
(xv) its evaluation of the financial terms of the Merger and their
effect on the Greystone Stockholders, including, among other things, the
resulting relative interests of Greystone and Lennar Stockholders in the
equity of the combined company, the guaranteed net worth of Lennar at the
time of the Merger, and the creation of the Land Partnership;
(xvi) the financial presentation and opinion of its financial advisor,
Smith Barney to the effect that, as of June 10, 1997 and based upon and
subject to certain matters set forth in its written opinion as of that
date, the Exchange Ratio was fair to holders of Greystone Common Stock from
a financial point of view. See "Opinion of Greystone's Financial Advisor;"
24
35
(xvii) the terms of the proposed financing arrangements for the
Surviving Corporation, the Separation Agreement, the Land Partnership and
the related transaction documents; and
(xviii) the fact that Leonard Miller, through his affiliates, would
hold equity in the combined company that would provide him with the ability
to control the combined company and to elect a majority of the members of
the board of directors of the combined company; in this regard the
Greystone Board considered that the market and investment community had
viewed favorably the control of Lennar by Mr. Miller and the fact that Mr.
Miller had agreed to the vote in favor of the Amendment (as defined below).
See "The Merger -- Voting Agreements; Miller Agreement."
As an inherent part of the foregoing analysis, the Board evaluated
Greystone's remaining independent as an alternative to the proposed transaction
with Lennar. In this regard, the Board considered the factors described above,
including without limitation (a) the Board's belief that the Merger (i) would
both result in geographic diversification and enhance Greystone's growth
prospects in California, (ii) would create a strongly capitalized homebuilder,
and (iii) would provide an opportunity for smooth management succession and (b)
the Board's belief (as discussed in clause (xiii) above and under "Opinion of
Greystone's Financial Advisor") that, although there could be no assurance, the
Merger enhanced the prospects for a higher trading multiple because larger,
geographically diverse homebuilding companies had historically traded at greater
price to earnings multiples than smaller, regional homebuilders. The Board
concluded that the proposed transaction with Lennar represented a superior
alternative for Greystone to remaining independent.
The foregoing discussion of the information and factors considered by the
Greystone Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Merger, the
Greystone Board did not find it practicable to and did not quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Greystone Board may have
given different weights to different factors. For a discussion of the interests
of certain members of Greystone's management and the Greystone Board in the
Merger, see "The Merger -- Interests of Certain Persons in the Merger."
BASED ON THE FOREGOING, THE GREYSTONE BOARD UNANIMOUSLY RECOMMENDS THAT
GREYSTONE STOCKHOLDERS VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT AND APPROVAL
OF THE MERGER.
In connection with Smith Barney's role as financial advisor to Greystone,
Smith Barney was provided with certain scenarios of financial projections with
respect to Greystone and Lennar prepared by the managements of the two
companies. The Greystone financial projections utilized in Smith Barney's
analyses reflected (i) 1997 revenues of $631.7 million and 1998 revenues of
$687.9 million, (ii) 1997 EBITDA of $72.9 million and 1998 EBITDA of $82.9
million, and (iii) 1997 net income of $30.7 million and 1998 net income of $36.2
million. The Lennar projections showed (i) 1997 revenues of $1.12 billion and
1998 revenues of $1.33 billion, (ii) 1997 EBITDA of $133.7 million and 1998
EBITDA of $158.1 million, and (iii) 1997 net income of $54.9 million and 1998
net income of $65.9 million. Those projections led to projected Surviving
Corporation EPS (on a post stock dividend basis) of $1.50 to $1.69 in 1997 and
$1.80 to $1.98 in 1998 (assuming in each case that $0 to approximately $16.6
million of annual cost savings and other potential synergies anticipated by the
management of Greystone were achieved). The Greystone and Lennar financial
projections depend on future performance and numerous other factors, including
those set forth under the heading "Risk Factors" and elsewhere in Greystone's
and Lennar's Exchange Act filings and in this Joint Proxy Statement/Prospectus.
Achievement of these projections is dependent on, among other things,
California's recovery and the strength of the Florida, Arizona, Texas and Nevada
new home markets, interest rate levels, general economic and industry
conditions, consumer confidence and the ability of Greystone to obtain adequate
supplies of lots at reasonable cost to meet demand and generate commensurate
returns. Greystone and Lennar disclaim any duty to update such projections and
make no representations as to whether such projections will be achieved or
otherwise. These financial projections were provided as a part of ongoing
dialogues with Smith Barney for purposes of its analysis and were not prepared
with a view toward public disclosure. As such, the projections are necessarily
incomplete in that they do not include all of the underlying assumptions and
qualifications on which they were based or any limitations on their predictive
value which may have been communicated to Smith Barney or may otherwise have
been understood by Smith Barney because of Smith Barney's familiarity with the
companies in the industry. No assurance can be given
25
36
as to future performance and actual results may vary materially from these
projections. Among other things, neither the 1997 Lennar projections nor the
1997 Surviving Corporation EPS projection took account of restructuring charges
which will result from the Spin-Off (which will be material) and both of those
projections included only preliminary allocations of goodwill and overhead
between Lennar and LNR. Also, such projections do not include all purchase
accounting adjustments.
OPINION OF GREYSTONE'S FINANCIAL ADVISOR
Smith Barney was retained by Greystone to act as its financial advisor in
connection with potential transactions involving Greystone, including the
proposed Merger. In connection with such engagement, Greystone requested that
Smith Barney evaluate the fairness, from a financial point of view, to the
holders of Greystone Common Stock of the Exchange Ratio. On June 10, 1997, at a
meeting of the Board of Directors of Greystone held to evaluate the proposed
Merger, Smith Barney delivered an oral opinion (which opinion was subsequently
confirmed by delivery of a written opinion dated June 10, 1997) to the Board of
Directors of Greystone to the effect that, as of the date of such opinion and
based upon and subject to certain matters stated therein, the Exchange Ratio was
fair, from a financial point of view, to the holders of Greystone Common Stock.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement and
certain related documents, and held discussions with certain senior officers,
directors and other representatives and advisors of Greystone and certain senior
officers and other representatives and advisors of Lennar concerning the
businesses, operations and prospects of Greystone and Lennar. Smith Barney
examined certain publicly available business and financial information relating
to Greystone and Lennar as well as certain financial forecasts and other
information and data for Greystone and Lennar which were provided to or
otherwise discussed with Smith Barney by the respective managements of Greystone
and Lennar, including information relating to certain strategic implications and
operational benefits anticipated to result from the Merger. Smith Barney
reviewed the financial terms of the Merger as set forth in the Merger Agreement
in relation to, among other things: current and historical market prices and
trading volumes of Greystone Common Stock; the historical and projected earnings
and other operating data of Greystone and Lennar; and the capitalization and
financial condition of Greystone and Lennar. Smith Barney also considered, to
the extent publicly available, the financial terms of other transactions
recently effected which Smith Barney considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations Smith
Barney considered relevant in evaluating those of Greystone and Lennar. Smith
Barney also evaluated the potential pro forma financial impact of the Merger on
Greystone. In connection with its engagement, Smith Barney was requested to
approach, and held discussions with, third parties to solicit indications of
interest in a possible acquisition of Greystone. In addition to the foregoing,
Smith Barney conducted such other analyses and examinations and considered such
other financial, economic and market criteria as Smith Barney deemed appropriate
in arriving at its opinion. Smith Barney noted that its opinion was necessarily
based upon information available, and financial, stock market and other
conditions and circumstances existing and disclosed, to Smith Barney as of the
date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Smith Barney. With respect to financial forecasts
and other information and data provided to or otherwise reviewed by or discussed
with Smith Barney, the managements of Greystone and Lennar advised Smith Barney
that such forecasts and other information and data were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
managements of Greystone and Lennar as to the future financial performance of
Greystone and Lennar and the strategic implications and operational benefits
anticipated to result from the Merger. Smith Barney assumed, with the consent of
the Board of Directors of Greystone, that the Merger will be treated as a
tax-free reorganization for federal income tax purposes. Smith Barney also
assumed that the Spin-Off, Stock Dividend and Land Partnership will be effected
in accordance with the terms contemplated thereby prior to consummation of the
Merger and, to the extent relevant to its analysis, evaluated Greystone and
Lennar after giving effect to such transactions. Smith Barney did not express
any opinion as to what the value of the Surviving Corporation Common Stock or
Surviving Corporation Class B Common Stock actually will be when
26
37
issued to Lennar stockholders pursuant to the Merger or the prices at which the
Surviving Corporation Common Stock or Surviving Corporation Class B Common Stock
will trade or otherwise be transferable subsequent to the Merger. Smith Barney
did not make and was not provided with an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of Greystone and Lennar nor
did Smith Barney make any physical inspection of the properties or assets of
Greystone and Lennar. Although Smith Barney evaluated the Exchange Ratio from a
financial point of view, Smith Barney was not asked to and did not recommend the
specific consideration payable in the Merger, which was determined through
negotiation between Greystone and Lennar. No other limitations were imposed by
Greystone on Smith Barney with respect to the investigations made or procedures
followed by Smith Barney in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED JUNE 10, 1997,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX II AND SHOULD BE READ CAREFULLY
IN ITS ENTIRETY. SMITH BARNEY HAS CONSENTED TO THE INCLUSION OF ITS OPINION
LETTER AS ANNEX II HERETO. IN GIVING SUCH CONSENT, SMITH BARNEY DOES NOT ADMIT
THAT IT COMES WITHIN THE CATEGORY OF PERSONS WHOSE CONSENT IS REQUIRED UNDER
SECTION 7 OF THE SECURITIES ACT, OR THE RULES AND REGULATIONS OF THE COMMISSION
THEREUNDER, NOR DOES IT THEREBY ADMIT THAT IT IS AN EXPERT WITH RESPECT TO ANY
PART OF THE REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY
STATEMENT/PROSPECTUS IS A PART WITHIN THE MEANING OF THE TERM "EXPERTS" AS USED
IN THE SECURITIES ACT, OR THE RULES AND REGULATIONS OF THE COMMISSION
THEREUNDER. THE OPINION OF SMITH BARNEY IS DIRECTED TO THE BOARD OF DIRECTORS OF
GREYSTONE AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE GREYSTONE SPECIAL MEETING. THE
SUMMARY OF THE OPINION OF SMITH BARNEY SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In preparing its opinion, Smith Barney performed a variety of financial and
comparative analyses, including those described below. The summary of such
analyses does not purport to be a complete description of the analyses
underlying Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, Smith Barney
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and opinion. In its analyses, Smith Barney made
numerous assumptions with respect to Greystone, Lennar, industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Greystone and Lennar. The estimates
contained in such analyses and the valuation ranges resulting from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, such estimates are inherently subject to substantial uncertainty.
Smith Barney's opinion and analyses were only one of many factors considered by
the Board of Directors of Greystone in its evaluation of the Merger and should
not be viewed as determinative of the views of the Board of Directors or
management of Greystone with respect to the Exchange Ratio or the proposed
Merger.
The following is a summary of the material financial analyses performed by
Smith Barney in connection with its opinion dated June 10, 1997:
Selected Company Analysis. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples of
Greystone, Lennar and the following 18 selected publicly traded companies in the
home building industry, consisting of (i) large national companies: Centex
Corporation; and Pulte Corporation (the "Large National Companies"), (ii) small
national companies: The Ryland Group Inc.; D.R. Horton, Inc.; and U.S. Home
Corporation (the "Small National Companies"); (iii) large regional companies:
Kaufman and Broad Home Corporation; and Toll Brothers, Inc. (the "Large Regional
Companies"); and (iv) small regional companies: Beazer Homes USA, Inc.;
Continental Homes
27
38
Holding Corp.; Crossman Communities, Inc.; Del Webb Corporation; Engle Homes
Inc.; Hovnanian Enterprises, Inc.; M.D.C. Holdings, Inc.; M/I Schottenstein
Homes, Inc.; NVR, Inc.; Schuler Homes, Inc.; and Standard Pacific Corporation
(the "Small Regional Companies" and, together with the Large National Companies,
the Small National Companies and the Large Regional Companies, the "Selected
Companies"). Smith Barney compared market values as multiples of estimated
calendar 1997 and 1998 net income and book value, and adjusted market values
(equity market value, plus total debt, minority interest and the book value of
preferred stock, less cash and cash equivalents) as multiples of, among other
things, latest 12 months earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Smith Barney also compared the implied trading
multiples of Greystone, Lennar and the Selected Companies. Net income
projections for the Selected Companies were based on estimates of selected
investment banking firms and net income projections for Greystone and Lennar
were based on internal estimates of the managements of Greystone and Lennar. All
multiples were based on closing stock prices as of June 6, 1997. With respect to
the Selected Companies analyzed, Smith Barney focused primarily on the Small
Regional Companies in the case of Greystone and the Large Regional Companies in
the case of Lennar, which companies Smith Barney considered to be most similar
to Greystone and Lennar, respectively. Applying a range of selected multiples
for the Small Regional Companies of estimated calendar 1997 and estimated
calendar 1998 net income, book value and latest 12 months EBITDA of 6.6x to
8.0x, 6.0x to 7.3x, 0.9x to 1.1x and 5.6x to 6.8x, respectively, to
corresponding financial data for Greystone resulted in an equity reference range
for Greystone of approximately $11.92 to $15.06 per share. Applying a range of
selected multiples for the Large Regional Companies of estimated calendar 1997
and estimated calendar 1998 net income, book value and latest 12 months EBITDA
of 8.8x to 10.7x, 7.6x to 9.3x, 1.7x to 2.0x and 6.7x to 8.2x, respectively, to
corresponding financial data for Lennar after giving effect to the pro forma
number of shares to be received by Lennar stockholders in the Merger (before
adjustment for the Stock Dividend) resulted in equity reference ranges for
Lennar of approximately $14.39 to $17.39 per share (after applying book value
multiples) and approximately $15.75 to $19.72 per share (before applying book
value multiples). The average multiples of estimated calendar 1997 and 1998 net
income, book value and EBITDA for the Selected Companies were 10.9x, 10.2x, 1.1x
and 8.3x, respectively (for the Large National Companies), 10.3x, 8.7x, 1.1x and
8.6x, respectively (for the Small National Companies), 9.7x, 8.4x, 1.8x and
7.5x, respectively (for the Large Regional Companies) and 7.3x, 6.7x, 1.0x and
6.2x, respectively (for the Small Regional Companies), as compared to
corresponding multiples for Greystone of 9.0x, 7.4x, 1.6x and 7.4x, respectively
(based on estimates of selected investment banking firms) and 8.1x, 6.9x, 1.6x
and 6.6x, respectively (based on internal estimates of the management of
Greystone), and as compared to corresponding multiples for Lennar of 9.3x, 8.4x,
1.3x and 7.1x, respectively. Based on internal estimates of the managements of
Greystone and Lennar as to the estimated calendar 1997 net income of the
Surviving Corporation and estimates of the management of Greystone as to certain
cost savings and other potential synergies anticipated by the management of
Greystone to result from the Merger and applying Lennar's estimated calendar
1997 net income multiple of 9.3x to corresponding financial data for the
Surviving Corporation resulted in an implied equity value for the Surviving
Corporation of approximately $17.39 per share (before adjustment for the Stock
Dividend). Based on such estimates and applying the range of estimated calendar
1997 net income multiples of the Large National Companies of 10.0x to 11.9x to
corresponding financial data for the Surviving Corporation resulted in an
implied equity reference range for the Surviving Corporation of approximately
$18.70 to $22.25 per share (before adjustment for the Stock Dividend). For
post-Stock Dividend information, see the last paragraph of "Recommendations of
the Boards of Directors and Reasons for the Merger -- Greystone."
Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney reviewed the purchase prices and implied
transaction multiples paid or proposed to be paid in 22 selected transactions in
the home building industry, consisting of (acquiror/target): Crossman
Communities, Inc./Don Galloway Homes, Inc.; The Fortress Group, Inc./Wilshire
Homes, Inc.; The Fortress Group, Inc./ D.W. Hudson Construction Company; D.R.
Horton, Inc./Torrey Homes, Inc.; D.R. Horton, Inc./SGS Communities, Inc.; D.R.
Horton, Inc./Trimark Communities LLC; Beazer Homes USA, Inc./Trendmaker, Inc.;
Continental Homes Holding Corp./Westchester Modular Homes; Kaufman and Broad
Home Corporation/ Rayco Ltd.; Beazer Homes USA, Inc./Del Mar Custom Homes
Development Inc.; M.D.C. Holdings, Inc./ Kemper Builders Inc.; D.R. Horton,
Inc./Regency Development, Inc.; D.R. Horton, Inc./Arappco Homes;
28
39
Beazer Homes USA, Inc./Bramalea Homes Texas, Inc.; Continental Homes Holding
Corp./Hefter Realty; Eagle Homes Inc./Park Homes West Inc.; Washington Homes
Inc./Westminster Homes, Inc.; Continental Homes Holding Corp./Aspen Homes; D.R.
Horton, Inc./Joseph M. Miller Construction and Argus Development; Continental
Homes Holding Corp./Milburn Investments Inc.; Beazer Homes USA, Inc./Watt
Housing Corporation; and Capital Pacific Homes/JM Peters of Arizona Inc.
(collectively, the "Selected Transactions"). Smith Barney compared transaction
values in the Selected Transactions as a multiple of, among other things, book
value. Applying a range of selected multiples (excluding outliers) for the
Selected Transactions of latest 12 months book value of 1.5x to 2.0x to
corresponding financial data for Greystone resulted in an equity reference range
for Greystone of approximately $15.51 to $20.68 per share.
No company, transaction or business used in the "Selected Company Analysis"
or "Selected Merger and Acquisition Transactions Analysis" as a comparison is
identical to Greystone, Lennar or the Merger. Accordingly, an analysis of the
results of the foregoing is not entirely mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the Selected Companies, the Selected
Transactions or the business segment, company or transaction to which they are
being compared.
Contribution Analysis. Smith Barney analyzed the respective contributions
of Greystone and Lennar to, among other things, the estimated revenue, EBITDA,
net income and book value of the Surviving Corporation for fiscal years 1997 and
1998, based on internal estimates of the managements of Greystone and Lennar,
both before and after giving effect to certain cost savings and other potential
synergies anticipated by the management of Greystone to result from the Merger.
This analysis indicated that (i) before giving effect to certain cost savings
and other potential synergies anticipated by the management of Greystone to
result from the Merger, in fiscal year 1997, Greystone would contribute
approximately 36.1% of revenue, 35.3% of EBITDA, 35.9% of net income and 45.8%
of book value, and Lennar would contribute approximately 63.9% of revenue, 64.7%
of EBITDA, 64.1% of net income and 54.2% of book value, of the Surviving
Corporation and, in fiscal year 1998, Greystone would contribute approximately
34.0% of revenue, 34.4% of EBITDA and 35.4% of net income, and Lennar would
contribute approximately 66.0% of revenue, 65.6% of EBITDA and 64.6% of net
income, of the Surviving Corporation and (ii) after giving effect to certain
cost savings and other potential synergies anticipated by the management of
Greystone to result from the Merger, in fiscal year 1997, Greystone would
contribute approximately 36.1% of revenue, 33.2% of EBITDA, 32.8% of net income
and 45.8% of book value, and Lennar would contribute approximately 63.9% of
revenue, 66.8% of EBITDA, 67.2% of net income and 54.2% of book value, of the
Surviving Corporation and, in fiscal year 1998, Greystone would contribute
approximately 34.0% of revenue, 32.6% of EBITDA and 32.9% of net income, and
Lennar would contribute approximately 66.0% of revenue, 67.4% of EBITDA and
67.1% of net income, of the Surviving Corporation. Smith Barney also analyzed
the relative equity value contributions of Greystone and Lennar to the Surviving
Corporation based on, among other things, closing stock prices for Greystone
Common Stock over specified periods and the estimated calendar 1997 and 1998 net
income and estimated trading multiples of Lennar, which indicated average
percentage equity value contributions of Greystone and Lennar of approximately
30% and 70%, respectively. Based on the Exchange Ratio, current stockholders of
Greystone and Lennar would own approximately 32.0% and 68.0%, respectively, of
the equity value of the Surviving Corporation upon consummation of the Merger
and Greystone and Lennar would constitute approximately 34.3% and 65.7%,
respectively, of the enterprise value of the Surviving Corporation. While such
analyses indicate that Greystone's contribution to certain operational measures
of the Surviving Corporation generally exceeds the equity ownership of
Greystone's stockholders in the Surviving Corporation, the percentage which
Greystone will constitute of the enterprise value of the Surviving Corporation
roughly equates or, in certain instances, exceeds Greystone's contributions to
such enterprise value. Such analyses also indicate that the equity ownership of
Greystone's stockholders in the Surviving Corporation exceeds the relative
equity value contribution of Greystone to the Surviving Corporation based on
closing stock prices for Greystone Common Stock over specified periods and the
estimated calendar 1997 and 1998 net income and estimated trading multiples of
Lennar.
Pro Forma Merger Analysis. Smith Barney analyzed certain pro forma effects
resulting from the Merger, including, among other things, the impact of the
Merger on the Surviving Corporation's projected
29
40
earnings per share ("EPS") for fiscal years 1997 and 1998 relative to
Greystone's EPS on a stand-alone basis, based both on estimates of selected
investment banking firms with respect to Greystone and internal estimates of the
management of Greystone. The results of the pro forma merger analysis suggested
that the Merger could be dilutive to Greystone's EPS in fiscal years 1997 and
1998 based on internal estimates of the management of Greystone by approximately
(16.8)% to (6.6)% in fiscal year 1997 and approximately (14.6)% to (5.8)% in
fiscal year 1998 assuming in each case $0 to approximately $16.6 million of cost
savings and other potential synergies anticipated by the management of Greystone
to result from the Merger were achieved, dilutive to Greystone's EPS based on
estimates of selected investment banking firms by approximately (8.3)% to (1.7)%
in fiscal year 1997 and by approximately (8.9)% to (1.5)% in fiscal year 1998,
assuming $0 to $9.7 million and $0 to $13.1 million, respectively, of annual
cost savings and other potential synergies were achieved, and accretive to
Greystone's EPS in fiscal years 1997 and 1998 based on estimates of selected
investment banking firms by approximately 0.6% and 3.0% in fiscal year 1997,
assuming approximately $13.1 million and $16.6 million, respectively, of annual
cost savings and other potential synergies were achieved, and by approximately
0.5% in fiscal year 1998, assuming approximately $16.6 million of such annual
cost savings and other potential synergies were achieved. The actual results
achieved by the Surviving Corporation may vary from projected results and the
variations may be material.
Discounted Cash Flow Analysis. Smith Barney did not perform a discounted
cash flow analysis for purposes of its opinion. The effectiveness of a
discounted cash flow analysis is dependent on, among other things, the
reliability of estimated cash flows and terminal value. The cyclicality of the
homebuilding industry undermines the emphasis placed by a discounted cash flow
on the terminal value as well as the interim cash flows. Consequently, Smith
Barney considered a discounted cash flow analysis to be a less reliable
valuation methodology for purposes of its analyses.
Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) indications of interest
received from, and discussions with, third parties other than Lennar; (ii)
historical and projected financial results of Greystone and Lennar; (iii) the
history of trading prices and volume for Greystone Common Stock; (iv) selected
published analysts' reports on Greystone and Lennar; and (v) the pro forma
ownership of the Surviving Corporation.
Pursuant to the terms of Smith Barney's engagement, Greystone has agreed to
pay Smith Barney for its services in connection with the Merger an aggregate
financial advisory fee of approximately $1.75 million. Greystone has also agreed
to reimburse Smith Barney for reasonable travel and other out-of-pocket expenses
incurred by Smith Barney in performing its services, including the fees and
expenses of its legal counsel, and to indemnify Smith Barney and related persons
against certain liabilities, including liabilities under the federal securities
laws, arising out of Smith Barney's engagement.
Smith Barney has advised Greystone that, in the ordinary course of
business, Smith Barney and its affiliates may actively trade or hold the
securities of Greystone and Lennar for their own account or for the account of
customers and, accordingly, may at any time hold a long or short position in
such securities. Smith Barney has in the past provided investment banking and
financial advisory services to Greystone unrelated to the proposed Merger,
including acting as lead underwriter for Greystone's initial public offering,
for which services Smith Barney has received compensation. In addition, Smith
Barney and its affiliates (including Travelers Group Inc. and its affiliates)
may maintain relationships with Greystone and Lennar and their respective
affiliates.
Smith Barney is an internationally recognized investment banking firm and
was selected by Greystone based on its experience, expertise and familiarity
with Greystone and its business. Smith Barney regularly engages in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes.
30
41
THE MERGER
GENERAL
The following summary of the material terms of the Merger Agreement does
not purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, which is attached as Annex I to this Joint Proxy
Statement/Prospectus.
EFFECTIVE TIME AND EFFECT OF THE MERGER
If the Merger is approved by the stockholders of Lennar and Greystone and
all other conditions to the obligations of the parties to consummate the Merger
are satisfied or waived, the Merger will become effective at 11:59 p.m. on the
day that the Certificate of Merger is filed with the Secretary of State of
Delaware (the "Effective Time"). The Effective Time is expected to occur on the
business day after the day on which all the conditions to the obligations of the
parties are fulfilled, but may be deferred until the last day of the month in
which all the conditions are fulfilled. The Effective Time is expected to occur
in the fourth calendar quarter of 1997. At the Effective Time, Lennar will be
merged into Greystone and the separate corporate existence of Lennar will
terminate, each then outstanding share of Lennar Common Stock will be converted
automatically into one share of Surviving Corporation Common Stock and each then
outstanding share of Lennar Class B Stock will be converted automatically into
one share of Surviving Corporation Class B Stock. Each share of Greystone Common
Stock (including Greystone Common Stock issued in the Stock Dividend) will, at
and after the Effective Time, continue to be one share of Surviving Corporation
Common Stock.
As a result of the Merger, the name of the Surviving Corporation will be
changed to "Lennar Corporation," the Certificate of Incorporation and Bylaws of
the Surviving Corporation will be changed to be essentially the same as the
pre-Merger certificate of incorporation and Bylaws of Lennar (except as
described under "Comparative Rights of Stockholders"), pre-Merger directors of
Lennar will occupy six of the eight places on the Surviving Corporation's Board
of Directors, the pre-Merger executive officers of Lennar will become the
executive officers of the Surviving Corporation and Lennar's current principal
executive offices will become the principal executive offices of the Surviving
Corporation. For accounting and consolidated tax purposes, the Merger will be
treated as an acquisition of Greystone by Lennar.
At the Effective Time, a certificate which represented Lennar Common Stock
or Lennar Class B Stock will automatically become a certificate representing the
number of shares of Surviving Corporation Common Stock or Surviving Corporation
Class B Stock into which the Lennar Common Stock or Lennar Class B Stock
represented by the certificate was converted.
After the Effective Time, a certificate which represented a share of
Greystone Common Stock before the Merger will represent a share of Surviving
Corporation Common Stock. However, because the name of the Surviving Corporation
will be "Lennar Corporation," promptly after the Effective Time, the Surviving
Corporation will send the persons or entities who held Greystone Common Stock
immediately before the Merger materials with which they can exchange their stock
certificates for stock certificates which state they represent shares of Lennar
Corporation common stock.
GREYSTONE STOCK DIVIDEND
Prior to the Effective Time, Greystone intends to pay the Stock Dividend of
.138 of a share of Greystone Common Stock per share of Greystone Common Stock to
the holders of record of Greystone Common Stock on a record date prior to the
Effective Time. Because of this Stock Dividend, the number of shares of
Surviving Corporation Common Stock held by former Greystone Stockholders
immediately after the Merger will be 1.138 times the number of shares which are
outstanding as of the record date of the Stock Dividend. If the Merger is not
consummated, Greystone does not intend to pay the Stock Dividend.
31
42
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of each of Lennar and Greystone to consummate the Merger
are subject to (a) obtaining the requisite approvals of the Merger Agreement and
the Merger from the respective stockholders of Lennar and Greystone, (b) the
expiration or termination of the waiting period under the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), if applicable,
(c) the absence of any judicial or governmental order which invalidates the
Merger Agreement or the Spin-Off or restrains Lennar, Greystone or LNR from
completing those transactions, and the absence of any action against Lennar or
Greystone which presents a reasonable likelihood of resulting in an award of
damages against the Surviving Corporation which would be material to the
Surviving Corporation, (d) the completion of the Spin-Off, (e) the receipt of
certain third party consents, (f) all representations and warranties of the
other party being true and correct in all material respects on the closing date
of the Merger and the delivery of officers' certificates to that effect and (g)
the receipt of opinions of special tax counsel to Lennar and Greystone to the
effect that the Merger constitutes a reorganization within the meaning of
Section 368(a)(1)(A) of the Code and will not result in gain or loss to their
respective stockholders.
Additional conditions to Lennar's obligation to consummate the Merger
include (a) receipt of the Tax Ruling, which Lennar received on August 20, 1997,
and (b) Greystone's having fulfilled in all material respects, all its
obligations under the Merger Agreement required to have been fulfilled prior to
the Effective Time.
Additional conditions to Greystone's obligations to consummate the Merger
include (a) Lennar's having fulfilled, in all material respects, all its
obligations under the Merger Agreement required to have been fulfilled prior to
the Effective Time, (b) the Surviving Corporation and Warburg having entered
into a Registration Rights Agreement substantially in the form contemplated by
the Merger Agreement and as described under "-- Registration Rights," (c)
receipt of a certificate, dated the date of the consummation of the Merger, of
Lennar's principal accounting officer to the effect that, based on the most
recent available monthly consolidated financial statements of Lennar and its
subsidiaries and all information of which such officer is aware concerning
Lennar's activities and results of operations since the date of those financial
statements, the stockholders equity of Lennar and its subsidiaries is at least
equal to the Minimum Lennar Net Worth, (d) the execution of agreements with
respect to the financing of the Surviving Corporation and the Land Partnership
and the absence of conditions to the availability of such financing, (e)
Lennar's receipt of good and valid title to a 50% general partner's interest in
the Land Partnership, (f) confirmation that the indebtedness of LNR or its
subsidiaries for which the Surviving Corporation will be primarily or
contingently liable after the Spin-Off will not exceed $50 million, (g)
Greystone's being reasonably satisfied with the documents reflecting, and the
terms of, the transfer of assets from Lennar to the Land Partnership, (h)
confirmation that 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 liability
resulting from Lennar's status as a general partner of the Land Partnership),
and (i) if the Spin-Off has occurred but the Tax Ruling has not been obtained,
Greystone's having received the opinion of Rogers & Wells to the effect that the
Distribution qualified as a distribution within the meaning of Section 355(a) of
the Code and no gain or loss will be recognized by Lennar as a result of the
Distribution.
Neither party is obligated to consummate the Merger if any condition to its
obligation is not satisfied or waived on or prior to the date of the Merger. Any
of the conditions to the obligations of Lennar or Greystone to consummate the
Merger may be waived. Neither Lennar nor Greystone has any present intention to
waive or modify any such condition that it deems material.
LENNAR NET WORTH
Lennar has agreed that at the Effective Time of the Merger, it will have an
Effective Time Net Worth, after giving effect to the Spin-Off but without giving
effect to the Merger, of (i) $200 million, plus (ii) if the Effective Time is
after August 31, 1997, a sum per day from September 1, 1997 to the Effective
Time intended to approximate the earnings of Lennar's homebuilding business
during that period (although actual results could be materially greater or less
than that sum). The Merger Agreement requires Lennar to cause its
32
43
balance sheet as of the Effective Time to be audited by Deloitte & Touche LLP
(Lennar's independent auditors). Ernst & Young LLP (Greystone's independent
auditors) will review all material aspects of the audit performed by Deloitte &
Touche LLP. The Merger Agreement includes procedures for resolving any disputes
regarding Lennar's Effective Time Net Worth that may arise.
In the principal agreement regarding the Spin-Off, Lennar and LNR have
agreed that after Lennar's Effective Time Net Worth is determined, LNR will pay
to Lennar, or Lennar will pay to LNR, any amount by which Lennar's Effective
Time Net Worth is less or greater than $200 million plus the specified sum per
day from September 1, 1997 to the Effective Time. See "Relationships Between
Lennar and LNR -- The Spin-Off; The Separation and Distribution Agreement." The
Merger Agreement requires the Surviving Corporation to enforce this agreement.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, Lennar and Greystone have made various
representations, warranties, covenants and agreements, relating to, among other
things, their respective businesses and financial condition, the number of
authorized shares of their capital stock, the accuracy of their various filings
with the Commission and the IRS, the satisfaction of certain legal requirements
for the Merger and the absence of certain material litigation. The
representations and warranties of each of the parties to the Merger Agreement
will expire at the Effective Time.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
The Merger Agreement provides that, prior to the Effective Time, each of
Lennar and Greystone will operate its business in the ordinary course and in a
manner consistent with past practice and generally provides for certain
restrictions with respect to each of them on, among other things, the issuance
or other disposition, encumbrance, purchase or repurchase of any shares of its
capital stock; the purchase, acquisition, sale, disposition, pledge, mortgage,
or other encumbrance of its property or assets; the declaration or payment of
dividends or the making of any other distributions or repayments of debt to its
Stockholders; the taking knowingly of any action that would prevent the Merger
from qualifying as a "reorganization" within the meaning of 368(a) of the Code
or that would prevent the Spin-Off from qualifying as a tax-free distribution
under Section 355 of the Code; the amendment of the charters or bylaws of it or
its subsidiaries; the incurrence of certain indebtedness; the making of certain
capital expenditures; the making of certain loans or advances to, or entering
into any material agreements or arrangements with its Stockholders, directors,
officers, or employees; the granting of certain employee benefits or the
adoption or amendment of employee benefit plans; the hiring of certain executive
and management employees or certain actions relating to the entering into,
amendment in any material respect of, or termination or waiver of any material
right under, certain contracts or arrangements material to it.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the Surviving Corporation will honor and
maintain all indemnification, contribution or similar rights with respect to
matters occurring on or prior to the Effective Time covering individuals who
were directors, officers or employees of Greystone or any of its subsidiaries at
or prior to the Effective Time. The Surviving Corporation has agreed to maintain
in effect for not less than six years after the Effective Time, Greystone's
policies of directors' and officers' liability insurance in effect on the date
of the Merger Agreement, and from and after the Effective Time to continue to
include as insureds the current and former officers, directors and employees of
Greystone who were covered by those policies on the date of the Merger
Agreement, with respect to all matters occurring on or prior to the Effective
Time. The Surviving Corporation will also maintain in effect for at least three
years after the Effective Time, directors' and officers' liability insurance
with respect to matters occurring after the Effective Time. In addition, the
Surviving Corporation will indemnify each present and former director and
officer of Lennar and Greystone against costs and expenses incurred in
connection with claims, proceedings and investigations arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time,
and 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.
33
44
EXCLUSIVITY
Each of Lennar and Greystone has agreed 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 or similar transaction
involving it or any purchase of, or tender offer for, all or any significant
portion of its equity securities or assets (an "Acquisition Proposal"). However,
Greystone may, in response to an Acquisition Proposal which Greystone's Board of
Directors determines, in good faith and after consultation with its independent
financial adviser, would result in a transaction (an "Acquisition Transaction")
which (i) would result in the Greystone 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 Stockholders
than the Merger, furnish confidential or non-public information to the potential
acquiror and enter into discussions and negotiations with the potential
acquiror.
Greystone has the right to terminate the Merger Agreement if Greystone
receives a Superior Proposal on or before August 9, 1997, its Board of Directors
resolves to accept the Superior Proposal and gives Lennar at least 10 days'
prior notice of Greystone's intention to terminate the Merger Agreement (which
notice may not be revoked without Lennar's consent), and Greystone has paid
Lennar $7.5 million. A "Superior Proposal" is an Acquisition Proposal which (i)
would result in Greystone's receiving consideration with a fair value determined
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 Stockholders than the Merger.
Greystone may also terminate the Merger Agreement if (i) 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, (ii) Greystone's Board of Directors
determines in good faith, and after consultation with an independent financial
adviser, that offer constitutes a Superior Proposal and resolves to accept the
Superior Proposal or recommend to Greystone Stockholders that they tender their
shares in response to the tender or exchange offer, or (iii) Greystone gives
Lennar ten business days' prior notice of its intention to terminate the Merger
Agreement (which notice may not be revoked without Lennar's consent) and
Greystone has paid Lennar $7.5 million.
AMENDMENT, TERMINATION AND WAIVER
The Merger Agreement may be amended at any time, whether prior to or after
approval by the stockholders of Lennar and Greystone, provided that after the
Merger Agreement has been approved and adopted by the stockholders, it may be
amended only as permitted by applicable law. Under certain conditions, the
Merger Agreement may be terminated prior to the Effective Time, whether prior to
or after approval by the Lennar or Greystone Stockholders. The conditions under
which the Merger Agreement may be terminated include termination by mutual
consent of Lennar and Greystone; termination by either party if the Merger has
not occurred by December 31, 1997 provided that the terminating party has not
failed to fulfill any obligation under the Merger Agreement which has caused the
failure of the Effective Time to occur on or before that date; termination by
Lennar or Greystone in the event of either (i) a breach by the other party of a
representation or warranty contained in the Merger Agreement, which breach
cannot be or has not been cured within 30 days, other than breaches that, in the
aggregate, would not reasonably be expected to have a material adverse effect on
Greystone or Lennar, (ii) a material breach by the other party of any of the
covenants or agreements contained in the Merger Agreement, which breach cannot
be or has not been cured within 30 days after notice and (iii) termination by
Greystone because of a Superior Proposal, as discussed above.
Lennar has agreed to pay Greystone $5 million if the Tax Ruling has not
been obtained by December 31, 1997 and Lennar or Greystone terminates the Merger
Agreement at a time when, with certain exceptions, the other conditions to the
Lennar's obligations to consummate the Merger have been fulfilled.
STOCK OPTIONS, COMPENSATION AND BENEFITS
Lennar Options and Greystone Options outstanding as of the Effective Time
will become options to purchase shares of Surviving Corporation Common Stock.
Because of the Spin-Off, some Lennar Options which were outstanding at the time
of the Spin-Off will entitle the holders to receive upon exercise, in addition
34
45
to shares of Surviving Corporation Common Stock, the shares of LNR common stock
the option holders would have received if they had exercised their options
immediately before the record date for the Spin-Off. LNR has agreed to provide
those shares to Lennar (and, therefore, to the Surviving Corporation) without
cost.
In order to take account of the Stock Dividend, when the Stock Dividend is
paid, each Greystone Option will entitle the holder to purchase 1.138 times the
number of shares to which it related prior to the Stock Dividend for a pre-share
exercise price of the stock option prior to the Stock Dividend divided by 1.138.
Also, as a result of the Merger, all Greystone Options which are outstanding at
the Effective Time will become fully exercisable at the Effective Time.
At June 30, 1997, the aggregate number of shares of Greystone Common Stock
subject to outstanding Greystone Options was 675,810, at exercise prices of
$1.83 per share (in the case of options of one director to purchase 14,282
shares granted prior to Greystone's initial public offering) and exercise prices
ranging from $13.00 to $16.38 per share otherwise, and of which Greystone
Options to purchase 394,277 shares were then exercisable. At June 30, 1997, the
aggregate number of shares of Lennar Common Stock subject to outstanding Lennar
Options was 1,287,900, at exercise prices which ranged from $6.54 to $27.00 per
share, and of which Lennar Options to purchase 239,212 shares were then
exercisable.
Pursuant to the Merger Agreement, from the Effective Time and through
December 31, 1997, the Surviving Corporation will provide for all Greystone
employees incentive compensation, base compensation and benefits which in the
aggregate are no less favorable than that provided by Greystone to its employees
immediately prior to the Effective Time. Also, Lennar stated in the Merger
Agreement that it was its current intention, although not a legal obligation, to
provide during the year ended December 31, 1998, incentive compensation,
benefits and base compensation to Greystone employees which, in aggregate, is at
least equal to that in the year ending December 31, 1997. Greystone employees
will receive full credit for all service with Greystone for purposes of all
compensation and benefit plans and policies, except to the extent that treatment
would result in duplication of benefits.
VOTING AGREEMENTS
Warburg Agreement. As an inducement to Lennar to enter into the Merger
Agreement, Warburg, Greystone and Lennar entered into an agreement (the "Warburg
Agreement") in which Warburg agreed, subject to the terms and conditions
thereof, to vote at least 50% of the outstanding Greystone Common Stock (i) in
favor of the Merger, the adoption by Greystone of the Merger Agreement, other
matters relating to the approval of the terms of the Merger Agreement and each
of the other transactions contemplated by the Merger Agreement; and (ii) against
any acquisitions or mergers involving Greystone or its shares, assets or
subsidiaries, or any change in Greystone's directors or capitalization if they
would in any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger Agreement
or would reasonably be likely to result in any of the conditions to Greystone's
obligations under the Merger Agreement not being fulfilled.
In addition, in the Warburg Agreement, Warburg agreed:
- Not to dispose of Greystone Common Stock prior to the Effective Time
unless the transferee agrees to be bound by the Warburg Agreement.
- Not to enter into any voting arrangement prior to the Effective Time,
other than for the purpose of voting its Greystone Common Stock as
required by the Warburg Agreement.
- If the Merger Agreement is terminated because of a Superior Proposal and
if that Superior Proposal or any other Superior Proposal is consummated
within one year, Warburg will pay Lennar any consideration Warburg
receives in such Superior Proposal in excess of $17.50 per share of
Greystone Common Stock, minus any taxes and any payments Warburg is
required to make under Section 16(b) of the Exchange Act.
- If the Merger occurs, not to sell or otherwise dispose of any Surviving
Corporation Common Stock it receives as a result of the Merger until six
months after the Effective Time.
35
46
The provisions of the Warburg Agreement described above (other than in the
last paragraph) will be terminated at the earliest of (i) 10 days after the
Final Date (as defined in the Warburg Agreement), (ii) the time when the Merger
Agreement is terminated in connection with a Superior Proposal, subject to
compliance with the conditions discussed above, or (iii) the Effective Time. In
addition, such covenants and agreements of the Warburg Agreement will end in the
event that at any time the Miller Agreement is not enforceable against the
Miller Entities or their successors or if the vote or consent of any holder of
securities of Lennar other than the parties to the Miller Agreement is required
to approve and adopt the Merger Agreement or to effect the transactions
contemplated by the Merger Agreement or the Spin-Off.
In the Warburg Agreement, Lennar agreed:
- While Warburg and its affiliates own at least 5% of the Surviving
Corporation Common Stock outstanding immediately following the Merger,
adjusted for stock splits, stock dividends and similar recapitalizations,
but not including stock otherwise issued after the Merger ("Adjusted
Outstanding Stock"), the Surviving Corporation's Board of Directors will
consist of not more than nine members, at least five of whom will not be
officers or employees of the Surviving Corporation or its subsidiaries or
officers, employees or directors of LNR or its subsidiaries.
- While Warburg and its affiliates beneficially own 10% or more of the
Adjusted Outstanding Stock, Warburg may nominate two nominees for the
Surviving Corporation Board, and the Surviving Corporation will recommend
that its stockholders vote for those nominees.
- While Warburg and its affiliates beneficially own between 5% and 10% of
the Adjusted Outstanding Stock, Warburg may nominate one nominee for the
Surviving Corporation Board, and the Surviving Corporation will recommend
that its stockholders vote for those nominees.
- While Warburg and its affiliates beneficially own 5% or more of the
Adjusted Outstanding Stock, at Warburg's request one of its nominees will
be made a member of the Independent Directors Committee established
pursuant to the Bylaws and each other committee of the Surviving
Corporation's Board, except the Executive Committee.
- While Warburg and its affiliates beneficially own 5% or more of the
Adjusted Outstanding Stock, the Surviving Corporation will not, and will
not permit any of its subsidiaries to, without Warburg's consent, (i)
issue shares of Surviving Corporation Common Stock (or convertible or
exchangeable securities) representing 20% of the Adjusted Outstanding
Stock in any three year period following the Effective Time, or (ii)
acquire in any transaction or series of related transactions assets or
properties with an aggregate fair market value of more than $100 million
(other than in the ordinary course of business consistent with past
practices in states in which the Surviving Corporation operates at the
Effective Time).
Miller Agreement. As an inducement to Greystone to enter into the Merger
Agreement and an inducement to Warburg to enter into the Warburg Agreement,
Leonard Miller and his family partnerships agreed in a voting agreement (the
"Miller Agreement") to vote all the Lennar Class B Stock they own (the "Miller
Shares") (i) in favor of the Merger, the adoption by Lennar of the Merger
Agreement, other matters relating to the approval of the terms of the Merger
Agreement and each of the other transactions contemplated by the Merger
Agreement; and (ii) against any acquisition or merger involving Lennar or its
shares, assets or subsidiaries, and certain other actions, if they would impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement or would reasonably be
likely to result in any of the conditions to Lennar's obligations under the
Merger Agreement not being fulfilled. The Miller Shares include 99.6% of the
outstanding Lennar Class B Stock, and are entitled to 79% of the votes which may
be cast with regard to the Merger.
36
47
In addition, in the Miller Agreement, Leonard Miller and the partnerships
agreed:
- Not to enter into any voting arrangement prior to the Effective Time,
other than for the purpose of voting the Miller Shares as required by the
Miller Agreement.
- For as long as Warburg is entitled to nominate persons to serve as
directors of the Surviving Corporation, to vote all equity securities of
the Surviving Corporation owned by them in favor of the election of the
Warburg nominees, and against their removal from the Surviving
Corporation Board.
- To vote all equity securities of the Surviving Corporation owned by them,
and take any other necessary actions, to insure that for as long as
Warburg owns 5% or more of the Adjusted Outstanding Stock the Surviving
Corporation's Board of Directors will consist of no more than nine
persons, at least of five of whom will not be officers or employees of
the Surviving Corporation or directors, officers or employees of LNR.
- To vote all their shares of Surviving Corporation Common Stock or Class B
Common Stock in favor of an amendment (the "Amendment") to the Surviving
Corporation's Certificate of Incorporation providing that any merger,
consolidation or other business combination in which the consideration
received by a holder of Surviving Corporation Class B Common Stock is
different from the type or amount of consideration received by a holder
of a share of Surviving Corporation Common Stock (a "Special Matter"),
must be approved by the affirmative vote of holders of at least a
majority of the outstanding shares of Surviving Corporation Common Stock,
as well as by the vote otherwise required by the Surviving Corporation's
Certificate of Incorporation or Bylaws or applicable rules of a
securities exchange. As discussed under " -- Litigation" below, Warburg
has agreed that, if the Settlement (as defined below) is approved and if
the Amendment is adopted at the 1998 annual meeting, in the event that
any vote or consent with respect to a Special Matter is submitted to
stockholders of the Surviving Corporation during the three-year period
after the Effective Time, Warburg will vote any shares of Surviving
Corporation Common Stock which it continues to hold on a pro rata basis
with the other holders of Surviving Corporation Common Stock.
- Until November 30, 1999, they will not dispose of stock of the Surviving
Corporation which they receive as a result of the Merger unless (i) the
transferee agrees to be bound by the Miller Agreement or (ii) after the
sale, Leonard Miller and the partnerships will hold in aggregate shares
representing more than 50% of the vote in an election of directors of the
Surviving Corporation. Such holders also agreed that prior to the first
to occur of the second anniversary of the Merger or the effectiveness of
the Amendment, none of such holders will vote any equity securities of
the Surviving Corporation owned by them in favor of any merger,
consolidation or other business combination that, if the Amendment were
effective, would require the affirmative vote of the holders of at least
a majority of the issued and outstanding shares of Surviving Corporation
Common Stock voting as a single class. The Surviving Corporation expects
to submit the Amendment to stockholders for approval at the 1998 Annual
Meeting.
REGISTRATION RIGHTS
In connection with the Merger, the Surviving Corporation will enter into a
Registration Rights Agreement in which the Surviving Corporation agrees, among
other things, to (i) at the request of holders of at least 50% of the shares
issued to Warburg and executives of Greystone in the Merger ("Requesting
Holders"), file a shelf registration statement under the Securities Act and keep
it effective for at least two years, (ii) at the request of Requesting Holders
file additional registration statements covering the Surviving Corporation
Common Stock held by Warburg or such executives of Greystone on not more than
three occasions during the ten years following the Merger and (iii) at the
request of Requesting Holders, include the Requesting Holders' Surviving
Corporation Common Stock in any other registration statements filed by the
Surviving Corporation during the ten years after the Merger (other than
registration statements relating to business combinations or employee benefit
plans), unless the managing underwriter of the offering to which a registration
statement relates delivers a written opinion to the Surviving Corporation to the
effect that inclusion of those shares in the registration statement would
adversely affect the success of the offering.
37
48
LITIGATION
On June 16, 1997, a stockholder of Greystone filed suit in the Court of
Chancery of the State of Delaware, New Castle County, against Greystone, its
directors, Warburg and Lennar, alleging that the individual defendants and
Warburg, among other things, "breached their fiduciary duties by undertaking the
sale of [Greystone] without giving adequate consideration to all feasible and
value-maximizing strategic alternatives." The suit alleged that Lennar knowingly
aided and abetted the alleged breaches of fiduciary duties and that "the
proposed transaction between [Greystone] and Lennar could not take place without
the knowing participation of Lennar." On August 26, 1997, another Greystone
Stockholder filed a separate lawsuit in the same court, based on substantially
similar allegations and naming the same parties, except Lennar, as defendants.
The plaintiffs in both actions seek an order permitting the action to be
maintained as a class action, preliminarily and permanently enjoining the
defendants from proceeding with or closing the Merger, rescinding the Merger if
it is consummated, directing the defendants to account to the plaintiff for all
damages, profits and special benefits obtained from their alleged unlawful
conduct, and awarding the plaintiff costs for maintaining the action (including
reasonable attorneys' fees) and such other relief as the court deems just and
proper.
On July 30, 1997, the plaintiff in the first stockholder lawsuit filed with
the court a notice dismissing that lawsuit as to Lennar only. On September 23,
1997, the remaining parties to the two lawsuits entered into a memorandum of
understanding memorializing an agreement in principle for the settlement of the
lawsuits (the "Settlement"), subject to certain conditions, including the
preparation and execution of definitive documentation necessary for the
Settlement, and the approval of the Settlement by the Delaware Chancery Court
following a hearing that will be held upon appropriate notice to Greystone
Stockholders who are members of the putative class on whose behalf the lawsuits
were brought. As part of the Settlement, Warburg agreed to the limitation on its
vote, described under "-- Voting Agreements" above, if the stockholders of the
Surviving Corporation approve the Amendment expected to be submitted at the 1998
Annual Meeting, and certain revisions were made in this Joint Proxy
Statement/Prospectus after consideration of comments received by counsel for
plaintiffs in the lawsuits.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Greystone Board and the Lennar
Board with respect to the Merger, stockholders should be aware that certain
directors and officers of Greystone and Lennar have interests in the Merger
different from the interests of the other stockholders.
Prior to the execution and delivery of the Merger Agreement, Greystone and
each of Jack R. Harter, Chairman, President and Chief Executive Officer of
Greystone, and Antonio B. Mon, Vice Chairman and Chief Financial Officer of
Greystone agreed that, effective as of the Effective Time, the preexisting
employment agreements dated as of January 1, 1996 of each of Mr. Harter and Mr.
Mon (the "Prior Agreements") would be terminated and, in lieu thereof, each of
Mr. Harter and Mr. Mon and Greystone Homes, Inc., a wholly owned subsidiary of
Greystone, would enter into new employment agreements (the "Employment
Agreements"). Pursuant to the foregoing, immediately prior to the Effective
Time, Mr. Harter and Mr. Mon would receive payments from Greystone of $1,750,000
and $1,200,000, respectively. In addition, each of Mr. Harter and Mr. Mon would
be entitled to base compensation ($45,833 per month and $41,667 per month,
respectively) through December 31, 1997 and to a 1997 annual incentive
compensation bonus ($825,000 and $750,000, respectively) to be paid no later
than February 15, 1998.
Pursuant to the Employment Agreements with Greystone Homes, Inc., each of
Mr. Harter and Mr. Mon will have the same officer titles with Greystone Homes,
Inc. as they had with Greystone under the Prior Agreements and will work on a
full-time basis through March 31, 1998 and on a part-time basis through June 30,
1998 for aggregate consideration of $600,000 each. The compensation payable
under the Employment Agreements will continue to be payable notwithstanding the
termination of the employment of Mr. Harter or Mr. Mon for any reason other than
for cause. In the event of termination for cause, Mr. Harter or Mr. Mon,
respectively, will be entitled to receive all base salary earned to the date of
termination, but will
38
49
forfeit all rights to subsequent bonus payments. Each of Mr. Harter and Mr. Mon
will also continue to be entitled to indemnification protections (which
indemnify Mr. Harter and Mr. Mon, respectively, to the maximum extent permitted
by law from damages, losses and expenses incurred by reason of serving as a
director, officer or employee) and certain other employee benefits and will not
be considered to have terminated employment for any purposes. Mr. Mon's
Employment Agreement prohibits Mr. Mon from competing with Greystone Homes, Inc.
through March 31, 1999 for consideration of $400,000. Neither Mr. Harter nor Mr.
Mon will be employed directly by the Surviving Corporation.
In addition, in connection with the Merger, the Company also entered into
agreements with each of Mr. Peter Kiesecker, President of Greystone Homes, Inc.
and Senior Vice President -- Homebuilding Operations of Greystone, and Mr. Bruce
Gross, Senior Vice President, Controller and Treasurer of Greystone, pursuant to
which employment agreements with each such executive were terminated. In lieu
thereof, such executives will be entitled to receive an aggregate amount equal
to $400,000 in the case of Mr. Kiesecker and $320,000 in the case of Mr. Gross
and the payout of previously deferred bonuses under previous years' MICP (as
defined below). Each of Mr. Kiesecker and Mr. Gross have agreed to continue
their employment with the Surviving Corporation. Mr. Kiesecker will continue to
direct the Operations of the Surviving Corporation's Pacific Greystone divisions
and Mr. Gross will continue to direct the financial operations of the Surviving
Corporation's Pacific Greystone divisions, and each of them will participate in
the MICP for the 1997 year to be paid no later than February 15, 1998. Neither
Mr. Kiesecker nor Mr. Gross has employment agreements with the Surviving
Corporation.
In addition, on May 22, 1997, the Compensation Committee of the Board of
Directors awarded Mr. Harter and Mr. Mon options to purchase, respectively,
45,000 and 40,000 shares of Greystone Common Stock under Greystone's 1996
Employee Stock Option and Award Plan, as amended (the "1996 Plan"). Such options
have an exercise price of $15.88 per share. Such grants were ratified by the
full Board of Directors on May 30, 1997. At the May 30, 1997 meeting of the
Board of Directors, David Kaplan, a member of the Board of Directors, was
awarded an option to purchase 10,000 shares of Greystone Common Stock under
Greystone's Amended and Restated 1995 Eligible Directors Stock Option Plan, as
amended (the "Director's Plan"). Such options have an exercise price of $16.38
per share. Such award was in addition to the automatic annual grant provision of
such plan.
In addition, prior to the execution and delivery of the Merger Agreement,
the Management Incentive Compensation Plan of Greystone (the "MICP") was amended
to provide that 1997 bonus award calculations will be made as if the Merger had
not occurred, that determinations with respect thereto will be made solely by
Mr. Harter and Mr. Leibowitz and that such amounts will be paid no later than
February 15, 1998, in accordance with the MICP, except that no portion of the
awards for corporate participants will be deferred. Also, at the Effective Time,
all corporate participants in the MICP will receive payouts of previously
deferred bonuses under prior year plan awards (without regard to whether such
participants continue employment with the Surviving Corporation) and all other
participants will be entitled to receive payouts of prior year awards if their
employment with the Surviving Corporation is terminated without cause prior to
December 31, 1998.
Certain of the payment obligations after the Effective Time under the
foregoing items will be supported by a rabbi trust.
The Board of Directors determined pursuant to the 1996 Plan that all stock
option awards thereunder would survive the Merger and remain exercisable in
accordance with their respective terms.
Greystone's deferred compensation plan, which was funded by eligible
employees' voluntary and contractual contributions, was terminated effective
June 30, 1997 and all accrued amounts under such plan were paid out effective
July 1, 1997.
The Merger Agreement provides that Sidney Lapidus and Reuben S. Leibowitz,
each of whom is a Managing Director of E.M. Warburg Pincus & Co. LLC and
currently a member of the Board of Directors of Greystone, will each remain as a
director of the Surviving Corporation. In addition, Warburg will be entitled to
the other benefits, and will be subject to the limitations, described under the
captions "The Merger -- Voting Agreements and The Merger -- Registration
Rights."
39
50
In addition to the benefits described above, each director and officer of
Lennar or Greystone who is a participant in the employee benefit plans and stock
option plans of those companies will be entitled to the benefits described under
the caption "The Merger -- Stock Options, Compensation and Benefits." As to
officers and directors of Lennar, the only benefit will be any increase in value
of stock as to which they held options, or which is held for their accounts in
Lennar's Employee Stock Ownership Plan, which may result from the Merger.
The Greystone Board was informed of the interests described above prior to
approving the Merger Agreement and the Merger.
ANTICIPATED ACCOUNTING TREATMENT
The Merger will be treated as a purchase for accounting and financial
reporting purposes.
REGULATORY APPROVALS
Lennar and Greystone have been advised that the Merger is not subject to
the notification requirements of the HSR Act. Neither of them is aware of any
other regulatory approvals which are required with regard to the Merger, other
than effectiveness of the Registration Statement under the Securities Act of
1933, of which this Joint Proxy Statement/ Prospectus is a part and the
authorization for listing on the NYSE of the shares of Greystone Common Stock to
be issued in the Merger.
RESALE OF LENNAR COMMON STOCK; AFFILIATES
All shares of Surviving Corporation Common Stock received in the Merger by
holders of Lennar Common Stock, and all shares of Surviving Corporation Common
Stock owned immediately after the Merger by former Greystone stockholders, will
be freely transferable, except that Surviving Corporation Common Stock received
by persons who are deemed to be "affiliates" of Lennar or Greystone prior to the
Merger may be resold by them only in transactions permitted by the resale
provisions of Rule 144 or 145 under the Securities Act, or as otherwise
permitted under the Securities Act. The affiliates of Lennar or Greystone
include persons that control, are controlled by, or are under common control
with, Greystone or Lennar, as the case may be, and may include certain officers
and directors of those corporations, as well as the corporation's controlling
stockholders.
NEW YORK STOCK EXCHANGE LISTING
Both the Lennar Common Stock and the Greystone Common Stock are listed on
the NYSE. It is expected that the Surviving Corporation Common Stock which will
be outstanding after the Merger will be listed on the NYSE and will trade under
the symbol "LEN."
40
51
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following pro forma combined condensed financial statements give effect
to the Spin-Off, the formation of the Land Partnership, the Stock Dividend and
the Merger. The Merger will be accounted for as a purchase of Greystone by
Lennar under generally accepted accounting principles. The pro forma combined
condensed financial statements reflect the operations of Lennar and Greystone
for the six months ended May 31 and June 30, 1997, respectively, and for the
years ended November 30 and December 31, 1996, respectively. The pro forma
balance sheet assumes the Spin-Off, the formation of the Land Partnership, the
Stock Dividend and the Merger occurred on the date of the balance sheet. The pro
forma statements of earnings assume the Spin-Off, the formation of the Land
Partnership, the Stock Dividend and the Merger occurred at the beginning of the
period presented.
The historical financial information of Lennar as of and for the six months
ended May 31, 1997 and for the year ended November 30, 1996 have been derived
from the Lennar financial statements which are incorporated herein by reference.
The historical financial information of Greystone as of and for the six months
ended June 30, 1997 and for the year ended December 31, 1996 have been derived
from the Greystone financial statements which are incorporated herein by
reference. The pro forma financial statements should be read in conjunction with
the accompanying notes and with the historical consolidated financial statements
of Lennar and Greystone incorporated herein by reference.
The unaudited pro forma financial statements have been included for
comparative purposes only. As further discussed in the accompanying notes, the
pro forma financial statements do not purport to show what the financial
position or operating results would have been if the Spin-Off, the formation of
the Land Partnership, the Stock Dividend and the Merger had been consummated as
of the dates indicated and should not be construed as representative of future
financial position or operating results.
41
52
SURVIVING CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
SIX MONTHS ENDED MAY 31,/JUNE 30, 1997
HISTORICAL
HISTORICAL PRO FORMA PACIFIC
LENNAR PRE MERGER GREYSTONE MERGER PRO FORMA
CORPORATION SPIN-OFF LENNAR CORPORATION ADJUSTMENTS SURVIVING
(7) ADJUSTMENTS CORPORATION (6) (4) CORPORATION
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES:
Homebuilding.................. $ 455,271 $ (24,501)(1) $ 430,015 $ 250,724 $ 0 $ 680,739
(755)(2)
Investment.................... 78,437 (78,437)(1) 0 0 0 0
Financial services............ 46,404 (25,127)(1) 21,277 1,485 0 22,762
Limited-purpose finance
subsidiaries................ 2,704 0 2,704 0 0 2,704
-------- ------- ------- ------- ----- -------
Total revenues................ 582,816 (128,820) 453,996 252,209 0 706,205
-------- ------- ------- ------- ----- -------
COSTS AND EXPENSES:
Homebuilding.................. 422,691 (18,294)(1) 402,961 219,067 0 622,028
(1,436)(2)
Investment.................... 41,434 (41,434)(1) 0 0 0 0
Financial services............ 25,995 (10,223)(1) 15,772 1,246 0 17,018
Limited-purpose finance
subsidiaries................ 2,704 0 2,704 0 0 2,704
Corporate general and
administrative.............. 6,610 (1,653)(1) 4,957 4,363 1,312(3) 10,632
Interest...................... 15,462 (10,122)(1) 5,340 7,797 (597)(3) 12,540
-------- ------- ------- ------- ----- -------
Total costs and expenses...... 514,896 (83,162) 431,734 232,473 715 664,922
-------- ------- ------- ------- ----- -------
EARNINGS BEFORE INCOME TAXES.... 67,920 (45,658) 22,262 19,736 (715) 41,283
Income taxes.................... 26,489 (17,807)(1,2) 8,682 8,052 233(3) 16,967
-------- ------- ------- ------- ----- -------
Net earnings.................... $ 41,431 $ (27,851) $ 13,580 $ 11,684 $ (948) $ 24,316
======== ======= ======= ======= ===== =======
Average shares.................. 36,300 14,960 53,000(5)
======== ======= =======
NET EARNINGS PER SHARE.......... $ 1.14 $ 0.78 $ 0.46
======== ======= =======
- ---------------
(1) Represents adjustments to exclude the results of LNR and the Land
Partnership, as if the Spin-Off had occurred, and the Land Partnership had
been formed, on December 1, 1996.
(2) Represents adjustments to include management fees and equity in earnings
from the Land Partnership.
(3) Represents preliminary purchase adjustments for amortization of goodwill
over a 20 year period (included in corporate general and administrative
expenses), and the amortization of the premium on debt on a level yield
method (included in interest expense) and its related tax effect, as if the
Merger had occurred on December 1, 1996. Actual adjustments will be based on
the fair value of the assets and liabilities of Greystone at the time of the
Merger in accordance with Accounting Principles Board Opinion No. 16 ("APB
16").
(4) As of May 31, 1997, the Merger Adjustments in the Combined Condensed Balance
Sheet reflect an increase in the inventories of Greystone to estimated fair
value of approximately $13 million. This adjustment (not included in Merger
Adjustments above) will increase cost of sales and decrease gross margin by
approximately $13 million and will decrease net income by approximately $8
million (approximately $0.15 per share) in the first three to six months of
the Surviving Corporation's operations.
(5) The pro forma average shares represent the average shares for historical
Lennar and shares issued to Greystone Stockholders, giving effect to the
Stock Dividend.
(6) Reclassifications have been made to conform to Lennar Corporation's
historical presentation.
(7) When the measurement date is reached in the fourth quarter of 1997, Lennar
will record a non-recurring restructuring charge for the estimated costs of
the Spin-Off and the formation of the Land Partnership. This charge is
currently estimated to be in the range of $20 million to $30 million,
pre-tax.
42
53
SURVIVING CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
YEAR ENDED NOVEMBER 30,/DECEMBER 31, 1996
HISTORICAL
HISTORICAL PRO FORMA PACIFIC
LENNAR PRE MERGER GREYSTONE MERGER PRO FORMA
CORPORATION SPIN-OFF LENNAR CORPORATION ADJUSTMENTS SURVIVING
(7) ADJUSTMENTS CORPORATION (6) (4) CORPORATION
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES:
Homebuilding.................. $ 952,648 $ (18,273)(1) $ 933,588 $ 421,706 $ 0 $1,355,294
(787)(2)
Investment.................... 139,500 (139,500)(1) 0 0 0 0
Financial services............ 82,577 (41,646)(1) 40,931 1,742 0 42,673
Limited-purpose finance
subsidiaries................ 6,436 0 6,436 0 0 6,436
---------- -------- ------- ------- ------ ---------
Total revenues................ 1,181,161 (200,206) 980,955 423,448 0 1,404,403
---------- -------- ------- ------- ------ ---------
COSTS AND EXPENSES:
Homebuilding.................. 861,582 (6,874)(1) 847,738 364,444 0 1,212,182
(6,970)(2)
Investment.................... 71,548 (71,548)(1) 0 0 0 0
Financial services............ 53,924 (17,751)(1) 36,173 1,440 0 37,613
Limited-purpose finance
subsidiaries................ 6,439 0 6,439 0 0 6,439
Corporate general and
administrative.............. 12,396 (3,099)(1) 9,297 7,347 2,624(3) 19,268
Interest...................... 31,033 (14,800)(1) 16,233 16,957 (1,194)(3) 31,996
---------- -------- ------- ------- ------ ---------
Total costs and expenses...... 1,036,922 (121,042) 915,880 390,188 1,430 1,307,498
---------- -------- ------- ------- ------ ---------
EARNINGS BEFORE INCOME TAXES.... 144,239 (79,164) 65,075 33,260 (1,430) 96,905
INCOME TAXES.................... 56,253 (30,874)(1,2) 25,379 13,570 466(3) 39,415
---------- -------- ------- ------- ------ ---------
NET EARNINGS.................... $ 87,986 (48,290) 39,696 19,690 (1,896) 57,490
========== ======== ======= ======= ====== =========
AVERAGE SHARES.................. 36,223 14,960 53,000 (5)
========== ======= =========
NET EARNINGS PER SHARE.......... $ 2.43 $ 1.32(8) $ 1.08
========== ======= =========
- ---------------
(1) Represents adjustments to exclude the results of LNR and the Land
Partnership, as if the Spin-Off had occurred, and the Land Partnership had
been formed, on December 1, 1995.
(2) Represents adjustments to include management fees and equity in earnings
from the Land Partnership.
(3) Represents preliminary purchase adjustments for amortization of goodwill
over a 20 year period (included in corporate general and administrative
expenses), and the amortization of the premium on debt on a level yield
method (included in interest expense) and its related tax effect, as if the
Merger had occurred on December 1, 1995. Actual adjustments will be based on
the fair value of the assets and liabilities of Greystone at the time of the
Merger in accordance with APB 16.
(4) As of May 31, 1997, the Merger Adjustments in the Combined Condensed Balance
Sheet reflect an increase in the inventories of Greystone to estimated fair
value of approximately $13 million. This adjustment (not included in Merger
Adjustments above) will increase cost of sales and decrease gross margin by
approximately $13 million and will decrease net income by approximately $8
million (approximately $0.15 per share) in the first three to six months of
the Surviving Corporation's operations.
(5) The pro forma average shares represent the average shares for historical
Lennar and shares issued to Greystone Stockholders, giving effect to the
Stock Dividend.
(6) Reclassifications have been made to conform to Lennar Corporation's
historical presentation.
(7) When the measurement date is reached in the fourth quarter of 1997, Lennar
will record a non-recurring restructuring charge for the estimated costs of
the Spin-Off and the formation of the Land Partnership. This charge is
currently estimated to be in the range of $20 million to $30 million,
pre-tax.
(8) Earnings per share are pro forma assuming that Greystone's initial public
offering and recapitalization (which is described in the Greystone 10-K)
occurred on January 1, 1996.
43
54
SURVIVING CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(UNAUDITED)
MAY 31,/JUNE 30, 1997
HISTORICAL
PRO FORMA PACIFIC
HISTORICAL PRE MERGER GREYSTONE MERGER PRO FORMA
LENNAR SPIN-OFF LENNAR CORPORATION ADJUSTMENTS SURVIVING
CORPORATION ADJUSTMENTS CORPORATION (7) (3) CORPORATION
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
ASSETS
HOMEBUILDING, INVESTMENT AND
FINANCIAL SERVICES:
Homebuilding and investment
assets:
Cash and cash equivalents..... $ 15,828 $ (3,205)(1) $ 12,623 $ 31,772 $ 0 $ 44,395
Receivables, net.............. 52,189 (11,872)(1) 40,317 10,153 0 50,470
Inventories................... 838,177 (375,615)(1) 462,562 321,389 13,000(4) 796,951
Land held for investment...... 60,102 (60,102)(1) 0 0 0 0
Investments in and advances to
partnerships................ 123,567 (36,869)(1) 86,698 0 0 86,698
Other assets (including
operating properties &
equipment, net)............. 401,789 (365,014)(1) 36,775 14,403 48,176(5) 99,354
Financial services assets..... 379,163 (283,885)(1) 95,278 752 0 96,030
---------- ---------- ------- ------- ------ ---------
1,870,815 (1,136,562) 734,253 378,469 61,176 1,173,898
---------- ---------- ------- ------- ------ ---------
LIMITED-PURPOSE FINANCE
SUBSIDIARIES.................. 55,022 (2,765)(2) 52,257 0 0 52,257
---------- ---------- ------- ------- ------ ---------
$1,925,837 $(1,139,327) $ 786,510 $ 378,469 $61,176 $1,226,155
========== ========== ======= ======= ====== =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
HOMEBUILDING, INVESTMENT AND
FINANCIAL SERVICES:
Homebuilding and investment
liabilities:
Accounts payable and other
liabilities................. $ 197,453 $ (50,406)(1) $ 147,047 $ 32,935 $ 0 $ 179,982
Mortgage notes and other debts
payable..................... 669,408 (289,236)(1) 331,446 181,144 12,000(4) 524,590
(48,726)(2)
Financial services
liabilities................. 264,202 (208,442)(1) 55,760 23 0 55,783
---------- ---------- ------- ------- ------ ---------
1,131,063 (596,810) 534,253 214,102 12,000 760,355
---------- ---------- ------- ------- ------ ---------
LIMITED-PURPOSE FINANCE
SUBSIDIARIES.................. 52,257 0 52,257 52,257
---------- ---------- ------- ------- ------ ---------
Stockholders' equity............ 742,517 (542,517)(1,2) 200,000 164,367 49,176(6) 413,543
---------- ---------- ------- ------- ------ ---------
$1,925,837 $(1,139,327) $ 786,510 $ 378,469 $61,176 $1,226,155
========== ========== ======= ======= ====== =========
- ---------------
(1) Represents adjustments to effect the Spin-Off and the formation of the Land
Partnership, as if the Spin-Off had occurred, and the Land Partnership had
been formed, on May 31, 1997.
(2) Represents adjustments to reflect capitalization of Lennar after the
Spin-Off but before the Merger at the Lennar Effective Time Net Worth of
$200,000,000. See "The Merger -- Lennar Net Worth."
44
55
(3) Represents preliminary purchase adjustments to reflect the fair value of the
assets and liabilities of Greystone as if the Merger had occurred on May 31,
1997. Actual adjustments will be based on the fair value of the assets and
liabilities of Greystone at the time of the Merger in accordance with APB
16.
(4) To adjust inventories and senior unsecured notes payable of Greystone to
their estimated fair value.
(5) To record the estimated goodwill of $52,498,000 less $4,322,000 to adjust
certain other assets of Greystone to fair value. The estimated goodwill was
calculated as follows:
Estimated fair value of shares issued......... $213,543,000
Less fair value of Greystone net assets:
Historical net assets....................... $164,367,000
Fair value adjustments...................... (3,322,000)
------------
Fair value of net assets................. 161,045,000
------------
Estimated goodwill............................ $ 52,498,000
============
(6) To record the estimated fair market value of common stock consideration
given to purchase Greystone representing 14,959,741 outstanding shares at an
average per share value of $14.27 (the closing price at the date of
announcement, June 11, 1997, of $15.125 adjusted for restrictions on certain
Greystone shares).
(7) Reclassifications have been made to conform to Lennar Corporation's
historical presentation.
45
56
BUSINESS OF LENNAR
At the time of the Merger (after the Spin-Off), Lennar will be engaged
entirely in homebuilding and related activities. Lennar's homebuilding
operations include the construction and sale of homes, as well as the purchase,
development and sale of residential land, the provision of financing to
homebuyers and homeowners and the provision of closing services, title insurance
and other services to homebuyers and homeowners.
Lennar and its predecessor have been building homes since 1954. Lennar
believes that since its acquisition of Development Corporation of America in
1986, it has each year delivered more homes in Florida than any other
homebuilder. Lennar has been building homes in Arizona since 1972. It continued
expanding its homebuilding operations by entering new markets in Dallas, Texas
in 1991, Houston, Texas and Port St. Lucie, Florida in 1992 and Sarasota,
Florida in 1994. In addition, Lennar began the development of an adult-community
in the Orlando, Florida area in 1995. During 1996, Lennar significantly expanded
its operations in Texas with the acquisition of the assets and operations of
Houston-based Village Builders (a homebuilder) and Friendswood Development
Company (a developer of master-planned communities). Additionally in 1996,
Lennar entered the California homebuilding market through several acquisitions
and partnerships. These acquisitions included Bramalea California, Inc. (a
Southern California homebuilder) and the assets of Renaissance Homes, Inc. (a
Sacramento, California homebuilder). The partnerships in California are
primarily involved in the development of master-planned communities. Lennar has
constructed and sold over 130,000 homes to date.
Lennar is involved in all phases of planning and building in its
residential communities, including land acquisition, site planning, preparation
of land, improvement of undeveloped and partially developed acreage, and design,
construction and marketing of homes. Lennar supervises and controls the
development and building of its residential communities, but subcontracts
virtually all segments of development and construction to others. Lennar
generally finances construction with its own funds or borrowings under its
unsecured working capital lines, not with secured construction loans. Lennar
employs sales associates who are paid salaries, commissions or both to make
on-site sales of Lennar's homes. Lennar also sells homes through independent
brokers.
Lennar sells single-family attached and detached homes and condominiums in
buildings generally one to five stories in height. Homes sold by Lennar are
primarily in the moderate price range for the areas in which they are located.
They are targeted primarily at first time homebuyers, move-up homebuyers and, in
some communities, retirees. The average sale price of a Lennar home was $149,900
in fiscal 1996.
Through financial services subsidiaries, Lennar provides conventional,
FHA-insured and VA-guaranteed mortgage loans to buyers of Lennar's homes and
others from offices located in Florida, California, Arizona, Texas, North
Carolina and Maryland. In 1996, loans to buyers of Lennar's homes represented
approximately one-third of Lennar's $527 million of residential loan
originations.
Lennar also arranges and provides title insurance for, and provides closing
services to, buyers of Lennar's homes and others. During 1996, it formed a
subsidiary to provide cable TV, alarm monitoring and telephone service to
residents of Lennar communities and possibly others.
For more information regarding Lennar, see the Lennar documents referenced
under "Incorporation of Certain Documents by Reference."
46
57
BUSINESS OF GREYSTONE
Greystone is a regional builder of high quality, single family homes
primarily targeted to first time and move-up homebuyers in infill and emerging
markets located throughout Northern and Southern California, as well as in the
Las Vegas and Phoenix areas. Greystone has expanded its operations through
selective acquisitions and by commencing start-up projects in new and existing
markets. Greystone conducts its homebuilding operations through eight divisional
offices.
Greystone focuses on two distinct market segments:
- Infill markets, which generally include sites zoned for non-residential
use within previously developed communities that will typically yield 50
to 200 residential lots.
- Emerging markets, which tend to include raw land and improved residential
lots in areas of active new home construction on the periphery of
metropolitan areas.
Greystone's infill projects are generally located in developed residential
areas with ready access to jobs, shopping, schools and other amenities. They
principally attract move-up buyers. Greystone's emerging projects tend to be
located in areas of active new construction but still within reasonable
commuting distance of major employment centers. These projects generally focus
on first time and move-up buyers desiring lower priced homes.
The Northern California region operations are currently conducted in
Alameda, Santa Clara, Contra Costa, San Mateo, Sacramento and San Joaquin
counties. The Southern California region concentrates its operations in the
counties of Los Angeles, Orange, San Bernardino, Riverside, San Diego and
Ventura. Greystone closed an approximately equal number of homes in Northern and
Southern California during 1996. Currently, Greystone's operations outside of
California are conducted in the Las Vegas, Nevada and Phoenix, Arizona areas.
Greystone acquires land for its residential home projects with a view
toward the development of finished lots capable of supporting housing units. It
generally limits the number of lots acquired to less than 150 in any one
project. Greystone functions as a general contractor, subcontracting its
construction activities. Greystone sells its homes through its own sales
representatives, although sales by independent real estate brokers are
encouraged in some markets.
In part because of the need to comply in many California communities with
requirements of local Design Review Boards, except in Arizona, Greystone
normally creates new designs for the houses in each of its developments. While
this affects Greystone's per home costs, it gives a uniqueness to Greystone's
developments.
Greystone operates through separate Divisions (of which there currently are
eight) managed by Division Presidents. Each Division President is a person with
substantial homebuilding experience in the geographic area in which the Division
operates. A Division President is responsible for Greystone's operations within
the Division's geographic area, including project identification, product
design, construction, marketing and customer service. However, corporate level
approval is required for final decisions regarding acquisition or disposition of
properties (other than sales of homes) and any other decisions that require
disbursements of funds or financing. Overall strategy is also centralized at the
corporate level.
Greystone offers mortgage brokerage services exclusively to its customers
in most of its markets. Greystone does not originate, fund or service the loans.
For more information regarding Greystone, see the Greystone documents
referenced under "Incorporation of Certain Documents by Reference," and in
particular the portion of the Greystone 10-K captioned "Cautionary Statements."
47
58
BUSINESS OF THE COMBINED COMPANIES
Based on information contained in homebuilding industry publications, as a
result of the Merger, the Surviving Corporation will become the nation's fifth
largest homebuilder based on 1996 homebuilding revenues and homes closed, and,
based on published financial statements of publicly held homebuilding companies,
the largest homebuilder in the nation based on 1996 homebuilding earnings before
interest and taxes. The following table provides data, on a state-by-state
basis, regarding the combined homebuilding operations of Lennar and Greystone at
November 30, 1996 as to Lennar and December 31, 1996 as to Greystone, and for
the respective three year periods ended on those dates:
HOMES DELIVERED IN NOVEMBER 30/DECEMBER 31, 1996
YEARS ENDED ------------------------------------
NOVEMBER 30/DECEMBER 31
-------------------------- HOMES COMPLETED OR
UNDER CONSTRUCTION
HOMES DELIVERED --------------------- SOLD HOMES
-------------------------- AVAILABLE NOT YET
STATE 1996 1995 1994 SOLD(1) FOR SALE STARTED(1)
- ------------------------------------ ------ ------ ------ ------- --------- ----------
Florida (Lennar historical)......... 3,363 3,395 3,717 641 630 564
California
Lennar historical................. 58 -- -- 39 60 --
Greystone historical(2)........... 1,413 1,342 1,331 290 324 63
Combined.......................... 1,471 1,342 1,331 329 384 63
Texas (Lennar historical)........... 1,832 781 616 394 336 44
Arizona
Lennar historical................. 715 504 632 180 71 67
Greystone historical.............. 274 21 -- 110 26 32
Combined.......................... 989 525 632 290 97 99
Nevada (Greystone historical)....... 274 11 -- 75 16 13
----- ----- ----- ----- ----- ---
Totals.................... 7,929 6,054 6,296 1,729 1,463 783
===== ===== ===== ===== ===== ===
- ---------------
Notes:
(1) Although firm contracts relating to these homes were executed, there can be
no assurance that purchasers will meet their obligations under the
contracts.
(2) Includes results from unconsolidated joint ventures.
COMPETITION
The housing industry is highly competitive. In their activities, each of
Lennar and Greystone has competed, and the Surviving Corporation will compete,
with numerous developers and builders in and near the areas where Lennar's and
Greystone's communities are located. Competition is on the basis of location,
design, quality, amenities and price. Some of the principal competitors of
Lennar and Greystone include Continental Homes, UDC Homes, Pulte and Kaufman and
Broad in Arizona, Centex Homes in Texas and Florida, Arvida/JMB Partners in
Florida, Lewis Homes in Nevada and Kaufman and Broad, Pardee Construction and
Standard Pacific in California.
NEW FINANCING
Lennar has received a commitment from The First National Bank of Chicago
("First Chicago") to provide the Surviving Corporation with two unsecured
revolving credit facilities (together the "New Facilities") in the aggregate
amount of $550 million which may be used to refinance existing indebtedness, for
working capital, for acquisitions and for general corporate purposes. Although
First Chicago has committed to provide the entire amount of the New Facilities,
it has advised Lennar that it may try to arrange a syndicate of financial
institutions, for which First Chicago would act as agent, to commit to a portion
of the New Facilities. One facility will be structured as a $450 million, five
year revolving credit facility maturing June 30, 2002. The second facility (up
to $100 million) will be structured as a revolving credit facility maturing 364
days after the closing date of the facility, subject to extension for two
one-year periods with the consent of the lenders. The
48
59
Surviving Corporation may elect, at the maturity of the second facility, to
convert borrowings under that facility to a term loan which amortizes in equal
quarterly amounts and matures on June 30, 2002.
Loans under the New Facilities will bear interest, at Lennar's (or the
Surviving Corporation's) option, (i) at a floating rate equal to the greater of
the corporate base rate announced by First Chicago from time to time, or the
federal funds rate most recently announced by First Chicago plus .50%, (ii) at
rates based on the London interbank offered rate ("LIBOR"), as adjusted for
certain reserve and other requirements applicable to lenders, for one- two-,
three-, or six-month periods, plus an interest margin based on the Surviving
Corporation's leverage ratio and senior unsecured long-term debt ratings
("Long-Term Ratings") at the time of the advance, or (iii) on the basis of
competitive bids.
Facility fees will be payable to each participant in the syndicate, if any,
based on the total amount of its commitment to make loans. The fees will be
based on the Surviving Corporation's leverage ratios and Long-Term Ratings.
The documentation governing the New Facility will include conditions
precedent to the lenders' funding obligations, representations and warranties,
covenants, events of default and other provisions customarily found in similar
transactions. In particular, the credit agreement will provide that (i) the
Surviving Corporation may not have a leverage ratio greater than 2.4 to 1.0 at
the end of any fiscal quarter through November 29, 1997, 2.25 to 1.0 from
November 30, 1997 through November 30, 1999 and 2.0 to 1.0 thereafter, (ii) the
surviving Corporation most have a minimum consolidated tangible net worth
greater than $300 million plus 50% of quarterly positive net income and 75% of
the net proceeds raised from the issuance of capital stock; (iii) the sum of the
Surviving Corporation's indebtedness (excluding financial subsidiaries) and
guaranty obligations (excluding obligations of the Land Partnership) of
subsidiaries and joint ventures which are not borrowers must be less than 15% of
the Surviving Corporation's consolidated tangible net worth, but in no event
greater than $60 million; (iv) the sum of investments in and advances to certain
financial services subsidiaries and investments in joint ventures (other than
the Land Partnership) must be limited to 25% of the Surviving Corporation's
consolidated tangible net worth; and (v) the amount of the Surviving
Corporation's investment in improved and unimproved land and investments in and
advances to the Land Partnership must be less than the sum of the Surviving
Corporation's consolidated net worth plus 50% of its subordinated debt.
First Chicago has also delivered to Lennar a commitment to provide the Land
Partnership with two secured credit facilities (together, the "Land Facilities")
in the aggregate amount of $225 million which may be used to refinance existing
indebtedness, for working capital and for general corporate purposes. One
facility will be structured as a $125 million secured revolving credit facility
which will mature four years after the closing date of the facility, subject to
a one year extension at the option of the Land Partnership with the consent of
the lenders. The second facility is a $100 million secured term loan facility
that amortizes principal at $7 million per quarter beginning in the third
quarter after the closing date of the facility, with a final payment of $9
million due four years after the closing date of the facility.
Advances under the Land Facilities are limited by certain borrowing base
calculations, and will be secured by security interests in all real and personal
property in the borrowing base.
The Surviving Corporation and LNR each will guarantee the obligations of
the Land Partnership with regard to the Land Facilities. The credit agreement
for the New Facilities will provide that an event of default under a Land
Facility which is not cured as provided in the applicable loan agreement will be
an event of default under the New Facilities.
Loans under the Land Facilities will bear interest, at the Land
Partnership's option, (i) at a floating rate equal to the greater of the
corporate base rate announced by First Chicago from time to time, or the federal
funds rate most recently announced by First Chicago plus .50% or (ii) at rates
based on LIBOR, as adjusted for certain reserve and other requirements
applicable to lenders, for one-, two-, three-, or six-month periods, plus an
interest margin based on the Surviving Corporation's leverage ratio and
Long-Term Ratings at the time of the advance.
Commitment fees will be payable on the unused portion of the revolving
facility for the ratable benefit of the lenders, based on the Surviving
Corporation's leverage ratio and Long-Term Ratings.
49
60
The documentation governing the Land Facilities will include conditions
precedent to the lenders' funding obligations, representations and warranties,
covenants, events of default and other provisions customarily found in similar
transactions. In particular, the credit agreement will provide that (i) the Land
Partnership's leverage ratio (the ratio of its consolidated indebtedness
(excluding non recourse debt of certain subsidiaries) divided by the adjusted
tangible net worth of the Land Partnership and certain subsidiaries) must not be
greater than 1.5 to 1.0, (ii) the Land Partnership's ratio of its free cash flow
divided by its fixed charges must exceed 1.25 times, calculated on a rolling
four quarter period after the first year, (iii) the Land Partnership's ratio of
its liquidity to its pro forma fixed charges must exceed 1.25 times, calculated
on a quarterly basis, (iv) the Land Partnership's consolidated tangible net
worth must be greater than 85% of its consolidated tangible net worth at closing
plus 50% of quarterly positive net income generated and 100% of capital
contributions subsequent to the closing, (v) the sum of the Land Partnership's
other indebtedness (excluding non-recourse indebtedness of certain
subsidiaries), subsidiary/joint venture recourse indebtedness and contingent
guaranty obligations must not exceed 15% of the consolidated tangible net worth
of the Land Partnership and certain subsidiaries; (vi) investments in and
advances to certain subsidiaries and joint ventures shall be limited to 25% of
the consolidated tangible net worth of the Land Partnership and certain
subsidiaries; and (vii) distributions may not exceed 50% of the Land
Partnership's net income and no distributions (other than to meet partners' tax
obligations) may be made until after the second full fiscal quarter after the
closing.
RELATIONSHIPS BETWEEN LENNAR AND LNR
THE SPIN-OFF; THE SEPARATION AND DISTRIBUTION AGREEMENT
Prior to the Merger, Lennar will effect the Spin-Off by (i) transferring
its real estate investment and management business to LNR and (ii) distributing
all the stock of LNR to Lennar Stockholders. An Information Statement describing
the Spin-Off and containing information about LNR and its subsidiaries will be
sent to all Lennar Stockholders.
The Spin-Off, and the relationship between Lennar and LNR after the
Spin-Off, are the subject of a Separation and Distribution Agreement dated June
10, 1997, between Lennar and LNR, a copy of which is attached hereto as Annex
III. The provisions of the Separation and Distribution Agreement include the
following:
- Lennar agrees to contribute to LNR prior to the Spin-Off all the Lennar
subsidiaries which are engaged wholly or primarily in the real estate
investment and management business and any assets of other subsidiaries
which are not used or expected to be used wholly or primarily in
connection with Lennar's homebuilding business. LNR will transfer back to
Lennar any assets of LNR subsidiaries which are used or expected to be
used primarily in connection with Lennar's homebuilding business.
- Prior to the Spin-Off, Lennar will contribute to LNR cash or additional
assets so that, after LNR's assumption of all Lennar's obligations which
relate primarily to its real estate investment and management business,
Lennar's Effective Time Net Worth will be $200 million plus an amount
intended to approximate the anticipated earnings of Lennar and its
homebuilding subsidiaries from August 31, 1997 to the Effective Time of
the Merger (although actual results could be greater or less by a
material amount).
- LNR will assume all the obligations of Lennar and its subsidiaries which
relate primarily to its real estate investment and management business,
including assuming the obligations under specified contracts and assuming
specified obligations for borrowed money.
- LNR will issue to Lennar the shares Lennar requires to complete the
Spin-Off. LNR will also issue to Lennar any shares Lennar is required to
distribute to holders of Lennar Options which were granted by Lennar
prior to the date of the Spin-Off.
- Until December 2002, Lennar and its homebuilding subsidiaries will not
engage, directly or indirectly, in the business of (i) acquiring and
actively managing commercial and residential multi-family rental
50
61
real estate other than as an incident to, or otherwise in connection
with, their homebuilding business, (ii) acquiring portfolios of
commercial mortgage loans or real estate assets acquired through
foreclosures of mortgage loans, other than real estate acquired as sites
of homes to be built or sold as part of their homebuilding business,
(iii) making or acquiring mortgage loans, other than mortgage loans
secured by detached or attached homes or residential condominium units,
(iv) constructing office buildings or other commercial or industrial
buildings, other than small shopping centers, professional office
buildings and similar facilities which will be adjuncts to their
residential developments, (v) purchasing commercial mortgage-backed
securities or real estate asset backed securities or (vi) acting as a
servicer or special servicer with regard to securitized commercial
mortgage pools. Lennar and its homebuilding subsidiaries will not,
however, be prevented from owning or leasing office buildings in which
they occupy a majority of the space; acquiring securities backed by pools
of residential mortgages; acquiring an entity which, when it is acquired,
is engaged in one of the prohibited activities as an incidental part of
its activities; owning as a passive investor an interest of less than 10%
of a publicly traded company which is engaged in a prohibited business;
acquiring commercial paper or short-term debt instruments of entities
engaged in one or more of the prohibited businesses; or owning an
interest in and managing the Land Partnership.
- LNR has agreed that it will not engage, directly or indirectly, in (a)
building or selling single family detached or attached homes or
condominium units in low-rise residential buildings, (b) developing
properties primarily as sites of homes or condominium units (other than
properties included in portfolios acquired by LNR or partnerships in
which it is a partner which Lennar elects not to acquire for the prices
paid by LNR or the partnerships), (c) providing first mortgage financing
for the purchases of homes or condominium units or (d) providing a first
mortgage refinancing of loans secured by homes or condominium units. LNR
is not, however, precluded from developing properties acquired upon
default of mortgages or as incidental portions of real estate portfolios
until they can be disposed of in an orderly manner; selling as
condominium units apartments in multi-family buildings which, when the
buildings or mortgages secured by them were acquired by LNR, were being
operated as rental buildings; acquiring securities backed by pools of
residential mortgages; providing financing to homebuilders or land
developers, acquiring their properties upon default and overseeing their
operations until they or their properties can be disposed of in an
orderly manner, owning as a passive investor an interest of less than 10%
in a publicly traded company which is engaged in a prohibited business;
acquiring an entity which, at the time it is acquired by LNR, is engaged
in one or more of the prohibited activities as an incidental part of its
activities; acquiring commercial paper or other short term debt
instruments of entities engaged in one or more of the prohibited
businesses; or owning an interest in the Land Partnership.
- All indebtedness of Lennar or any of its homebuilding subsidiaries to LNR
or any of its subsidiaries, and all indebtedness of LNR or any of its
subsidiaries, to Lennar or any of its homebuilding subsidiaries, will be
eliminated immediately before the date of the Spin-Off.
- Lennar will indemnify LNR or any of its subsidiaries, against any
liabilities or expenses relating to (a) Lennar's homebuilding business,
(b) any Lennar obligations for borrowings incurred before the date of the
Spin-Off which are not assumed by LNR, or (c) any registration statement,
proxy statement, press release or other document issued by Lennar in
connection with the Merger (except with regard to information about LNR
provided in writing by LNR).
- LNR will indemnify Lennar and each of its homebuilding subsidiaries
against any liabilities or expenses relating to (i) the real estate
investment and management business, (ii) any obligations assumed by LNR
or any of its subsidiaries, (iii) the Spin-Off, (iv) the Information
Statement relating to the Spin-Off, (v) any press release or any document
issued by LNR with regard to the Spin-Off, (vi) any obligations,
including contingent obligations, of Lennar or any of its past or current
subsidiaries or affiliates existing on or before the date of the Spin-Off
that did not arise exclusively or primarily in the conduct of Lennar's
homebuilding business (except that indemnification with regard to Lennar
corporate financings or other Lennar corporate activities which do not
specifically relate to any aspects of its operations will be limited to
71.5% of the liability or expense) and (vii) any actual or
51
62
contingent liabilities of Lennar or any of its past or current
subsidiaries or affiliates existing on or before the date of the Spin-Off
relating to any business or line of business which at any time was
treated on Lennar's consolidated financial statements as a discontinued
operation or a discontinued line of business, or which was divested by
Lennar or any of its current or former subsidiaries prior to the date of
the Spin-Off.
- If, other than because of actions taken by Lennar after completion of the
Merger, it is determined that the Spin-Off did not qualify as a
transaction in which the LNR stock distributed to the Lennar stockholders
does not result in income or gain to the Lennar stockholders and does not
require Lennar to recognize income or gain, and as a result Lennar incurs
any liabilities for taxes, interest or penalties to any taxing
jurisdiction which it would not have incurred if the Spin-Off had been
tax free, LNR will pay Lennar an amount equal to the liabilities incurred
for taxes, interest and penalties as a result of the Spin-Off and all
related accounting, legal and professional fees, as well as any costs,
expenses or damages Lennar incurs as a result of stockholder litigation
or controversies because the Spin-Off is not tax free.
- All transactions between Lennar or any of its homebuilding subsidiaries
and LNR or any of its subsidiaries must be on substantially the same
terms as those which would prevail in a transaction between unaffiliated
persons. Neither Lennar nor any of its homebuilding subsidiaries may
enter into any transaction with LNR or any of its subsidiaries which will
involve a payment or loan of more than $5 million unless Lennar receives
a copy of a resolution of LNR's Board of Directors in which that Board of
Directors determines that the transaction is on substantially the same
terms as those which would prevail in a transaction between unaffiliated
persons. Neither LNR nor its subsidiaries may enter into any transaction
with Lennar or any of its homebuilding subsidiaries which will involve a
payment or loan of more than $5 million unless LNR or a subsidiary
receives a copy of a resolution of Lennar's Board of Directors in which
that Board of Directors determines that the transaction or loan is on
substantially the same terms as those which would prevail in a
transaction between unaffiliated persons. The requirement that
transactions be on substantially the same terms as those which would
prevail in a transaction between unaffiliated persons does not include
transactions with the Land Partnership.
- LNR will pay Lennar an amount equal to its share of Lennar's total income
tax liability for the period from December 1, 1996 to the date of the
Spin-Off, allocating income to LNR and its subsidiaries on a basis
provided in the Treasury Regulations as if Lennar and LNR were separately
incorporated members of the same consolidated group during that period
and LNR owned and operated Lennar's real estate investment and management
business during the period.
- Lennar and LNR will each give the other access to their books and records
and knowledgeable personnel in order to permit the other to prepare
financial statements and tax returns, in connection with audits of tax
returns, and for other business purposes.
- If, after an audit required by the Merger Agreement, it is determined
that Lennar's Effective Time Net Worth was less or more than $200 million
plus the amount intended to approximate the anticipated earnings of
Lennar and its homebuilding subsidiaries from August 31, 1997 to the date
of the Merger, LNR will pay Lennar a sum equal to the amount by which
Lennar's Effective Time Net Worth was less than that amount, or Lennar
will pay LNR a sum equal to the amount by which Lennar's Effective Time
Net Worth was more than that amount.
Under the Separation and Distribution Agreement, the obligations of Lennar
and LNR to carry out the Spin-Off are conditioned upon, among other things, (a)
Lennar's having obtained the Tax Ruling that the Spin-Off will qualify under
Section 355(a) of the Code, and accordingly, no gain or loss will be recognized
to (and no amount will be included in the income of) Lennar Stockholders upon
receipt of the stock of LNR, and no gain or loss will be recognized to Lennar as
the result of the Spin-Off, and (b) the LNR Common Stock's having been
authorized for a listing on the NYSE. The Tax Ruling has been obtained and
Lennar has been informed that LNR's Common Stock will be authorized for listing
on the New York Stock Exchange when a required Securities and Exchange
Commission filing (which has been made) becomes effective.
52
63
As of May 31, 1997, LNR and its subsidiaries had a pro forma book value
(giving effect to contributions by Lennar to LNR's capital in connection with
the Spin-Off and to LNR's proposed contribution to the Land Partnership) of $543
million and pro forma total debt of $321 million.
THE LAND PARTNERSHIP
Wholly owned subsidiaries of LNR and Lennar will enter into a Partnership
Agreement creating the Land Partnership which will be known as Lennar Land
Partners. Lennar and LNR, through their subsidiaries, will each own 50% of the
Land Partnership. The purpose of the Land Partnership will be to have Lennar and
LNR share the risks and profits of ownership of some real property which has
been acquired by Lennar for use in its homebuilding activities, and possibly
additional properties which will be acquired in the future. Prior to formation
of the Land Partnership, Lennar will transfer to the LNR subsidiary properties
or interests in properties which are to be contributed by it to the Land
Partnership and which will represent approximately 50% of the fair value of all
the assets initially contributed to the Land Partnership. Lennar will contribute
the remaining assets to its own subsidiary. The LNR subsidiary and the Lennar
subsidiary will then each contribute the original properties or interests in
properties to the Land Partnership in exchange for a 50% interest in the Land
Partnership.
Lennar will manage the day-to-day activities of the Land Partnership under
a management agreement. Lennar will be reimbursed by the Land Partnership for
all direct out-of-pocket expenses and will receive an agreed amount per month
for certain indirect expenses. The monthly reimbursement for indirect expenses
for 1997 has been set at $500,000. The amount of the reimbursement for indirect
expenses is subject to adjustment in the Land Partnership's annual business
plan.
The Land Partnership will be governed by an Executive Committee of not more
than three members designated by each partner, with all the members designated
by a partner acting as representatives of that partner (without fiduciary or
other obligations to the other partner) and together having a single vote.
Actions of the Executive Committee must be by majority vote (based upon one vote
per partner). Therefore, while the LNR and Lennar subsidiaries are the only
partners, each of them will have a veto over all matters presented to the
Executive Committee. Even if there were additional partners, a number of matters
would require the unanimous vote of the Executive Committee (based upon one vote
per partner), including (i) the acquisition by the Land Partnership of real
property, other than the original properties contributed by Lennar and LNR, (ii)
the sale of any real property to a partner or an affiliate of a partner, other
than upon exercise of an option or under a purchase agreement which had been
approved by the Executive Committee, (iii) the adoption of an annual business
plan, (iv) approval of a master plan relating to a property owned by the Land
Partnership, (v) any transaction or series of transactions involving the
expenditure by the Land Partnership of $50,000, unless the transactions were
contemplated by a business plan adopted by the Executive Committee, in which
case the threshold amount is the greater of $50,000 or 110% of the budgeted
amount, (vi) a borrowing from or loan to any person, including a partner or its
affiliate, (vii) any amendment to the Management Agreement with Lennar, (viii)
any requirement that the partners make additional capital contributions to the
Land Partnership, or (ix) any agreement with a partner or an affiliate of a
partner which is not otherwise subject to the requirement of unanimous Executive
Committee approval.
Although Lennar may recommend that the Land Partnership acquire additional
properties, Lennar will be under no obligation to do so, and Lennar will be free
to acquire properties itself without considering whether they would be suitable
for the Land Partnership. Conversely, because of the requirements discussed
above for unanimous Executive Committee approval of acquisitions of properties,
LNR could, in effect, veto any future property acquisitions by the Land
Partnership. If Lennar failed to recommend that the Land Partnership acquire
additional properties, or LNR vetoed all proposed acquisitions of additional
properties by the Land Partnership, the activities of Land Partnership would be
limited to developing and disposing of the original properties which are
contributed to it when it is formed.
The Surviving Corporation's Bylaws will provide that its representatives on
the Executive Committee of the Land Partnership may not vote in favor of any
action specified to require the unanimous vote of the Executive Committee
without approval of the Independent Directors Committee of the Surviving
Corpora-
53
64
tion's Board of Directors, none of the members of which may be an officer or
employee of the Surviving Corporation or a subsidiary or a director, officer or
employee of LNR or any subsidiary of Lennar.
When Lennar transfers properties to the Land Partnership (or to LNR to be
contributed by it to the Land Partnership) as part of its initial contribution
to the Land Partnership, Lennar will retain options to repurchase many of those
properties for use in its homebuilding operations. Those options will be at
prices which Lennar believes are similar to what they would have been if the
options had been from unrelated persons. However, some other provisions of the
options are more favorable to Lennar than what would have been expected in
options from unrelated persons. For example, Lennar is not required to pay for
the options or to keep them in effect. The procedures described above under
which LNR can veto sales of properties to Lennar, other than upon exercise of
options, and can veto future property acquisitions by the Land Partnership, are
intended to ensure that any transactions between Lennar and the Land Partnership
other than upon exercise of options retained by Lennar when properties are
contributed to the Land Partnership will be on terms substantially similar to
those which would prevail in transactions with unrelated persons. In addition,
it is expected that any options which the Land Partnership may grant Lennar in
the future will be on terms substantially similar to those which would prevail
in transactions with unrelated persons.
OTHER RELATIONSHIPS
There will be a number of relationships between Lennar and LNR after the
Spin-Off, in addition to those arising under the Separation and Distribution
Agreement or relating to the Land Partnership. Among other things, immediately
after the Spin-Off, all the stockholders of LNR will be persons who were
stockholders of Lennar immediately before the Spin-Off. More importantly,
Leonard Miller, who will have voting control of the Surviving Corporation and
will be its Chairman of the Board, is expected also to have voting control of
LNR through his ownership of LNR Class B Common Stock. Mr. Miller will own 27.6%
of LNR's stock, which, if nobody but Mr. Miller elects to receive LNR Class B
Common Stock, will entitle Mr. Miller to approximately 79% of the votes which
can be cast by LNR stockholders. Also, Stuart Miller, who will be the chief
executive officer of the Surviving Corporation, will be the Chairman of the
Board (but not a full time employee) of LNR, and Steven Saiontz, the Chief
Executive Officer of LNR, will be a director of the Surviving Corporation.
Stuart Miller is Leonard Miller's son. Steven Saiontz is Leonard Miller's
son-in-law. In addition, LNR and the Surviving Corporation will, for a period
after the Spin-Off, share some computers and other facilities and some computer
service personnel, Lennar may continue to oversee construction of four
commercial projects owned by LNR until they are completed, and Lennar may
service residential mortgages owned by LNR. Also, Lennar leases office space
from LNR. Finally, because all LNR's employees immediately after the Spin-Off
will be people who were previously employees of Lennar, LNR will have to assume
many of Lennar's benefit obligations with regard to the people who become
employees of LNR.
54
65
MANAGEMENT OF THE SURVIVING CORPORATION
The directors and executive officers of the Surviving Corporation will be
as follows:
NAME POSITION
----------------------------------------- ------------------------------------------------
Leonard Miller........................... Chairman of the Board and Director
Stuart A. Miller......................... President, Chief Executive Officer and Director
Irving Bolotin........................... Senior Vice President and Director
Cory J. Boydston......................... Vice President -- Finance
Allan J. Pekor........................... Vice President; Secretary
Marshall H. Ames......................... Vice President
Jonathan M. Jaffe........................ Vice President
Sherman J. Kronick....................... Vice President
M. Eugene Saleda......................... Treasurer
Diane J. Bessette........................ Controller
Charles I. Babcock, Jr. ................. Director
Sidney Lapidus........................... Director
Reuben S. Leibowitz...................... Director
Steven J. Saiontz........................ Director
Arnold P. Rosen.......................... Director
For information regarding the ages and business backgrounds of the
executive officers of the Surviving Corporation (other than Cory Boydston and
Diane Bessette, whose descriptions are contained below), reference is made to
the caption "Directors and Executive Officers of the Registrant" in Part III of
the Lennar 10-K. Similar information regarding the Surviving Corporation's
directors (other than Sidney Lapidus and Reuben Leibowitz), as well as
additional information regarding directors and executive officers, including
executive compensation, securities ownership of certain beneficial owners and
management and certain relationships and related transactions, is incorporated
by reference to Items 10, 11, 12 and 13 of the Lennar 10-K (which incorporates
portions of Lennar's definitive proxy statement for Lennar's 1997 Annual Meeting
of Stockholders), which is incorporated herein by reference. Similar information
regarding Sidney Lapidus and Reuben Leibowitz is incorporated by reference to
Part III of the Greystone 10-K (which incorporates portions of Greystone's
definitive proxy statement for Greystone's 1997 Annual Meeting of Stockholders),
which is incorporated herein by reference.
Cory J. Boydston, age 38, Vice President -- Finance. Mrs. Boydston has
been employed by Lennar for 10 years and is currently responsible for all
financial and administrative areas of Lennar, including accounting, finance,
treasury, tax, management information systems, risk management, internal audit,
legal and human resources. Prior to assuming these responsibilities, she served
as Chief Financial Officer for Lennar's investment division operation in Atlanta
and was Lennar's Corporate Controller, as well as a homebuilding division
controller and the corporate Director of Financial Systems. Before joining
Lennar, Mrs. Boydston worked in several financial capacities at Hayes
Microcomputer Products and was a Senior Auditor with Arthur Andersen & Co. Mrs.
Boydston received a Bachelor of Science degree in Accounting from Florida State
University in 1981 and holds a CPA license in the State of Georgia.
Diane J. Bessette, age 36, Controller. Ms. Bessette has been employed by
Lennar for two years. In her current position, she is responsible for the
accounting and management information system functions of Lennar. Prior to her
current position, Ms. Bessette was the Assistant Controller for Lennar. Before
joining Lennar, she was a Financial Senior Manager at The Holson Burnes Group,
Inc. and was a Manager at Price Waterhouse LLP. Ms. Bessette received a Bachelor
of Arts degree in Psychology from Rhode Island College and a Master of Science
degree in Accounting from the University of Rhode Island. She holds a CPA
license from the State of Rhode Island.
55
66
ADDITIONAL DIRECTOR
The Merger Agreement contemplates that the Surviving Corporation will have
one additional director. That person, who has not yet been identified, will be
appointed after the consummation of the Merger.
DESCRIPTION OF THE CAPITAL STOCK OF THE SURVIVING CORPORATION
GENERAL
The total authorized number of shares of stock of the Surviving Corporation
will be 130,500,000 shares. Of these, 100,000,000 shares are classified as
Common Stock, 30,000,000 shares are classified as Class B Common Stock and
500,000 shares are classified as Preferred Stock. If at any time after shares of
Surviving Corporation Class B Common Stock are issued, there no longer are any
outstanding shares of Surviving Corporation Class B Common Stock, the
authorization to issue Surviving Corporation Class B Common Stock will terminate
and after that time the shares of stock the Surviving Corporation is authorized
to issue will be 130,000,000 shares of Common Stock and 500,000 shares of
Preferred Stock.
All the shares of Surviving Corporation Common Stock and Surviving
Corporation Class B Stock to be issued in connection with the Merger will be
fully paid and non-assessable. Holders of shares of Surviving Corporation Common
Stock, Surviving Corporation Class B Stock and Surviving Corporation Preferred
Stock will not have any preemptive rights to subscribe for or purchase any
securities of the Surviving Corporation, except that (i) if the Surviving
Corporation distributes any of its stock to its stockholders, it will distribute
Common Stock to the holders of its Common Stock and Class B Common Stock to the
holders of its Class B Common Stock, and (ii) the resolutions of the Surviving
Corporation's Board of Directors authorizing the creation of particular series
of Preferred Stock may give preemptive rights to the holders of that series of
Preferred Stock.
PREFERRED STOCK
The Surviving Corporation Certificate of Incorporation authorizes the
Surviving Corporation Board to issue, without action or approval of the
Surviving Corporation stockholders, one or more series of Surviving Corporation
Preferred Stock with such relative rights, voting power, preferences and
restrictions as shall be stated in the resolution or resolutions providing for
the issuance thereof.
COMMON STOCK AND CLASS B COMMON STOCK
The Surviving Corporation's Common Stock and Class B Common Stock will be
identical in all respects, except as described below.
Dividends
The cash dividends paid with regard to a share of Class B Common Stock in a
calendar year may not be more than 90% of the cash dividends paid with regard to
a share of Common Stock in that calendar year. Each dividend or distribution
made to the holders of Common Stock or Class B Common Stock (other than cash
dividends) will be distributable to the holders of the Common Stock and the
Class B Common Stock without regard to class, except that in the case of
dividends or other distributions payable in stock of the Surviving Corporation
other than Preferred Stock, the stock distributed with respect to the Common
Stock will be additional shares of Common Stock and the stock distributed with
respect to the Surviving Class B Common Stock will be additional shares of Class
B Common Stock.
Voting Rights
With respect to all matters upon which stockholders are entitled to vote or
to give consents, (1) the holders of the Common Stock and the holders of the
Class B Common Stock will vote together without regard to class, (2) each holder
of record of Common Stock will be entitled to one vote for each share of Common
Stock, and (3) each holder of record of Class B Common Stock will be entitled to
ten votes for each share
56
67
held in his or her name, except that any amendment to the Surviving
Corporation's Certificate of Incorporation which would change the number of
authorized shares, the par value or the voting rights of, the restriction on
dividends upon, or any other provision of the Certificate of Incorporation
relating to, the Common Stock or the Class B Common Stock, in addition to being
adopted as required by law, must be approved by holders of a majority of the
shares of Common Stock which vote with regard to the amendment. Holders of
shares of Common Stock and Class B Common Stock do not have any cumulative
voting rights.
Restrictions on Transfer of Surviving Corporation Class B Stock
No beneficial owner of shares of Class B Common Stock may transfer shares
of Class B Common Stock, except to a Permitted Transferee of that Class B Common
Stockholder. A "Permitted Transferee" of a Class B Stockholder is (i) the Class
B Stockholder's spouse; (ii) a parent or lineal descendant (including an adopted
child) of a parent of the Class B Stockholder, or the spouse of a lineal
descendant of a parent of the Class B Stockholder; (iii) a trustee, guardian or
custodian for, or an executor, administrator or other legal representative of
the estate of, the Surviving Corporation Class B Stockholder, or a trustee,
guardian or custodian for any Permitted Transferee of the Class B Stockholder;
(iv) the trustee of a trust (including a voting trust) for the benefit of the
Class B Stockholder or (v) a corporation, partnership or other entity of which
the Class B Stockholder and Permitted Transferees of the Class B Stockholder are
the beneficial owners of a majority in voting power of the equity.
Conversion of Surviving Corporation Class B Stock into Surviving Corporation
Common Stock
A Class B Stockholder may at any time convert shares of Class B Common
Stock into a like number of shares of Common Stock. Common Stock may not be
converted into Class B Common Stock. Therefore, once Class B Common Stock has
been converted into Common Stock, the Common Stock may not be reconverted into
Class B Common Stock. If at any time the number of outstanding shares of Class B
Common Stock is less than 10% of the outstanding shares of Common Stock and
Class B Common Stock taken together, the Class B Common Stock will automatically
be converted into, and become for all purposes, shares of Common Stock.
Liquidation
Upon the liquidation of the Surviving Corporation, the assets available for
distribution to the holders of the Common Stock and the Class B Common Stock,
after satisfaction of all the Surviving Corporation's obligations and any
preferential payments to which holders of its Preferred Stock, if any, may be
entitled, will be paid equally to the holders of the shares of Common Stock and
the Class B Common Stock as though they were shares of the same class.
STAGGERED BOARD OF DIRECTORS
The Surviving Corporation's Certificate of Incorporation provides that the
Surviving Corporation's Board will be divided into three classes, with one class
of directors to be elected for a three-year term at each annual meeting of
stockholders.
TRANSFER AGENT
The Transfer Agent for the Surviving Corporation Common Stock is Bank of
Boston, N.A., Canton, Massachusetts.
57
68
COMPARATIVE RIGHTS OF STOCKHOLDERS
If the Merger is consummated, holders of Lennar Common Stock and Greystone
Common Stock will become holders of Surviving Corporation Common Stock. In
connection with the Merger, the Surviving Corporation will restate the Greystone
Certificate of Incorporation and adopt new bylaws (the "Surviving Corporation
Certificate of Incorporation and Bylaws"). The rights of the Surviving
Corporation's stockholders will be governed by the Surviving Corporation
Certificate of Incorporation and Bylaws, which will be substantially similar to
the existing Lennar Certificate of Incorporation and Bylaws. The rights of
Greystone Stockholders differ in certain respects from the rights of Surviving
Corporation stockholders. The following is a summary of the material differences
in the rights of Stockholders of Lennar and Greystone and Surviving Corporation
stockholders. Unless otherwise noted, the rights of the Surviving Corporation's
stockholders are identical to those of Lennar Stockholders.
CAPITALIZATION
Lennar. The authorized capital stock of Lennar consists of 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 $10.00 per share ("Lennar Preferred
Stock"). As of September 2, 1997, there were 26,097,675 shares of Lennar Common
Stock outstanding held of record by 788 stockholders, 9,966,631 shares of Lennar
Class B Stock outstanding held of record by approximately 18 stockholders and no
shares of Lennar Preferred Stock outstanding.
The Lennar Certificate of Incorporation authorizes the Lennar Board to
provide for the issuance of Lennar Preferred Stock in one or more series and to
fix the designation, dividend rate, terms of redemption, preferences, sinking
fund provisions, terms of conversion, voting rights and any other rights,
preferences, powers and restrictions not inconsistent with applicable law of
each such series without any further vote or action by the holders of Lennar
Common Stock or Lennar Class B Stock.
Greystone. The authorized capital stock of Greystone consists of
35,000,000 shares of Greystone Common Stock and 5,000,000 shares of Preferred
Stock, par value $.01 per share ("Greystone Preferred Stock"). As of September
9, 1997, there were 14,967,229 shares of Greystone Common Stock outstanding held
of record by approximately 30 stockholders and no shares of Greystone Preferred
Stock outstanding.
The Greystone Certificate of Incorporation authorizes the Greystone Board
to provide for the issuance of Greystone Preferred Stock in one or more series
and to fix the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations and restrictions thereof,
without any further vote or action by the holders of Greystone Common Stock.
Surviving Corporation. The authorized capital stock of the Surviving
Corporation will consist of 100,000,000 shares of Surviving Corporation Common
Stock, 30,000,000 shares of Surviving Corporation Class B Stock and 500,000
shares of Preferred Stock, par value $10.00 per share.
VOTING RIGHTS
Lennar. With respect to all matters upon which stockholders of Lennar are
entitled to vote or to which Lennar Stockholders are entitled to give consent,
the holders of the outstanding shares of Lennar Common Stock and Lennar Class B
Stock will vote together without regard to class. Each holder of Lennar Common
Stock is entitled to one vote for each share held of record and may not cumulate
votes for the election of directors. Each holder of Lennar Class B Stock is
entitled to ten votes for each share held of record and may not cumulate votes
for the election of directors.
Greystone. Each holder of Greystone Common Stock is entitled to one vote
for each share held of record and may not cumulate votes for the election of
directors.
58
69
NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS
Lennar. The number of persons constituting the Lennar Board is seven. The
Lennar Certificate of Incorporation provides that the Lennar Board will consist
of not fewer than three and not more than fifteen directors. The directors of
Lennar are divided into three classes, with approximately one-third of the
directors elected by the stockholders annually. Consequently, members of the
Lennar Board serve staggered three-year terms.
The Lennar Certificate of Incorporation provides that if there is a vacancy
on the Lennar Board, other than a vacancy resulting from the removal of a
director, or if the number of directors is increased, the directors in office by
majority vote may fill the vacancy or newly created directorship, or any such
vacancy or newly created directorship may be filled by the stockholders at an
annual meeting of stockholders. If a vacancy occurs because of the removal of a
director, that vacancy may only be filled by the stockholders at an annual
meeting of stockholders. A director elected to fill a vacancy or newly created
directorship will serve for the remainder of the then present term of office of
the class to which he or she is elected.
Under the Lennar Bylaws, the holders of record of Lennar Common Stock and
Lennar Class B Stock may, by a majority vote, remove only for cause any Lennar
director originally elected by them or any director who filled a vacancy created
by the death or resignation of any director originally elected by them.
Greystone. The Greystone Certificate of Incorporation provides that the
Greystone Board will consist of such number of directors as shall be determined
from time to time in the manner provided in the Greystone Bylaws, and in the
absence of such determination, the Board will consist of seven directors. The
current number of directors is six. The directors of Greystone are divided into
three classes, with approximately one-third of the directors elected by the
stockholders annually. Consequently, members of the Greystone Board serve
staggered three-year terms.
The Greystone Certificate of Incorporation provides that any vacancy on the
Greystone Board may be filled by the majority vote of the remaining directors of
the class in which such vacancy occurs or by the sole remaining director of that
class if only one such director remains, or by the majority vote of the members
of the remaining classes if no such director remains. A director elected to fill
a vacancy will serve for the remainder of the then present term of office of the
class to which he or she is elected. Notwithstanding any of the provisions of
the Greystone Certificate of Incorporation, whenever the holders of any class or
classes of stock or series thereof are entitled to elect one or more directors,
vacancies and newly created directorships of such class or classes or series may
be filled by a majority of the directors elected by such class or classes or
series thereof then in office, or by the sole remaining director so elected.
Under the Greystone Certificate of Incorporation, any Greystone director
may be removed only for cause by the holders of a majority of the shares of
Greystone then entitled to vote for the election of directors.
Surviving Corporation. The number of persons constituting the Surviving
Corporation's Board may not be fewer than three nor more than fifteen. Following
the Merger, the number of persons constituting the Surviving Corporation's Board
will be eight. The Surviving Corporation's Board must appoint an Independent
Directors Committee consisting of three or more independent directors. The
Surviving Corporation may not, without the approval of the Independent Directors
Committee, (i) take certain actions regarding the Land Partnership; (ii) incur,
or permit any of its subsidiaries to incur, guarantee or otherwise become
obligated with regard to any indebtedness which will cause the Surviving
Corporation and its subsidiaries to have a consolidated ratio of debt to
tangible net worth which is more than 2.5:1 or a ratio of earnings to fixed
charges for the most recent twelve month period which is less than 2:1; (iii)
enter into, or permit any of its subsidiaries to enter into, any transactions
with LNR or any of its subsidiaries; or (iv) agree to any amendment of, or give
any waiver or consent under, the Separation and Distribution Agreement. The
Independent Directors Committee will be automatically disbanded, and its
approval rights will lapse, on November 30, 2002.
If the Merger is approved by Greystone Stockholders representing at least
75% of the outstanding shares of Greystone Common Stock entitled to vote with
regard to the Merger, then the Surviving Corporation Certificate of
Incorporation will contain provisions dividing the Surviving Corporation Board
into three classes serving staggered three-year terms and establishing the
standards for removal of directors similar to those
59
70
contained in the Lennar Certificate of Incorporation. If, however, the Merger is
approved by Greystone Stockholders representing less than 75% of the outstanding
shares of Greystone Common Stock entitled to vote with regard to the Merger,
then the Surviving Corporation Certificate of Incorporation will contain
provisions with regard to those matters similar to those contained in the
Greystone Certificate of Incorporation.
AMENDMENTS TO CERTIFICATES OF INCORPORATION
Lennar. Lennar's Certificate of Incorporation may be amended in any manner
provided for by law.
Greystone. Greystone's Certificate of Incorporation provides that the
affirmative vote of the holders of at least 75% of the outstanding shares of
stock entitled to vote, voting together as a single class, shall be required to
alter, amend or repeal the provisions which (i) require stockholder action at an
annual or special meeting, and not by written consent; (ii) require advance
notice of stockholder nominations for the election of directors and of business
to be brought by stockholders before any meeting of the stockholders; (iii)
divide Greystone's Board into three classes serving staggered three-year terms
and establish the standards for removal of directors described above under
"-- Number, Election, Vacancy and Removal of Directors;" and (iv) require a 75%
vote to amend the provisions described in (i), (ii) and (iii) above.
Surviving Corporation. If the Merger is not approved by Greystone
Stockholders representing at least 75% of the outstanding shares of Greystone
Common Stock entitled to vote with regard to the Merger, then the Surviving
Corporation Certificate of Incorporation will contain an amendment provision
similar to the Greystone provision discussed above. If the Merger is approved by
Greystone Stockholders representing at least 75% of the outstanding shares of
Greystone Common Stock entitled to vote with regard to the Merger, then the
Surviving Corporation Certificate of Incorporation may be amended in any manner
provided for by law.
AMENDMENTS TO BYLAWS
Lennar. Lennar's Bylaws may be amended by the holders of Lennar Common
Stock and Lennar Class B Stock or by the Lennar Board by a majority vote at any
meeting called for that purpose, except that the affirmative vote of a majority
of the outstanding stock entitled to vote on the election of directors is
required to alter, amend or repeal the provisions which (i) provide for the
election of officers and the filling of any vacancy of an officer; (ii) specify
the duties of the chairman of the board and the president; and (iii) amend the
provisions described in (i) and (ii) above.
Greystone. Greystone's Bylaws may be altered, amended or repealed by
Greystone Stockholders or by the Greystone Board at any regular or special
meeting of the stockholders or Greystone Board, as applicable.
Surviving Corporation. The provisions regarding the Independent Directors
Committee in the Surviving Corporation's Bylaws may only be amended with the
approval of the Independent Directors Committee or with the affirmative vote of
the holders of a majority of the shares of Surviving Corporation Common Stock
(voting separate and apart from the Surviving Corporation Class B Stock) which
are voting with respect to the amendment.
STOCKHOLDER ACTION
Lennar. Since the Lennar Certificate of Incorporation does not prohibit or
limit stockholder actions by written consent, Lennar Stockholders may act by
written consent without a meeting or by vote at a meeting.
Greystone. The Greystone Certificate of Incorporation provides that any
action required or permitted to be taken by its stockholders must be taken at an
annual or special meeting of stockholders and may not be taken by written
consent.
Surviving Corporation. If the Merger is approved by Greystone Stockholders
representing at least 75% of the outstanding shares of Greystone Common Stock
entitled to vote with regard to the Merger, then the Surviving Corporation
Certificate of Incorporation will provide that stockholders may act by written
consent
60
71
without a meeting or by vote at a meeting. If, however, the Merger is approved
by Greystone Stockholders representing less than 75% of the outstanding shares
of Greystone Common Stock entitled to vote with regard to the Merger, then the
Surviving Corporation Certificate of Incorporation will provide that any action
required or permitted to be taken by its stockholders must be taken at an annual
or special meeting of stockholders and may not be taken by written consent.
NOTICE OF CERTAIN STOCKHOLDER ACTIONS
Lennar. The Lennar Certificate of Incorporation does not require advance
notice of stockholder nominations for election of directors or of business to be
brought by stockholders before any meeting of stockholders.
Greystone. The Greystone Certificate of Incorporation provides that a
stockholder must give advance notice to the Secretary of Greystone of
stockholder nominations for election of directors and in order to properly bring
business before an annual meeting of stockholders. Under the Greystone Bylaws,
in either case, a stockholder's written notice must be delivered to or mailed
and received at the principal executive offices of Greystone not less than 60
days nor more than 90 days prior to the meeting, or, if less than 70 days'
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, then not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made.
Surviving Corporation. If the Merger is approved by Greystone stockholders
representing at least 75% of the outstanding shares of Greystone Common Stock
entitled to vote with regard to the Merger, then the Surviving Corporation
Certificate of Incorporation and Bylaws will not require advance notice of
stockholder nominations for election of directors or of business to be brought
by stockholders before any meeting of stockholders. If, however, the Merger is
not approved by that requisite vote, then the Surviving Corporation Certificate
of Incorporation and Bylaws will have provisions similar to the Greystone
Certificate of Incorporation and the Greystone Bylaws with regard to advance
notice of stockholder actions.
SPECIAL STOCKHOLDER MEETINGS
Lennar. The Lennar Bylaws provide that special meetings of stockholders
may be called for any purpose by the president of Lennar, or by the Lennar Board
(either by written instrument signed by a majority or by resolution adopted by a
vote of the majority), and special meetings shall be called by Lennar's
president or secretary whenever stockholders owning a majority of any class of
capital stock issued, outstanding and entitled to vote at such meeting so
request in writing.
Greystone. The Greystone Bylaws provide that special meetings of
stockholders may be called for any purpose by the president of Greystone, and
shall be called by Greystone's president or secretary at the request in writing
of a majority of the Greystone Board or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of
Greystone issued, outstanding and entitled to vote.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
The DGCL provides that a corporation's certificate of incorporation may
include a provision limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. However, no such provision can eliminate or limit the
liability of a director for (i) any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
violation of Section 174 of the DGCL regarding unlawful payment of dividends or
unlawful stock purchases or redemptions, (iv) any transaction from which the
director derived an improper personal benefit or (v) any act or omission prior
to the adoption of such a provision in the certificate of incorporation.
Lennar. The Lennar Certificate of Incorporation does not contain any
provision limiting the personal liability of its directors.
61
72
Greystone. The Greystone Certificate of Incorporation provides that no
director shall be personally liable to Greystone or to its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Greystone or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.
Surviving Corporation. The Surviving Corporation Certificate of
Incorporation provides that no director shall be personally liable to the
Surviving Corporation or to its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Surviving Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or
(iv) for any transaction from which the director derived an improper personal
benefit.
DIVIDENDS
Lennar. The Lennar Certificate of Incorporation provides that cash
dividends paid with regard to a share of Lennar Class B Stock in a calendar year
may not be more than 90% of the cash dividends paid with regard to a share of
Lennar Common Stock in that calendar year. Each dividend or distribution made to
the holders of Lennar Common Stock or Lennar Class B Stock (other than cash
dividends) will be distributable to the holders of Lennar Common Stock and
Lennar Class B Stock without regard to class, except that in the case of
dividends or other distributions payable in stock of Lennar other than Lennar
Preferred Stock, the stock distributed with respect to Lennar Common Stock will
be additional shares of Lennar Common Stock and the stock distributed with
respect to Lennar Class B Stock will be additional shares of Lennar Class B
Stock.
Greystone. The Greystone Bylaws provide that dividends may be paid in
cash, in property or in shares of Greystone capital stock.
CONVERSION
Lennar. Holders of Lennar Common Stock have no rights to convert their
Common Stock into any other securities. A holder of Lennar Class B Stock may at
any time convert shares of Lennar Class B Stock into a like number of shares of
Lennar Common Stock by surrendering the certificates representing the shares of
Lennar Class B Stock to be converted to Lennar accompanied by a request that all
or a specified number of the shares of Lennar Class B Stock represented by the
certificates be converted into Lennar Common Stock. Once Lennar Class B Stock
has been converted into Lennar Common Stock, the Lennar Common Stock may not be
reconverted into Lennar Class B Stock. If at any time the number of outstanding
shares of Lennar Class B Stock is less than 10% of the outstanding shares of
Lennar Common Stock and Lennar Class B Stock taken together, the Lennar Class B
Stock will automatically be converted into, and become for all purposes, shares
of Lennar Common Stock.
Greystone. Holders of Greystone Common Stock have no rights to convert
their Common Stock into any other securities.
APPRAISAL RIGHTS
NEITHER THE HOLDERS OF LENNAR COMMON STOCK NOR THE HOLDERS OF GREYSTONE
COMMON STOCK ARE ENTITLED TO APPRAISAL RIGHTS WITH RESPECT TO THE MERGER. Under
the DGCL, dissenters' appraisal rights are not available for shares of any class
of stock which are listed on a national securities exchange and are to be
converted into shares of stock of another corporation which are listed on a
national securities exchange. Both the Lennar Common Stock and the Greystone
Common Stock are listed on the NYSE and the Surviving Corporation Common Stock
is expected to be listed on the NYSE after the Merger. Accordingly, neither the
holders of Lennar Common Stock nor the holders of Greystone Common Stock are
entitled to dissenters' rights in connection with the Merger.
62
73
CERTAIN HOLDERS OF LENNAR CLASS B STOCK ARE ENTITLED TO APPRAISAL RIGHTS
WITH RESPECT TO THE MERGER. If the Merger is consummated, a holder of record of
Lennar Class B Stock (other than Leonard Miller's family partnerships, who own
all but 36,601 of the outstanding shares of Lennar Class B Stock and have agreed
to vote for the adoption of the Merger Agreement and approval of the Merger
which will, in turn, eliminate their appraisal rights) on the date of making a
demand for appraisal, as described below, who (i) continues to hold those shares
through the Effective Time; (ii) strictly complies with the procedures set forth
under Section 262 of the DGCL; and, (iii) has not voted in favor of the Merger,
will be entitled to have those shares appraised by the Delaware Court of
Chancery under Section 262 and to receive payment for the "fair value" of these
shares in lieu of the consideration provided for in the Merger Agreement. This
Joint Proxy Statement/Prospectus is being sent to all holders of record of
Lennar Class B Stock on the record date for the Lennar Special Meeting and
constitutes notice of the appraisal rights available to those holders under
Section 262. THE STATUTORY RIGHT OF APPRAISAL GRANTED BY SECTION 262 REQUIRES
STRICT COMPLIANCE WITH THE PROCEDURES SET FORTH IN SECTION 262. FAILURE TO
FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF
DISSENTERS' RIGHTS UNDER SECTION 262. The following is a summary of the
principal provisions of Section 262.
A holder of Lennar Class B Stock electing to exercise appraisal rights
under Section 262 must deliver a written demand for appraisal of such
stockholder's shares to Lennar prior to the vote on the Merger. The written
demand must identify the stockholder of record and state the stockholder's
intention to demand appraisal of his shares. All demands should be delivered to
Lennar Corporation, Attention: Cory J. Boydston, Vice President -- Finance,
Lennar Corporation, 700 Northwest 107th Avenue, Miami, Florida 33172.
Only a holder of shares of Lennar Class B Stock on the date of making a
written demand for appraisal who continuously holds those shares through the
Effective Time is entitled to seek appraisal. Demand for appraisal must be
executed by or for the holder of record, fully and correctly, as that holder's
name appears on the holder's stock certificates representing shares of Lennar
Class B Stock. If Lennar Class B Stock is owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, the demand should be made
in that capacity, and if Lennar Class B Stock is owned of record by more than
one person, as in a joint tenancy or tenancy in common, the demand should be
made by or for all owners of record. An authorized agent, including one or more
joint owners, may execute the demand for appraisal for a holder of record; that
agent, however, must identify the record owner or owners and expressly disclose
in the demand that the agent is acting as agent for the record owner or owners
of the shares.
A record holder such as a broker who holds shares of Lennar Class B Stock
as a nominee for beneficial owners, some of whom desire to demand appraisal,
must exercise appraisal rights on behalf of those beneficial owners with respect
to the shares of Lennar Class B Stock held for those beneficial owners. In that
case, the written demand for appraisal should set forth the number of shares of
Lennar Class B Stock covered by it. Unless a demand for appraisal specifies a
number of shares, the demand will be presumed to cover all shares of Lennar
Class B Stock held in the name of the record owner.
BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO EXERCISE
APPRAISAL RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO COMPLY WITH THE STATUTORY
REQUIREMENTS WITH RESPECT TO THE EXERCISE OF APPRAISAL RIGHTS BEFORE THE DATE OF
THE LENNAR SPECIAL MEETING.
Within 10 days after the Effective Time, the Surviving Corporation is
required to send notice of the effectiveness of the Merger to each stockholder
who prior to the Effective Time complies with the requirements of Section 262.
Within 120 days after the Effective Time, the Surviving Corporation or any
stockholder who has complied with the requirements of Section 262 may file a
petition in the Delaware Court of Chancery demanding a determination of the fair
value of the shares of the Surviving Corporation Class B Stock held by all
stockholders seeking appraisal. A dissenting stockholder must serve a copy of
the petition on the Surviving Corporation. If no petition is filed by either the
Surviving Corporation or any dissenting stockholder within the 120-day period,
the rights of all dissenting stockholders to appraisal will cease. Stockholders
seeking to exercise appraisal rights should not assume that the Surviving
Corporation will file a petition with respect to
63
74
the appraisal of the fair value of their shares or that the Surviving
Corporation will initiate any negotiations with respect to the fair value of
those shares. The Surviving Corporation is under no obligation to and has no
present intention to take any action in this regard. Accordingly, stockholders
who wish to seek appraisal of their shares should initiate all necessary action
with respect to the perfection of their appraisal rights within the time periods
and in the manner prescribed in Section 262. FAILURE TO FILE THE PETITION ON A
TIMELY BASIS WILL CAUSE THE STOCKHOLDER'S RIGHT TO AN APPRAISAL TO CEASE.
Within 120 days after the Effective Time, any stockholder who has complied
with subsections (a) and (d) of Section 262 is entitled, upon written request,
to receive from the Surviving Corporation a statement setting forth the
aggregate number of shares of Lennar Class B Stock not voted in favor of the
Merger with respect to which demands for appraisal have been received by Lennar
and the number of holders of those shares. The statement must be mailed within
10 days after the written request has been received by Lennar or within 10 days
after expiration of the time for delivery of demands for appraisal under
subsection (d) of Section 262, whichever is later.
If a petition for an appraisal is filed in a timely manner, at the hearing
on the petition, the Delaware Court of Chancery will determine which
stockholders are entitled to appraisal rights and will appraise the shares of
Lennar Class B Stock owned by those stockholders, determining the fair value of
those shares, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, to be paid,
if any, upon the amount determined to be the fair value. In determining fair
value, the court is to take into account all relevant factors. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings. The
Delaware Supreme Court has stated that, in making this determination of fair
value, the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts that were known or
that could be ascertained as of the date of the merger that throw any light on
future prospects of the merged corporation. The Delaware Supreme Court also held
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenter's exclusive remedy.
Stockholders considering seeking appraisal should consider that the fair
value of their shares determined under Section 262 could be more than, the same
as, or less than, the value of the consideration provided for in the Merger
Agreement without the exercise of appraisal rights, and that investment banking
opinions as to fairness from a financial point of view are not necessarily
opinions as to fair value as determined under Section 262. The cost of the
appraisal proceeding may be determined by the Court of Chancery and assessed
against the parties as the Court deems equitable in the circumstances. Upon
application of a dissenting stockholder, the court may order that all or a
portion of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding (including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts) be charged pro rata
against the value of all shares of Lennar Class B Stock entitled to appraisal.
In the absence of such a determination or assessment, each party bears its own
expenses.
Any stockholder who has fully demanded appraisal in compliance with Section
262 will not, after the Effective Time, be entitled to receive payment of
dividends or other distributions on the Lennar Class B Stock, except for
dividends or distributions payable to stockholders of record at a date prior to
the Effective Time.
A stockholder may withdraw a demand for appraisal and accept the Surviving
Corporation Class B Stock at any time within 60 days after the Effective Time,
or thereafter may withdraw such a demand with the written approval of the
Surviving Corporation. If an appraisal proceeding is properly instituted,
proceeding may not be dismissed as to any stockholder without the approval of
the Delaware Court of Chancery, and any such approval may be conditioned on the
Court of Chancery's deeming the terms to be just. If, after the Effective Time,
a holder of Lennar Class B Stock who had demanded appraisal for the holder's
shares fails to perfect or loses his right to appraisal, those shares will be
treated under the Merger Agreement as if they had been converted as of the
Effective Time into Surviving Corporation Class B Stock.
64
75
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE LAW, ANY LENNAR
CLASS B STOCKHOLDER WHO IS CONSIDERING EXERCISING APPRAISAL RIGHTS SHOULD
CONSULT A LEGAL ADVISOR.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Lennar has received an opinion of its counsel, Rogers & Wells, to the
effect that for federal income tax purposes, the Merger of Lennar with and into
Greystone, in accordance with the terms of the Merger Agreement, will constitute
a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code and
will not result in gain or loss to Lennar or Lennar Stockholders. The opinion of
Rogers & Wells also states that the aggregate tax bases of the shares of
Surviving Corporation Common Stock or Surviving Corporation Class B Stock
received by a Lennar Stockholder in accordance with the terms of the Merger
Agreement will be the same as the aggregate tax bases of the shares of Lennar
Common Stock or Lennar Class B Stock surrendered in exchange therefor. The
holding period of the shares of Surviving Corporation Common Stock or Surviving
Corporation Class B Stock will include the period during which the shares of
Lennar Common Stock or Lennar Class B Stock surrendered in exchange therefor
were held, provided such shares of Lennar Common Stock or Lennar Class B Stock
were held as capital assets at the Effective Time.
Greystone will receive at Closing an opinion of its counsel, Wachtell,
Lipton, Rosen & Katz, to the effect that for federal income tax purposes (a) the
Merger will constitute a "reorganization" within the meaning of Section
368(a)(1)(A) of the Code and will not result in gain or loss to Greystone or
Greystone Stockholders and (b) Greystone Stockholders will not recognize gain or
loss as a result of the receipt of the Stock Dividend. Greystone's receipt of a
favorable tax opinion is a condition to Greystone's obligations to complete the
Merger. Greystone will not waive this condition.
These opinions are made in reliance on upon certain representations of the
managements of Lennar and Greystone as to certain facts and circumstances
regarding the Merger.
Each Greystone Stockholder must allocate its current basis in its Greystone
Common Stock between those shares and the shares received pursuant to the Stock
Dividend based upon their respective relative fair market values.
NEW TAX LEGISLATION NOT APPLICABLE
Under the Revenue Act of 1997 (the "Revenue Act"), a corporation which
distributes the stock of a subsidiary in a spin-off will be required to
recognize gain if the spin-off is part of a plan in which one or more persons
acquire directly or indirectly stock representing a 50% or greater interest in
either the distributing corporation or the subsidiary. If one or more persons
acquire stock representing a 50% or greater interest in the distributing
corporation or the subsidiary within two years before or after the spin-off, the
acquisition will be treated as being part of a plan unless it is established
that that was not the case. The Merger will result in Greystone Stockholders'
receiving only 32% of the stock of the Surviving Corporation. Therefore, even
though the Spin-Off and the Merger probably would be treated as having been part
of the same plan, the provision of the Revenue Act will not apply to the Merger.
Also, the Revenue Act states that it will not apply to a spin-off which involves
an acquisition described in a ruling request submitted to the Internal Revenue
Service on or before April 16, 1997. Lennar filed the request for the Tax Ruling
regarding the Spin-Off on April 11, 1997 and, while it did not name Greystone,
it described the Greystone transaction in the ruling request (and the Greystone
transaction is a principal factor cited by the Internal Revenue Service in the
Tax Ruling it issued).
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT TAKE ACCOUNT OF
SPECIAL TAX CONSIDERATIONS WHICH MAY APPLY TO PARTICULAR STOCKHOLDERS. LENNAR
AND GREYSTONE STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR MORE
SPECIFIC AND DEFINITIVE ADVICE AS TO THE FEDERAL INCOME TAX CONSEQUENCES TO THEM
OF THE MERGER, AS WELL AS
65
76
ADVICE AS TO THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS AND POSSIBLE AMENDMENTS TO SUCH LAWS.
LEGAL MATTERS
The validity of the shares of Greystone Common Stock and Greystone Class B
Stock to be issued in connection with the Merger will be passed upon for
Greystone by the law firm of O'Melveny & Myers LLP, Los Angeles, California.
Certain of the tax consequences of the Merger to Greystone Stockholders will be
passed upon by Wachtell, Lipton, Rosen & Katz, New York, New York.
Certain of the tax consequences of the Merger to Lennar Stockholders will
be passed upon by Rogers & Wells, New York, New York.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this Joint Proxy Statement/Prospectus by reference
from the Lennar 10-K have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by reference
and have been so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing. Representatives of
that firm are expected to be present at the Lennar Special Meeting. They will be
given an opportunity to make a statement if they wish to do so, and are expected
to be available to respond to appropriate questions.
The consolidated financial statements of Greystone appearing in the
Greystone 10-K have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing. Representatives of that firm are expected to
be present at the Greystone Special Meeting. They will be given an opportunity
to make a statement if they wish to do so, and are expected to be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS
As previously announced, any proposals of Greystone Stockholders intended
to be presented at the 1998 Annual Meeting of Stockholders (if such meeting is
required), must be received by Greystone for inclusion in Greystone's proxy
statement no later than November 18, 1997.
As previously announced, any proposals of Lennar Stockholders intended to
be presented at the 1998 Annual Meeting of Stockholders (if such meeting is
required), must be received by Lennar for inclusion in Lennar's proxy statement
no later than November 3, 1997.
Any proposals of Surviving Corporation Stockholders intended to be
presented at the 1998 Annual Meeting of Stockholders (if such meeting is
required), must be received by Surviving Corporation for inclusion in Surviving
Corporation's proxy statement no later than November 3, 1997.
66
77
ANNEX I
PLAN AND AGREEMENT OF MERGER
DATED AS OF
JUNE 10, 1997
BETWEEN
PACIFIC GREYSTONE CORPORATION
AND
LENNAR CORPORATION
78
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.......................................................................... 1
2.3 Directors........................................................................ 1
2.4 Officers......................................................................... 1
2.5 Stock of Greystone............................................................... 1
2.6 Stock of Lennar.................................................................. 1
2.7 Exchange of Certificates......................................................... 2
2.8 Greystone Options................................................................ 2
ARTICLE III
EFFECTIVE TIME
3.1 Date of the Merger............................................................... 2
3.2 Execution of Certificate of Merger............................................... 3
3.3 Effective Time of the Merger..................................................... 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Lennar......................................... 3
4.2 Representations and Warranties of Greystone...................................... 8
4.3 Termination of Representations and Warranties.................................... 11
ARTICLE V
ACTIONS PRIOR TO THE MERGER
5.1 Activities Until Effective Time.................................................. 12
5.2 HSR Act Filings.................................................................. 14
5.3 Registration Statement, Proxy Statements and Stockholders' Meetings.............. 14
5.4 No Solicitation of Offers; Notice of Indications of Interest..................... 15
5.5 Lennar's Efforts to Fulfill Conditions........................................... 15
5.6 Greystone's Efforts to Fulfill Conditions........................................ 16
5.7 Merger Date Audit................................................................ 16
5.8 Indemnification for Prior Acts................................................... 17
5.9 Amendments to the Spin Off Agreement and Partnership Agreement................... 18
5.10 Compensation, Benefits........................................................... 18
ARTICLE VI
CONDITIONS PRECEDENT TO MERGER
6.1 Conditions to Greystone's Obligations............................................ 19
6.2 Conditions to Lennar's Obligations............................................... 21
i
79
PAGE
----
ARTICLE VII
TERMINATION
7.1 Right to Terminate............................................................... 21
7.2 Manner of Terminating Agreement.................................................. 22
7.3 Effect of Termination............................................................ 22
ARTICLE VIII
ABSENCE OF BROKERS
8.1 Representations and Warranties Regarding Brokers and Others...................... 23
ARTICLE IX
GENERAL
9.1 Expenses......................................................................... 23
9.2 Access to Properties, Books and Records.......................................... 23
9.3 Plan of Reorganization........................................................... 24
9.4 Press Releases................................................................... 24
9.5 Entire Agreement................................................................. 24
9.6 Survival of Obligations.......................................................... 24
9.7 Effect of Disclosures............................................................ 24
9.8 Captions......................................................................... 24
9.9 Prohibition Against Assignment................................................... 24
9.10 Modification or Amendment........................................................ 24
9.11 Waiver of Conditions............................................................. 24
9.12 No Third Party Beneficiaries..................................................... 24
9.13 Notices and Other Communications................................................. 24
9.14 Governing Law.................................................................... 25
9.15 Counterparts..................................................................... 25
ii
80
PLAN AND AGREEMENT OF MERGER
This is a Plan and Agreement of Merger, dated as of June 10, 1997 between
PACIFIC GREYSTONE CORPORATION ("Greystone"), a Delaware corporation, and LENNAR
CORPORATION ("Lennar"), a Delaware corporation.
ARTICLE I
MERGER OF LENNAR AND GREYSTONE
1.1 The Merger. At the Effective Time (defined below), Lennar will be
merged with and into Greystone (the "Merger"), with Greystone being the
surviving corporation of the Merger (the "Surviving Corporation"). Except as
specifically 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, immunities, 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 Corporate 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 Effective Time (defined below)
until subsequently amended, the Certificate 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 Effective 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
certificate 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 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
81
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 after 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 receive 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 Effective 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
exchanging Old Certificates for New Certificates. When Old Certificates 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.
(c) If an Old Certificate has been lost, stolen or destroyed, the Surviving
Corporation will accept an affidavit 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 acting 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, escheat or similar laws.
2.8 Greystone Options. All options granted by Greystone pursuant to any
plans listed on Exhibit 4.2-O(2) that are outstanding as of the Effective Time
(collectively, the "Company 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 Dividend) 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).
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.
2
82
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. Lennar 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.
(b) Lennar has all corporate power and authority necessary to enable
it to enter into this Agreement and carry out the transactions contemplated
by this Agreement. All corporate actions necessary to authorize 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"), constitute approval sufficient so that neither Greystone nor
any record or beneficial owner of stock of Greystone will be subject 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 agreement 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, neither the execution or
delivery of this Agreement, the Spin Off Agreement or the Partnership
Agreement (the "Partnership Agreement") between Lennar and LPC forming
Lennar Land Partners (the "Land Partnership") or any document to be
delivered in accordance 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, 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.
3
83
(d) Lennar and each of its subsidiaries is qualified to do business as
a foreign corporation in each jurisdiction in which it is required to be
qualified, except jurisdictions 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, liabilities 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.
(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 Effective 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 Lennar Stock, and there are no convertible
or exchangeable securities or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which Lennar is bound to
issue any additional shares of its capital stock or other securities.
(f) Except as shown on Exhibit 4.1-F, no notices, reports or other
filings are required to be made by Lennar or any of its subsidiaries with,
nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by Lennar from, any governmental or regulatory
authority, agency, court, commission or other entity, domestic or foreign
("Governmental Entity"), in connection with the execution, 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.
(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 outstanding 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 covenants or transfer or
voting restrictions with respect to outstanding securities of any of
Lennar's subsidiaries, and there are no convertible or exchangeable
securities or other contracts, 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 exhibits, post-effective amendments and
supplements thereto) required to be filed by it under each of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the
4
84
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 applicable requirements of the appropriate
act and the rules and regulations thereunder. As of their respective dates,
the Lennar SEC Reports 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 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 otherwise) of any nature, except
liabilities, obligations or contingencies 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 primarily 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. 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 results 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 subsidiaries
for the same period of the prior year. Since November 30, 1996, the
business of the Lennar Companies has been conducted 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 divide its businesses into (A) its homebuilding business (including
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 homebuyers and homeowners, its business of
maintaining common areas for homeowners and the portion of its financial
services business relating to providing financing to residential home
purchasers (both of homes sold by Lennar subsidiaries and of homes sold by
others) and homeowners, servicing residential mortgages, providing or
obtaining title insurance for homebuyers, providing closing services to
homebuyers and investing in securities 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 Management
Business"), and distribute the Asset Management Business to its
stockholders (the division of Lennar's businesses into the Homebuilding
Business and the Asset Management Business and the distribution of the
Asset
5
85
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 Exhibit 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 operations of the Homebuilding Business
at the dates, and for the periods, to which they relate, subject to
possible audit adjustments 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 Homebuilding Business
will in the future include the 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, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees, except where
the failure to comply 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 (Lennar and those
subsidiaries collectively being the "Homebuilding Companies") has all
permits, licenses, certificates 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 Lennar or such subsidiary to carry on its business as it is
presently conducted, except for such permits, licenses, certificates,
orders, filings, applications and registrations, 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 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
6
86
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, 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 administrative 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 organize 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
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 Employee 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.
7
87
(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 compliance with all applicable Environmental Laws (as defined
below), and (ii) neither Lennar 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 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
Environmental Law. As used in this Agreement, "Environmental Law" means (i)
any federal, state, foreign or local law, statute, ordinance, rule,
regulation, code, license, permit, authorization, 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 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 Partnership 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 authority necessary to
enable it to enter into this Agreement and carry out the transactions
contemplated by this Agreement. All corporate actions necessary to
authorize Greystone to enter into this Agreement and to carry out the
transactions contemplated by it, other than approval by the stockholders of
Greystone, 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 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, neither the execution and
delivery of this Agreement or of any document to be delivered in accordance
with this Agreement nor the consummation of the transactions contemplated
by this Agreement or by any document to be delivered in accordance with
this Agreement will (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
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
obligation under, or the creation of a lien, pledge, security interest or
other encumbrance on the assets or properties of Greystone 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
8
88
Contracts") 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
individually 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 jurisdiction in which it is required to be
qualified, except 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 securities.
(f) Except as shown on Exhibit 4.2-F, no notices, reports or other
filings are required to be made by Greystone or any of its subsidiaries
with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Greystone from, any Governmental
Entity 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.
(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
authorized, 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 restrictions with respect to outstanding securities of
any of Greystone's subsidiaries, and there are no convertible or
exchangeable securities or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which any of Greystone's
subsidiaries are bound to issue any additional shares of their capital
stock or other equity securities.
(h) Since June 20, 1996, Greystone has filed with the SEC all forms,
statements, reports and documents (including all exhibits, post-effective
amendments and supplements thereto) required to be filed by it under each
of the Securities Act, the Exchange Act and the respective rules and
regulations 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
9
89
statements and unaudited interim consolidated financial statements of
Greystone included in the Greystone SEC Reports have been prepared in
accordance with 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 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
"Greystone 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 aggregate, 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 Balance Sheet or the Greystone
Interim Balance Sheet. Since March 31, 1997, Greystone has made all
disclosures about its activities 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 subsidiaries 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 operations 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 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 subsidiaries 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 conducted 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, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees, except where
the failure to comply 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, certificates 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, applications and
registrations, 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 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 Returns the failure of which to file would not in the
aggregate have a Material Adverse Effect on Greystone, 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
Greystone or its subsidiary, and (ii) duly paid in full or made adequate
provision in accordance with GAAP for the payment of all Taxes
10
90
(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 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 Greystone or any of its subsidiaries. Exhibit 4.2-O(2)
is a complete 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 Greystone 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 provisions 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 Exhibit 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 aggregate, would not reasonably be
expected to have a 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
11
91
rights or claims as a result of any of those representations 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 assets 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 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) borrowings 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, (ii) as to Lennar, borrowings under the
arrangements which are the subject of the Loan Commitments (or other
arrangements 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 Asset Management Business after the Spin-Off and
with respect to which neither the Surviving Corporation nor any of its
subsidiaries 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 commitments 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.
(f) Not directly or indirectly redeem, purchase, repurchase or
otherwise acquire any shares of its capital 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
subsidiaries of Lennar to Lennar or other wholly owned subsidiaries of
Lennar, (ii) regular quarterly dividends on regularly scheduled payment
dates by Lennar not higher than the per share quarterly dividends it
declared on April 8, 1997, (iii) distributions by Lennar pursuant to the
Spin Off Agreement, (iv) payments by subsidiaries of Greystone to Greystone
or other subsidiaries 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, stockholders, directors, officers
12
92
or employees or to any "affiliate" (other than a subsidiary) or
"associate", of any of the foregoing (as such terms are defined in Rule
12(b)-2 promulgated under the Exchange Act).
(h) Maintain its books of account and records in the usual manner, in
accordance with GAAP applied on a consistent basis, subject to normal
year-end adjustments and accruals and not make any change in any accounting
methods or systems of internal accounting controls, except as may be
appropriate 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 Entities.
(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 ordinary course of business in states in which
it is doing business on the date of this Agreement 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 benefit (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 business 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
employee 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
arrangements which are necessary, or which Lennar deems advisable, to take
account of the Spin-Off and which, on the date the amendments 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 outstanding options or materially change the terms of any
options (except, possibly, to accelerate the time when they can be
exercised), and as to other plans, do not increase the total liabilities 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 options
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 issue 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, understandings, 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
13
93
as a tax-free distribution under Section 355 of the Code or that would
cause any of its representations and warranties herein to become untrue in
any material 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 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 transactions 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 Commission 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 assist 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 practicable 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 assure
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 Registration Statement, including consolidated
financial statements of Lennar and its subsidiaries at November 30, 1996 and for
the three years ended on that date 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 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 about Greystone
included in the Registration Statement, in the light of the circumstances under
which they are made, not misleading.
14
94
(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 information provided by Lennar, in the light
of the circumstances under 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) relating 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 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 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 included 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 adjournments
which may be required to comply with law or with any order 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 neither it nor any of its
subsidiaries nor any of the officers or directors of it or its subsidiaries
shall, and that it shall direct and use its best efforts to cause its and its
subsidiaries' employees, agents and representatives (including any investment
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,
reorganization, share exchange, consolidation or similar transaction involving
it or any other person or entity, or any purchase 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 proposal. Nothing herein
shall prevent any disclosure of any determination 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 Acquisition Proposal which Greystone's Board of
Directors determines, in good faith and after consultation with its independent
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
negotiations with such Potential Acquiror.
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 Paragraph 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 nothing 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
15
95
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 subparagraph (a), Lennar will use its
best efforts to cause all holders of obligations which will be assumed by LPC
under the Assumption Agreement with regard to which Lennar or any subsidiary
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 obligation, 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 subparagraph (b) and in obtaining the consents described on Exhibit
6.1-C.
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 Paragraph 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 consolidated 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 effect 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 Deloitte & 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 Surviving Corporation.
(b) Promptly after the Effective Time Balance Sheet is available to it, the
Surviving Corporation will deliver 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 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 Effective 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 (defined 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
16
96
Exception Report is delivered to the Independent Directors with regard to each
item specified in the Exception Report. If Ernst & Young and Deloitte & 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 conclusive on the parties. If issues in
dispute are submitted to the Accountants for resolution, LPC and the Surviving
Corporation (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
accountants), and each party will be afforded the opportunity to present to the
Accountants any material relating to the determination 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 effect
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 "Lennar 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 Surviving Corporation shall
honor in accordance with their respective terms and maintain in full force and
effect without limitation 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
certificate of 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 subsidiaries 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 directors
and officers liability insurance in effect at the date of this Agreement, which
are listed on Exhibit 5.8-A(2) (notwithstanding any provision of such policies
that such policies terminate as a result of the Merger), and from and after the
Effective 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 officers liability insurance comparable to that maintained by Greystone as
of the date hereof with respect to matters occurring 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
subsidiaries, (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,
17
97
whether civil, criminal, 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 indemnification under
subparagraph (b) of this Paragraph 5.8, upon learning of the claim, action,
suit, proceeding or investigation 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 liability 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
investigation (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 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 Corporation 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 Partnership
Agreement. Without the prior written consent of Greystone, 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 Employees"), (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
compensation, benefits and base compensation which in the aggregate are no less
favorable than that provided by Greystone or its subsidiaries to such Greystone
Employees immediately prior to the Effective Time and (ii) it is Lennar's
current intention (although 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 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
applicable to Greystone Employees after the Effective Time, all service by
Greystone Employees with Greystone and its subsidiaries 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
benefits. Except as contemplated by the amendments to employment agreements
listed
18
98
on Exhibit 4.2-O(2), the Surviving Corporation shall honor all employment
agreements and individual severance 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 obligations 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 Lennar contained in this
Agreement, and all representations and warranties of Lennar and LPC
contained in the Spin Off 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 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
representations and warranties are expressly made as of a specified date)
and Lennar will have delivered to Greystone a 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 Agreement 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 invalidates 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, immediately prior to such completion, all
conditions contained in Paragraph 3.1 of the Spin Off Agreement will have
been satisfied (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 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 Agreement substantially in the form of
Exhibit 6.1-H(1).
19
99
(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 interest 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 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 indebtedness) will not exceed $50 million in aggregate.
(m) The documents by which Lennar and its subsidiaries 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 agreements 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 regard to Lennar Land Partners will be as shown on Exhibit 6.1-M(2),
in each case unless altered with the consent of Greystone. Without limiting
the foregoing, such documents providing 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 otherwise) 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 assumption and indemnification obligations shall survive any exercise
of any option to purchase such property or asset.
(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 recognized to
Lennar as a result of the distribution of stock of LPC to Lennar's
stockholders in connection with the Spin-Off, except that Rogers & Wells
may except from its opinion the possibility that Lennar will realize income
or gain as a result of any payment required by Paragraph 10.1 of the Spin
Off Agreement.
20
100
(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 obligations of Lennar to
complete the Merger are subject to the following conditions (any or all of which
may be waived by Lennar):
(a) All representations and warranties of Greystone 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
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 material 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 invalidates 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 material after the Merger
to the Surviving Corporation and its subsidiaries.
(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 common 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 Section 368(a)(1)(A) of the Code and that the Merger will
not result in gain or loss to Lennar's stockholders.
ARTICLE VII
TERMINATION
7.1 Right to Terminate. This Agreement may be terminated 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 Effective Time is not on or
before December 31, 1997; provided however that the right to terminate this
Agreement under this Paragraph 7.1(b) will not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of the failure of the Effective Time to occur on or before that date.
21
101
(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
aggregate, 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 covenants or agreements 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.
(d) By Greystone, if it receives a Superior Proposal on or before
August 9, 1997, and its Board of Directors 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
provision; provided, however, 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 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 determined 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
intention 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 intention, which will be not earlier than the
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.
(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 advisor, that
such offer constitutes a Superior Proposal and resolves to accept such
Superior Proposal or recommend to Greystone's stockholders that they tender
their shares in response to such tender or exchange offer and (C) Greystone
shall have given Lennar ten business days' prior notice of its intention to
terminate pursuant to this provision; provided, however, 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 terminate this Agreement pursuant to this subparagraph (e) and
subparagraph (d)). A notice of intention 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 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 terminate this Agreement, it can terminate
this agreement by a notice to the other of them that it is terminating this
Agreement.
7.3 Effect of Termination. (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
obligations under this Agreement, other than the parties' respective obligations
under Paragraph 9.1 and the second sentence of Paragraph 9.2(a) and (b). Nothing
in this Paragraph will, however, relieve either party of liability for any
wilful or intentional breach of any covenant contained in this Agreement which
occurs before this Agreement is terminated.
(b) If the Tax Ruling is not obtained by December 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
occurred and (iii) all the conditions in Paragraph 6.2, other than those in
Paragraphs
22
102
6.2(d), 6.2(f), 6.2(g) and 6.2(h) have been fulfilled (or would be fulfilled
upon delivery of appropriate certificates by officers of the parties), Lennar
will pay Greystone the sum of $5 million within 20 days after this Agreement is
terminated.
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 limited to, reasonable fees and expenses of counsel
and costs of investigation) incurred because of any claim by anyone for
compensation as a broker, a finder or in any similar capacity by reason of
services allegedly rendered to the indemnifying party 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 terminated, Lennar will, and will cause each of its
subsidiaries to, give representatives of Greystone reasonable access during
normal business hours to all of their respective management, properties, books
and records. Until the Effective Time, Greystone will, 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 information (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 terminated, 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, properties, 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 obligation 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 Greystone or a subsidiary, or (iv) otherwise
is independently developed 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
23
103
material obtained by Lennar from Greystone or a subsidiary in connection with
the transactions which are the subject of this Agreement or evidence that that
material has been destroyed by Lennar.
9.3 Plan of Reorganization. This Agreement is intended to be a plan of
reorganization for the purposes of Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended.
9.4 Press Releases. Greystone and Lennar will consult with each other
before issuing any press releases or otherwise making any public statements with
respect to this Agreement or the transactions contemplated by it, except that
nothing 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 transactions 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 representations, warranties, understandings or agreements
concerning the transactions which are the subject of this Agreement or those
other documents other than those expressly set forth in this Agreement or those
other documents.
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 Lennar), including but not limited to its, obligations under
Paragraphs 5.7, 5.8 and 5.10, will survive the Effective Time and the Merger.
9.7 Effect of Disclosures. Any information disclosed by a party in
connection with any representation or warranty contained in this Agreement
(including exhibits to this Agreement) will be treated as having been disclosed
in connection 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 provisions of the
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized 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 provided in Paragraph 2.8
(Greystone Options) or Paragraph 8 (Indemnification; Directors' and Officers'
Insurance), this Agreement 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 of America, to the
following addresses (or such other
24
104
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 applicable 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 signatures of some, but not all, the
parties. Each of those counterparts will be deemed an original, but all of them
together will constitute one and the same agreement.
IN WITNESS WHEREOF, Greystone and Lennar have executed 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 A. MILLER
------------------------------------
Title: President
PACIFIC GREYSTONE CORPORATION
By: /s/ JACK R. HARTER
------------------------------------
Title: President
25
105
ANNEX II
[LETTERHEAD OF SMITH BARNEY INC.]
June 10, 1997
The Board of Directors
Pacific Greystone Corporation
6767 Forest Lawn Drive
Los Angeles, California 90068
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Pacific Greystone Corporation
("Greystone") of the Exchange Ratio (as defined below) set forth in the
Agreement and Plan of Merger, dated as of June 10, 1997 (the "Merger
Agreement"), between Greystone and Lennar Corporation ("Lennar"). As more fully
described in the Merger Agreement, (i) Lennar will be merged with and into
Greystone (the "Merger"), with Greystone being the surviving corporation (the
"Surviving Corporation") and current holders of the Common Stock, par value
$0.01 per share, of Greystone (the "Greystone Common Stock") owning
approximately 32% of the outstanding shares of the Common Stock, par value $0.10
per share, of the Surviving Corporation (the "Surviving Corporation Common
Stock") and (ii) each outstanding share of the Common Stock, par value $0.10 per
share, of Lennar (the "Lennar Common Stock") will be converted into the right to
receive one share of Surviving Corporation Common Stock and each outstanding
share of the Class B Common Stock, par value $0.10 per share, of Lennar (the
"Lennar Class B Common Stock") will be converted into the right to receive one
share of the Class B Common Stock, par value $0.10 per share, of the Surviving
Corporation (the "Surviving Corporation Class B Common Stock" and the number of
shares of Surviving Corporation Common Stock and Surviving Corporation Class B
Common Stock into which each share of Lennar Common Stock and Lennar Class B
Common Stock will be converted in the Merger, the "Exchange Ratio"). We
understand that, immediately prior to the consummation of the Merger, (i) the
asset management business of Lennar ("Asset Management Co.") will be distributed
to Lennar's stockholders (the "Spin-Off"), (ii) a 13.8% stock dividend will be
paid to holders of Greystone Common Stock (the "Stock Dividend") and (iii)
Lennar's residential land inventory will be transferred to a joint venture in
which each of Asset Management Co. and the Surviving Corporation will own a 50%
general partnership interest (the "Land Partnership").
In arriving at our opinion, we reviewed the Merger Agreement and certain related
documents, and held discussions with certain senior officers, directors and
other representatives and advisors of Greystone and certain senior officers and
other representatives and advisors of Lennar concerning the businesses,
operations and prospects of Greystone and Lennar. We examined certain publicly
available business and financial information relating to Greystone and Lennar as
well as certain financial forecasts and other information and data for Greystone
and Lennar which were provided to or otherwise discussed with us by the
respective managements of Greystone and Lennar, including information relating
to certain strategic implications and operational benefits anticipated to result
from the Merger. We reviewed the financial terms of the Merger as set forth in
the Merger Agreement in relation to, among other things: current and historical
market prices and trading volumes of Greystone Common Stock; the historical and
projected earnings and other operating data of Greystone and Lennar; and the
capitalization and financial condition of Greystone and Lennar. We considered,
to the extent publicly available, the financial terms of other transactions
recently effected which we considered relevant in evaluating the Merger and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of Greystone and Lennar. We also
evaluated the potential pro forma financial impact of the Merger on Greystone.
In connection with our engagement, we were requested to approach, and held
discussions with, third parties to solicit indications of interest in a possible
acquisition of Greystone. In addition to the foregoing, we conducted such other
analyses and examinations and considered such other financial, economic and
market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise
106
The Board of Directors
Pacific Greystone Corporation
June 10, 1997
Page 2
reviewed by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with us,
we have been advised by the managements of Greystone and Lennar that such
forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of Greystone and Lennar as to the future financial performance of
Greystone and Lennar and the strategic implications and operational benefits
anticipated to result from the Merger. We have assumed, with your consent, that
the Merger will be treated as a tax-free reorganization for federal income tax
purposes. We also have assumed that the Spin-Off, Stock Dividend and Land
Partnership will be effected in accordance with the terms contemplated thereby
prior to consummation of the Merger and, the extent relevant to our analysis,
have evaluated Greystone and Lennar after giving effect to such transactions. We
are not expressing any opinion as to what the value of the Surviving Corporation
Common Stock or Surviving Corporation Class B Common Stock actually will be when
issued to Lennar stockholders pursuant to the Merger or the prices at which the
Surviving Corporation Common Stock or Surviving Corporation Class B Common Stock
will trade or otherwise be transferable subsequent to the Merger. We have not
made or been provided with an independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of Greystone and Lennar nor have we
made any physical inspection of the properties or assets of Greystone and
Lennar. Our opinion is necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
Smith Barney has been engaged to render financial advisory services to Greystone
in connection with the proposed Merger and will receive a fee for such services,
a significant portion of which is contingent upon the consummation of the
Merger. We also will receive a fee in connection with the delivery of this
opinion. In the ordinary course of our business, we and our affiliates may
actively trade or hold the securities of Greystone and Lennar for our own
account or for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities. We have in the past provided
investment banking services to Greystone unrelated to the proposed Merger, for
which services we have received compensation. In addition, we and our affiliates
(including Travelers Group Inc. and its affiliates) may maintain relationships
with Greystone and Lennar.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Greystone in its evaluation of the
proposed Merger, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on any
matter in connection with the proposed Merger. Our opinion may not be published
or otherwise used or referred to, nor shall any public reference to Smith Barney
be made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of Greystone Common Stock.
Very truly yours,
SMITH BARNEY INC.
107
ANNEX III
SEPARATION AND DISTRIBUTION AGREEMENT
This is an agreement dated June 10, 1997 between Lennar Corporation
("Lennar"), a Delaware corporation, and LPC, Inc. ("LPC"), a Delaware
corporation.
Lennar formed LPC with the intention of contributing to LPC, through
contributions of the stock of various Lennar subsidiaries and of assets of other
subsidiaries, and assumptions of obligations by LPC, the assets and liabilities
constituting Lennar's entire commercial and multi-family residential real estate
asset management business and the portion of Lennar's finance business relating
to the financing of commercial properties (together, the "Commercial Asset
Management Business"). The Commercial Asset Management Business is described on
Exhibit A. Lennar will retain its business of building and selling single family
detached and attached homes and condominium units in low-rise buildings and
related activities, as well as the portion of its finance business relating to
the financing of residential homes (the "Homebuilding Business"). The
Homebuilding Business is described on Exhibit B.
In forming LPC, Lennar acquired 100 shares of common stock of LPC ("Common
Stock"). After Lennar contributes the Commercial Asset Management Business to
LPC, Lennar intends to distribute the stock of LPC to Lennar's stockholders at
the rate of one share of Common Stock for each share of common stock of Lennar
("Lennar common stock") or Class B common stock of Lennar ("Lennar Class B
Stock"), and to give each Lennar stockholder the right to exchange Common Stock
for Class B Common Stock of LPC ("Class B Common Stock") by an election (an
"Exchange Election") delivered to LPC at least 10 days prior to the date the
Common Stock is to be distributed to Lennar's stockholders.
The purpose of this Agreement is to set forth the agreement between Lennar
and LPC regarding the issuance of the Common Stock and Class B Common Stock
which is to be distributed to Lennar's stockholders and matters relating to the
activities of Lennar and its subsidiaries and of LPC and its subsidiaries after
the distribution of that stock to Lennar's stockholders.
Lennar and LPC agree as follows:
ARTICLE I
CONTRIBUTIONS OF COMMERCIAL ASSET MANAGEMENT BUSINESS
1.1 Contribution of Assets. (a) Not later than the day before the
Distribution Date (defined below), Lennar will contribute to LPC or wholly owned
subsidiaries of LPC all the shares of all the subsidiaries of Lennar which are
engaged wholly or primarily in aspects of the Commercial Asset Management
Business.
(b) To the extent that Lennar or any of its subsidiaries which do not
become subsidiaries of LPC on or before the Distribution Date (together the
"Lennar Companies") own any assets which are not used, and are not expected to
be used, wholly or primarily in connection with the Homebuilding Business, not
later than the day before the Distribution Date, the applicable Lennar Companies
will transfer those assets to LPC or subsidiaries designated by LPC. To the
extent that LPC or any subsidiaries which are contributed by Lennar to LPC on or
before the Distribution Date (LPC and its subsidiaries on the Distribution Date
being the "LPC Companies") own any assets which are used, or are expected to be
used, primarily in connection with the Homebuilding Business, not later than the
day before the Distribution Date, the applicable LPC Companies will transfer
those assets to Lennar or subsidiaries designated by Lennar.
(c) Not later than the day before the Distribution Date, Lennar will
contribute to LPC cash or additional assets so that, after the assumption by LPC
Companies of obligations of Lennar and its subsidiaries as described in
Paragraph 1.2, the net worth of the Lennar Companies will be reduced to the
Lennar Minimum Net Worth, as that term is described in a Plan and Agreement of
Merger (the "Merger Agreement") dated the same date as this Agreement between
Lennar and Pacific Greystone Corporation.
108
(d) Lennar and the other Lennar Companies, and LPC and the other LPC
Companies, will execute and deliver such deeds, bills of sale, stock powers and
other documents, and will do such other things, as are necessary or appropriate
to carry out the contributions and transfers of assets described in the
preceding subparagraphs of this Paragraph and which, at the request of Pacific
Greystone Corporation, will be satisfactory in form and substance to Pacific
Greystone Corporation.
1.2 Assumption of Obligations and Liabilities. Not later than the day
before the Distribution Date, Lennar and LPC will execute an Assignment and
Assumption Agreement (the "Assumption Agreement") in the form of Exhibit 1.2 by
which (i) the Lennar Companies assign certain contracts, agreements, and
commitments (the "Assigned Agreements") to LPC Companies, (ii) the LPC Companies
agree to fulfill the obligations of Lennar or its subsidiaries under the
Assigned Agreements, and (iii) LPC assumes all the obligations of Lennar and its
subsidiaries which relate primarily to the Commercial Asset Management Business
and assumes the obligations for borrowed money described in the Assumption
Agreement.
ARTICLE II
ISSUANCE AND DISTRIBUTION OF SHARES
2.1 Issuance of Shares to Lennar. (a) On a date designated by Lennar (the
"Distribution Date") on at least five days' prior notice to LPC, LPC will issue
to Lennar certificates representing (i) a number of shares of Common Stock equal
to the number of shares of Lennar common stock and Lennar Class B Stock which
are outstanding on the Distribution Date minus (x)100 shares and (y) the number
of shares of Lennar common stock and Lennar Class B Stock which are the subject
of properly made Exchange Elections, and (ii) a number of shares of Class B
Stock equal to the number of shares of Lennar common stock and Lennar Class B
Stock which are the subject of properly made Exchange Elections.
(b) If at any time after the Distribution Date, Lennar notifies LPC that
Lennar is required to deliver shares of Common Stock to persons who have
exercised options which were granted by Lennar prior to the Distribution Date,
LPC will, as promptly as practicable after the notice from Lennar, deliver to
Lennar certificates representing a number of shares of Common Stock equal to the
number of shares Lennar is required to deliver because of the exercise of
options as specified in the notice from Lennar.
2.2 Distribution of Shares by Lennar. On the Distribution Date, Lennar
will distribute to its stockholders the shares of Common Stock or Class B Stock
which Lennar receives from LPC in accordance with Paragraph 2.1(a). Promptly
after Lennar receives any shares of Common Stock from LPC in accordance with
Paragraph 2.1(b), Lennar will distribute those shares to people whose exercise
of options caused LPC to be required to issue the shares to Lennar.
2.3 Transfer of Distributed Shares. To the extent practicable, LPC will
issue shares to Lennar by delivering to Lennar each time shares of a class are
to be issued to it a global certificate representing all the shares of that
class being issued to Lennar at that time. LPC will then cause its transfer
agent to cooperate with Lennar in transferring shares from Lennar to its
stockholders or to the people who exercised warrants or converted convertible
securities.
ARTICLE III
CONDITIONS TO OBLIGATIONS
3.1 Conditions. The obligations of Lennar and LPC under Articles I and II
are subject to the following conditions (each of which may be waived as a
condition to its obligations by Lennar or by LPC):
(a) Lennar will have obtained a private letter ruling from the
Internal Revenue Service (the "Ruling") to the effect that (i) the
distribution of LPC stock to Lennar stockholders on the Distribution Date
as described in Paragraphs 2.1(a) and 2.2 (the "Distribution") will qualify
as a distribution within the meaning of Section 355(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and accordingly, no gain or
loss will be recognized to (and no amount will be included in the income
of)
2
109
Lennar's stockholders upon the receipt of stock of LPC as a result of the
Distribution and (ii) no gain or loss will be recognized to Lennar on the
distribution of stock of LPC to Lennar's stockholders as a result of the
Distribution (except that the Ruling may exclude from its coverage the
possibility that Lennar will realize income or gain as a result of the
payment contemplated by Paragraph 10.1)
(b) All required governmental approvals of the Distribution, if any,
will have been obtained, other than governmental approvals the lack of
which would not have a material adverse effect on either the Lennar
Companies, taken together, or the LPC Companies, taken together.
(c) LPC will have filed a combined Form 10 and information statement
with the Securities and Exchange Commission relating to its Common Stock
(the "Form 10 Information Statement"), and that Form 10 will have become
effective.
(d) The shares of Common Stock to be distributed in the Distribution
and the shares of Common Stock which Lennar may have to deliver upon
exercise of options which are outstanding on the Distribution Date will
have been authorized for listing on the New York Stock Exchange upon notice
of issuance.
(e) Lennar will have distributed to its stockholders a proxy statement
or information statement relating to the Distribution which contains all
the information about the Distribution required by Regulation 14A or 14C
under the Securities Exchange Act of 1934, as amended.
(f) No order of a court enjoining or otherwise restraining the
Distribution will be in effect and no governmental proceeding regarding the
Distribution will be pending which is reasonably likely to result in the
imposition of penalties against Lennar or LPC as a result of the
Distribution which would be material to either of those entities and its
subsidiaries taken as a whole.
(g) LPC will have executed the Assumption Agreement.
3.2 Efforts to Fulfill Conditions. Lennar and LPC each will use its best
efforts to cause all the conditions in Paragraph 3.1 to be fulfilled on or
before the Distribution Date.
ARTICLE IV
AGREEMENTS NOT TO COMPETE
4.1 Lennar Agreement Not to Compete. From the Distribution Date until
December 1, 2002, Lennar will not, and will cause its subsidiaries not to,
engage directly or indirectly in (i) acquiring and actively managing commercial
or residential multi-family rental real estate, other than as an incident to, or
otherwise in connection with, the Homebuilding Business, (ii) acquiring
portfolios of commercial mortgage loans or of real estate assets acquired
through foreclosures of mortgage loans (other than real estate acquired as the
site of homes to be built or sold as part of the Homebuilding Business), (iii)
making or acquiring mortgage loans, other than mortgage loans secured by
detached or attached homes or residential condominium units, (iv) constructing
office buildings or other commercial or industrial buildings, other than small
shopping centers, professional office buildings, educational facilities,
recreational facilities and other commercial facilities built on properties
which Lennar is developing primarily as residential developments and which will
be adjuncts to those residential developments, (u) owning or leasing an office
building in which it occupies a majority of the usable office space and leasing
or subleasing the remainder of the office space in that building, (v) purchasing
commercial mortgage backed securities or real estate asset backed securities, or
(vi) acting as a servicer or special servicer with regard to securitized
commercial mortgage pools. Nothing in this Paragraph will, however, prevent
Lennar or any of its subsidiaries from, (v) acquiring securities backed by pools
of residential mortgages, (w) acquiring an entity or an interest in an entity
which, at the time the entity or interest in it is acquired by Lennar or a
subsidiary, is engaged in one or more of the activities described in the first
sentence of this Paragraph as an incidental (but not as a principal) part of its
activities, (x) owning as a passive investor, without any involvement in
operations or management, an interest of less than 10% in a publicly traded
operating company which is engaged in one or more of the activities described in
the first sentence of this Paragraph, (y) acquiring commercial paper or other
short-term debt instruments of entities
3
110
engaged in one or more of the businesses described in the first sentence of this
Paragraph for investment, and without any intention of becoming involved in the
operations or management of the issuer of the commercial paper or other debt
instruments or (z) owning an interest in, and managing, Lennar Land Partners, a
partnership to be formed by a Partnership Agreement between a subsidiary of
Lennar and a subsidiary of LPC.
4.2 LPC Agreement Not to Compete. From the Distribution Date until
December 1, 2002, LPC will not, and will cause its subsidiaries not to, engage
directly or indirectly in (i) building or selling single family detached or
attached homes or condominium units in residential buildings of five or fewer
stories, (ii) developing properties primarily as the sites of homes or
condominium units of the type described in clause (i), other than properties
included in portfolios acquired by LPC or partnerships in which it is a partner
and which Lennar elects not to acquire from LPC or the partnerships for the
prices LPC or the partnerships paid for them (allocating purchase prices to
assets acquired as parts of pools using the relative sales price method of cost
allocation) or to develop under arrangements with LPC or the partnerships, (iii)
providing first mortgage financing for the purchase of homes or condominium
units of the type described in clause (i), or (iv) providing first mortgage
re-financing of loans secured by homes or condominium units of the type
described in clause (i). Nothing in this Paragraph will, however, prevent LPC or
any of its subsidiaries from (s) developing properties acquired upon default of
mortgages or acquired as incidental portions of portfolios of real estate assets
for reasonable periods after foreclosure or acquisition until there can be
orderly dispositions of the properties, (t) selling as condominium units
apartments in residential multi-family buildings which are acquired by LPC or
its subsidiaries and which, at the time LPC or its subsidiaries acquired the
buildings or acquired mortgage loans secured by the buildings, were being
operated as rental buildings, (u) acquiring securities backed by pools of
residential mortgages, (v) providing financing to homebuilders or land
developers, acquiring the homebuilders or land developers or their properties
upon default with regard to the financing, and overseeing the operations of the
homebuilders or land developers and development of their properties for
reasonable periods after default until there can be orderly dispositions of the
defaulting homebuilders or land developers or their properties, (w) acquiring as
a passive investor without any involvement in operations or management, an
interest of less than 10% in a publicly traded operating company which is
engaged in one or more of the activities described in the first sentence of this
Paragraph, (x) acquiring an entity or an interest in an entity which, at the
time it is acquired by LPC or a subsidiary, is engaged in one or more of the
activities described in the first sentence of this Paragraph as an incidental
(but not as a principal) part of its activities, (y) acquiring commercial paper
or other debt instruments of entities engaged in one or more of the businesses
described in the first sentence of this Paragraph for investment, and without
any intention of becoming involved in the operations or management of the issuer
of the commercial paper or other debt instruments or (z) owning an interest in
Lennar Land Partners.
4.3 Activities of Lennar Land Partners. No action taken by Lennar Land
Partners in accordance with the Partnership Agreement by which it is formed will
be a breach of the obligations of either Lennar or LPC under this Article.
4.4 Consents to Prohibited Activities. Either Lennar or LPC may consent
to the other of them engaging, in a specific instance with regard to a specific
property or other asset, in an activity which would otherwise be prohibited by
the applicable one of Paragraph 4.1 or 4.2 if (i) the party engaging in the
activity (the "Acting Party") has offered to sell that property or other asset
to the other party (the "consenting party") for the lesser of the price paid by
the Acting Party for the property or other asset or the fair market value of the
property or other asset and (ii) the Board of Directors of the consenting party
has, by resolution, (x) determined that the consenting party does not want to
acquire the property or other asset for the price offered by the Acting Party,
(y) determined that the Acting Party's engaging in the activity with regard to
the property or other asset will not materially adversely affect any activities
in which the consenting party is engaged, and (z) approved the consenting
party's consenting to the Acting Party's engaging in the activity with regard to
the property or other asset.
4.5 Curing Violations. If Lennar or LPC violates the applicable one of
Paragraph 4.1 or 4.2 with regard to a specific property or asset, (i) the other
of them may not institute any action or proceeding seeking injunctive relief,
damages or any other type of relief because of the violation until at least 90
days after it has
4
111
given notice of the violation to the violating party, and (ii) the violating
party will be relieved of all liability with regard to the violation if the
violating party either (x) discontinues the violation within the 90 day period,
or (y) within the 90 day period offers to sell the property or other asset to
the other party for the lesser of the amount the violating party paid for the
property or other asset or the fair market value of the property or other asset
and, if that offer is not accepted within 30 days after it is made, the
violating party disposes of the property or other asset, or discontinues the
violation, within 120 days after the end of the 30 day period.
ARTICLE V
INTERCOMPANY INDEBTEDNESS
5.1 Elimination of Intercompany Indebtedness. Effective at 11:59 P.M. on
the day before the Distribution Date, all indebtedness of any of the Lennar
Companies to any of the LPC Companies, and all indebtedness of any of the LPC
Companies to any of the Lennar Companies, will be eliminated. This elimination
(a) will be effected by dividends to Lennar by all the Lennar Companies and all
the LPC Companies of all the indebtedness to them which is to be eliminated and
contributions of that indebtedness by Lennar to the capital of the respective
Lennar Companies and LPC Companies which are the obligors with regard to that
indebtedness, and (b) will be evidenced by a document executed by Lennar.
5.2 Exchange of Releases. On the Distribution Date, (i) Lennar will
deliver to LPC a document in which Lennar, for itself and each of its
subsidiaries other than the LPC Companies, releases each of the LPC Companies
from any and all liabilities or obligations which any of the LPC Companies has
or may have on the Distribution Date, or ever had prior to the Distribution
Date, to Lennar or any of its subsidiaries other than the LPC Companies, and any
and all claims which Lennar or any of its subsidiaries other than the LPC
Companies has or may have on the Distribution Date, or ever had prior to the
Distribution Date, against any of the LPC Companies, arising out of obligations
or occurrences which arose or occurred on or before the Distribution Date (other
than obligations under this Agreement, the Assumption Agreement, under documents
by which Lennar transfers stock of LPC Companies or assets to LPC or its
subsidiaries prior to the Distribution or under any other documents described in
this Agreement which are to be executed in connection with the Distribution),
whether known or unknown and whether liquidated in amount or contingent, and
(ii) LPC will deliver to Lennar a document in which LPC, for itself and each of
its subsidiaries, releases Lennar and each of its subsidiaries other than the
LPC Companies from any and all liabilities or obligations which Lennar orany of
its subsidiaries has or may have on the Distribution Date, or ever had prior to
the Distribution Date, to any of the LPC Companies, and any and all claims which
any of the LPC Companies has or may have on the Distribution Date, or ever had
prior to the Distribution Date, against Lennar or any of its subsidiaries other
than the LPC Companies, arising out of obligations or occurrences which arose or
occurred on or before the Distribution Date (other than obligations under this
Agreement, under the Assumption Agreement or under any other documents described
in this Agreement which are to be executed in connection with the Distribution),
whether known or unknown and whether liquidated in amount or contingent.
5.3 Agreement not to Sue. (a) Lennar agrees that it will not bring, and
it will take all steps necessary to prevent each of its subsidiaries from
bringing, any claim, action or proceeding against any of the LPC Companies
relating to any sum which is the subject of the release delivered by Lennar in
accordance with Paragraph 5.2 or which subsequently becomes due because of
anything which occurred on or before the Distribution Date (other than a sum
which becomes due under or with regard to this Agreement or any other document
executed in connection with the Distribution).
(b) LPC agrees that it will not bring, and it will take all steps necessary
to prevent each of its subsidiaries from bringing, any claim, action or
proceeding against Lennar or any of its subsidiaries other than the LPC
Companies relating to any sum which is the subject of the release delivered by
LPC in accordance with Paragraph 5.2 or which subsequently becomes due because
of anything which occurred on or before the Distribution Date (other than a sum
which becomes due under or with regard to this Agreement or any other document
executed in connection with the Distribution).
5
112
5.4 No Representations Regarding Transferred Assets or Liabilities. LPC
agrees and acknowledges on behalf of itself and each of the other LPC Companies
that none of Lennar or any of its subsidiaries has in this Agreement, in any
other agreement or instrument or otherwise, made or will make any representation
or warranty whatsoever as to the assets, business or liabilities transferred or
assumed as described in the preamble to this Agreement or as contemplated by
this Agreement, or as to any consents or approvals required in connection with
the consummation of those transfers, the Distribution or any other aspects of
the transactions contemplated by this Agreement, it being agreed and understood
that LPC and each of the other LPC Companies will receive all of its assets from
Lennar or a subsidiary on an "as is, where is" basis and will bear the economic
and legal risk that conveyance of such assets might prove to be insufficient or
might subject LPC or other LPC Companies to liabilities, or that the title to
any assets received from Lennar or a subsidiary (or owned by an LPC Company when
it was transferred to LPC) was other than good and marketable and free from
encumbrances (whether or not LPC knew this was the case).
ARTICLE VI
INDEMNIFICATIONS
6.1 Indemnification by Lennar. Lennar agrees to indemnify LPC and each of
its subsidiaries and their respective successors and assigns and the officers
and directors of each of them against, and to hold each of them harmless from,
any liabilities, claims or expenses, including reasonable attorneys fees and
expenses of investigation, (collectively, "Losses") relating to, arising out of
or resulting from, (i) the Homebuilding Business, whether as a result of any
condition which exists or is created, any event which occurred or occurs, or any
action which was or is taken, whether before, on or after the Distribution Date,
(ii) any obligation of Lennar or any of its subsidiaries existing at the
Effective Time of the Merger for borrowed money incurred before the Distribution
Date which is not assumed by LPC in the Assumption Agreement, (iii) any
registration statement, proxy statement, or any press release or other document
issued by Lennar, relating to, or otherwise in connection with, the Merger,
except with regard to Losses relating to information provided by LPC in writing
for inclusion in the registration statement or proxy statement or (iv) any
breach of any of the covenants of Lennar set forth in Paragraph 5.1.
6.2 Indemnification by LPC. LPC agrees to indemnify Lennar and each of
its subsidiaries (other than the LPC Companies), their respective successors and
assigns, and the officers and directors of any of them against, and agrees to
hold each of them harmless from, any Losses relating to, arising out of or
resulting from (i) the Commercial Asset Management Business, whether as a result
of any condition which exists or is created, any event which occurred or occurs,
any action which was or is taken, or any obligation (including, but not limited
to, obligations to employees) which was or is incurred, either before, on or
after the Distribution Date, (ii) any of the obligations assumed by LPC or any
LPC Company in the Assumption Agreement, (iii) the Distribution, (iv) the Form
10 Information Statement, (v) any press release or other document issued by LPC
relating to, or otherwise in connection with, the Distribution, (vi) any
liabilities or obligations, actual or contingent, of any nature whatsoever of
Lennar or any of its past or current subsidiaries or affiliates existing or
alleged to exist on or prior to the Distribution Date that did not arise
exclusively or primarily in the conduct of the Homebuilding Business, except
that the indemnification with regard to any Loss arising solely because of
corporate financing by Lennar or other corporate activities by Lennar which do
not specifically relate to any aspect of the operations of Lennar or its
subsidiaries will be limited to 71.5% of the amount of the Loss, (vii) any
liabilities or obligations actual or contingent, of any nature whatsoever of
Lennar or any of its past or current subsidiaries or affiliates existing or
alleged to exist on or prior to the Distribution Date arising out of or relating
to any business or line of business which is or at any time was treated on the
consolidated financial statements of Lennar and its subsidiaries as a
discontinued operation or a discontinued line of business or any business or
line of business (as those terms are used in accordance with GAAP) which was
divested by Lennar or any of its current or former subsidiaries prior to the
Distribution Date, or (viii) a breach of the covenants of LPC contained in
Paragraph 5.1 or 6.7.
6.3 Third Party Claims. If any claim is made against Lennar or any of its
subsidiaries (other than a LPC Company), or any of their officers or directors,
for which Lennar, the subsidiary or its officer or director
6
113
intends to seek indemnification under Paragraph 6.2, or any claim is made
against any of the LPC Companies, or any of their officers or directors, for
which the LPC Company or its officer or director intends to seek indemnification
under Paragraph 6.1, the corporation or individual which intends to seek
indemnification (the "Indemnified Party") will promptly, and in any event within
10 days after it is notified of the claim, notify the one of Lennar or LPC from
which indemnification will be sought (the "Indemnifying Party") of the claim. If
the Indemnifying Party acknowledges that it will be liable to indemnify the
Indemnified Party with regard to the claim, the Indemnifying Party will have the
right to control the defense of the claim. Delay in notifying an Indemnifying
Party of a claim will not affect the Indemnifying Party's obligation to
indemnify with regard to the claim, except to the extent the delay in notifying
the Indemnifying Party adversely effects the Indemnifying Party's ability to
defend against or settle the claim. An Indemnified Party may participate in the
defense of a claim against it with its own counsel, but at its own expense
(including the costs of its counsel). Under no circumstances will a party be
entitled to indemnification against the costs of settling a claim unless (i) the
Indemnifying Party has approved the settlement of the claim, or (ii) the
Indemnifying Party has denied it has an obligation to indemnify the party
against which the claim was brought with regard to the subject matter of the
claim, but it is ultimately determined that the Indemnifying Party did indeed
have such an obligation.
6.4 Insurance Coverage. In determining the amount which Lennar is
required to pay to LPC under Paragraph 6.1, or which LPC is required to pay to
Lennar under Paragraph 6.2, as a result of a Loss, the amount for which Lennar
or a subsidiary, or LPC or a subsidiary, is entitled to be indemnified will be
net of any insurance proceeds recovered or recoverable by the company being
indemnified with respect to the Loss and net of any deductible amount under any
policy under which the company being indemnified made a recovery with respect to
the Loss, or would have made a recovery under the policies in effect with
respect to the Loss if the Loss had exceeded the deductible amount.
6.5 Contribution. If the indemnity provided for in Paragraph 6.1 through
6.4 is not available in any instance for any reason, Lennar and LPC each will
contribute on an equitable basis in respect of the Loss for which that indemnity
is not available.
6.6 LPC Indemnification for Distribution Tax Costs. (a) If, other than
because of actions taken by Lennar after completion of the Merger, regardless of
whether Lennar obtained the Ruling, it is ultimately determined that the
Distribution did not qualify for Tax-Free Status, and as a result Lennar incurs
any Spin-Off Tax Liabilities as a result of the Distribution, LPC will pay to
Lennar an amount such that the amount received by Lennar, net of any taxes
payable with the respect to the payments from LPC, is equal to the Tax Cost of
the Distribution.
(b) For purposes of this Paragraph 6.6, the following terms will have the
meanings set forth below:
"Tax Cost" means (i) the Aggregate Spin-off Tax Liabilities; (ii) all
accounting, legal and other professional fees, and court costs incurred in
connection with any settlement, final determination, judgement or other
determination with respect to such Aggregate Spin-off Tax Liabilities, and
(iii) all costs, expenses and damages associated with stockholder
litigation or controversies, and any amount paid by Lennar or any of its
subsidiaries in respect of the tax liability of shareholders, whether paid
to shareholders or to the Internal Revenue Service or any other taxing
authority payable by Lennar or any of its affiliates, in each case
resulting from the absence of Tax-Free Status for the Distribution.
"Taxing Jurisdiction" means the United States and every other
government or governmental unit having jurisdiction to tax Lennar or LPC.
"Spin-off Tax Liabilities," with respect to any Taxing Jurisdiction,
means all taxes, interest and penalties actually paid to such Taxing
Jurisdiction that would not have been paid if the Distribution qualified
for Tax-Free Status.
"Aggregate Spin-off Tax Liabilities" means the sum of the Spin-off Tax
Liabilities with respect to each Taxing Jurisdiction.
7
114
"Tax-Free Status" means the qualification of the Distribution (i) as a
transaction described in Section 355 (a)(1) of the Code, (ii) as a
transaction in which the stock which is distributed is qualified property
for purposes of Section 355(c)(2) of the Code, and (iii) as a transaction
in which Lennar recognizes no income or gain other than intercompany items
or excess loss accounts taken into account pursuant to the Treasury
Regulations promulgated pursuant to Section 1502 of the Code.
(c) Except as otherwise required by law, in filing its tax returns for the
year in which the Distribution Date falls, Lennar will treat the Distribution as
not resulting in recognition of gain to Lennar. If Lennar becomes aware during
an examination of its Federal corporate income tax return, or any state income,
franchise or similar tax return, for the taxable year in which the Distribution
Date falls that the agent conducting the examination is seriously considering
asserting that the Distribution did not qualify for Tax-Free Status and
therefore (or for any other reason) Lennar and its subsidiaries may incur
Spin-Off Tax Liabilities, Lennar will (i) promptly notify LPC of this fact, (ii)
to the extent reasonably practicable, segregate the issue of whether the
Distribution qualified for Tax-Free Status from other issues being examined,
(iii) permit LPC to control the tax examination in so far as it relates to that
issue and any administrative or judicial appeals relating to the issue
(including whether to settle the issue or to appeal from an adverse
determination with regard to the issue) and (iv) cooperate with LPC in all
reasonable respects in LPC's efforts to establish that the Distribution
qualified for Tax-Free Status and because of that (or for any other reason)
Lennar and its subsidiaries are not required to recognize income or gain because
of the Distribution.
6.7 Return of Homebuilding Assets. If after the Distribution Date it is
determined that (i) at the Effective Time of the Merger the Lennar Companies do
not have all the assets (other than cash) necessary for their conduct of the
Homebuilding Business in a manner consistent with past practice, as it is
currently being conducted at the Distribution Date and as Lennar contemplates it
will be conducted after the Distribution Date (except to the extent the
Homebuilding Business will in the future include the operations of Pacific
Greystone), and (ii) some of the assets necessary for the Lennar Companies'
conduct of the Homebuilding Business in that manner were transferred to or
otherwise held by LPC Companies on or prior to the Distribution Date, the LPC
Companies to which the assets were transferred or which hold the assets will
transfer them to Lennar without consideration.
ARTICLE VII
TRANSACTIONS BETWEEN COMPANIES
7.1 Terms of Transactions Between Companies. All transactions between
Lennar or any other of the Lennar Companies and LPC or any other of the LPC
Companies after the Distribution Date will be on the following terms:
(a) Any transactions or relationships which are the subject of a
Shared Facilities Agreement executed by Lennar and LPC will be on the terms
provided in the Shared Facilities Agreement.
(b) Any transactions or arrangements (including any loan transactions)
entered into after the Distribution Date between any of the Lennar
Companies and any of the LPC Companies will be on substantially the same
terms as those which would prevail in a transaction between unaffiliated
persons. If a transaction takes place under an agreement which, at the time
it was executed, was on terms which would have prevailed in an agreement
between unrelated persons, the transaction will be deemed to be on terms
which would have prevailed in transactions between unrelated persons even
if at the time the transaction takes place, the terms in the agreement are
not the same as those which would have prevailed in a separate transaction
agreed to at the time of the transaction.
(c) If the Distribution Date is before the Merger Date under the
Merger Agreement (or such earlier date as the Merger Agreement terminates),
none of the Lennar Companies will engage in any transactions with any of
the LPC Companies between the Distribution Date and the Merger Date (or the
earlier termination of the Merger Agreement) without the prior consent of
Pacific Greystone Corporation, which will not be unreasonably withheld or
delayed.
8
115
7.2 Approval of Transactions Between Companies. (a) No Lennar Company may
enter into any transaction or related series of transactions with one or more
LPC Companies which will involve a payment or loan to or from the LPC Company or
Companies of more than $5 million in the aggregate unless Lennar or another
Lennar Company receives a certified copy of a resolution of the Board of
Directors of LPC in which that Board of Directors determines that the
transaction or loan meets the requirements of Paragraph 7.1.
(b) No LPC Company may enter into any transaction or related series of
related transactions with one or more Lennar Companies which will involve a
payment or loan to or from the Lennar Company or Companies of more than $5
million in the aggregate unless LPC or another LPC Company receives a certified
copy of a resolution of the Board of Directors of Lennar in which that Board of
Directors determines that the transaction or loan meets the requirements of
Paragraph 7.1.
7.3 Transactions with Land Partnership. A transaction between a Lennar
Company or a LPC Company and Lennar Land Partners will not be deemed to be a
transaction between a Lennar Company and a LPC Company, and therefore will not
be subject to Paragraph 7.1 or Paragraph 7.2.
ARTICLE VIII
TAX SHARING
8.1 Preparation of Tax Returns; Responsibilities for Taxes. (a) Lennar
will be responsible for the preparation of all consolidated combined or unitary
Tax Returns ("Consolidated Tax Returns"), and other Tax Returns relating to
Federal, state and other corporate income taxes and other Income Taxes ("Income
Taxes") which include the income of Lennar and/or any of its subsidiaries (other
than the LPC Companies) or the assets or income of the Homebuilding Businesses,
with regard to all periods ending on or before the Distribution Date
("Pre-Closing Periods") and for the payment of all Taxes shown on those Tax
Returns to be due. LPC and its subsidiaries will be responsible for filing all
other Tax Returns relating to them or their assets or the Commercial Asset
Management business which are required to be filed after the Distribution Date
and for the payment of all Taxes shown on those Tax Returns to be due. "Tax
Return" means any return, filing, questionnaire or other document required to be
filed, including requests for extensions of time, filings made with estimated
tax payments, claims for refund and amended returns that may be filed, for any
period with any taxing authority (whether domestic or foreign) in connection
with any Tax or Taxes (whether or not a payment is required to be made with
respect to such filing). "Taxes" means all forms of taxation, whenever created
or imposed, and whether of the United States or elsewhere, and whether imposed
by a local, municipal, governmental, state, federation or other body, and
without limiting the generality of the foregoing, shall include income, sales,
use, ad valorem, gross receipts, value added, franchise, transfer, recording,
withholding, payroll, employment, excise, occupation, premium and property
taxes, together with any related interest, penalties and additions to any such
tax, or additional amounts imposed by any taxing authority (domestic or foreign)
upon Lennar, the LPC Companies or any of their respective subsidiaries,
divisions, assets or branches.
(b) LPC hereby assumes and agrees to pay to Lennar on or prior to the due
date for each payment due following the Distribution Date its share of the
"Pre-Distribution Tax Liability" for any Pre-Closing Period beginning on or
after the December 1, 1996 for which Tax Returns have not yet been filed. LPC's
share of the "Pre-Distribution Tax Liability" for each Pre-Closing Period shall
be the sum of
(i) that portion of the total tax liability shown on each of Lennar's
Income Tax Returns (including estimated payment Tax Returns) for such
Pre-Closing Period, as filed (each, a "Company Pre-Distribution Return"),
as would be allocated to the LPC Companies on a net basis (taking into
account any Tax Benefits of any LPC Companies) under the basic method under
Treas. Reg. sec.1.1552-1(a)(2) if: (p) Lennar and LPC were separately
incorporated members of the same consolidated group for such Pre-Closing
Period; (q) Lennar owned and operated the Homebuilding Business during such
Pre-Closing Period; ;and (r) LPC owned and operated the Commercial Assets
Management Business during such Pre-Closing Period;
9
116
(ii) reduced by the sum of (x) all amounts paid by LPC after the
Distribution Date with respect to such Pre-Closing Tax Liability, and (y)
an amount equal to LPC's share of all estimated Income Tax payments
remitted on LPC's behalf to the relevant taxing authority on or prior to
the Distribution Date with respect to such Pre-Closing Period. LPC's share
of all estimated income tax payments remitted by Lennar to the taxing
authority on or prior to the Distribution Date with respect to such
Pre-Closing Period shall be equal to such percentage of such payments as
the LPC Companies' net income (taking into account any Tax benefits) bears
to Lennar's overall consolidated net income. If the calculations made
herein indicate that LPC has either overpaid or underpaid its share of any
such Pre-Distribution Tax Liability, then at the time that the relevant
Company Pre-Distribution Return is filed, Lennar shall pay LPC the amount
of any such overpayment or LPC shall pay Lennar the amount of any such
underpayment, the amount of such overpayment or underpayment, as the case
may be, to be equal to the difference between the amounts calculated
pursuant to paragraphs (i) and (ii) of this subparagraph. All calculations
and determinations required to be made pursuant to this subparagraph shall
be made in good faith by LPC and shall be subject to Lennar's approval,
which approval shall not be withheld unless Lennar in good faith reasonably
disputes any such calculation or determination, in which case any payments
shall nevertheless be made in accordance with LPC's calculations and
determinations, subject to subsequent adjustment in accordance with the
provisions of subparagraph (f) below.
(c) Whenever a party hereto (hereinafter an "Indemnitee") is notified in
writing by any taxing authority of the existence of an issue which could
increase the liability for any Tax of the other party hereto or any affiliate
(hereinafter an "Indemnity Issue"), the Indemnitee shall promptly give notice to
such other party (hereinafter an "Indemnitor") of such Indemnity Issue. The
Indemnitor and its representatives, at the Indemnitor's expense, shall be
entitled to participate (i) in all conferences, meetings or proceedings with any
taxing authority, the subject matter of which is or includes an Indemnity Issue
and (ii) in all appearances before any court, the subject matter of which is or
includes an Indemnity Issue, the Responsible Party (as defined below) for any
Tax Return with respect to which there is an increase or decrease in liability
for any Tax or with respect to which a payment is required hereunder shall have
the right to decide as between the parties hereto how such matter is to be dealt
with and finally resolved with the appropriate taxing authority and shall
control all audits and similar proceedings. The Responsible Party agrees to
cooperate in the settlement of any Indemnity Issue with the other party and to
take such other party's interests into account. If the Indemnitor is not the
Responsible Party, such cooperation may include permitting the Indemnitor, at
the Indemnitor's sole expense, to litigate or otherwise resolve any Indemnity
Issue. Notwithstanding the foregoing, if the Responsible Party is not the
Indemnitor, the Responsible Party shall not enter into a final settlement with
the relevant taxing authority with respect to any matter involving an Indemnity
Issue without first presenting the proposed settlement to the Indemnitor, who
shall provide the Responsible Party with written consent to such settlement
within ten days of receipt (which consent may not unreasonably be withheld),
whereupon (or if the Indemnitor fails to respond to such settlement in writing
within such ten day period) the Responsible Party may enter into such settlement
with the relevant taxing authority; provided, however, that the Indemnitor may
withhold its consent to the proposed settlement by notifying the Responsible
Party in writing within such ten day period that the Indemnitor does not consent
to the proposed settlement. If the Indemnitor provides the Responsible Party
with written notification withholding consent in accordance with the immediately
preceding sentence, then:
(1) The Indemnitor shall fully indemnify and hold harmless the Responsible
Party from and against any and all liabilities for Taxes and other costs and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees) over and above the payments that the Responsible Party would have been
liable for if the Responsible Party had entered into the proposed settlement;
and
(2) The Responsible Party shall, in its sole discretion:
(a) enter into a closing agreement or other final resolution with
respect to such matter with the relevant taxing authority with respect to
all issues other than Indemnity Issues and shall allow the Indemnitor to
continue to defend the Indemnity Issues in proceedings with the relevant
taxing authority; or
10
117
(b) settle all issues with respect to such matter with the relevant
taxing authority and/or pay any additional liability for Taxes as provided
for in such settlement, provided that such settlement shall permit the
Indemnitor to file a claim for refund with respect to any Indemnity Issues;
or
(c) pay to the Indemnitor any additional liability for Taxes as
provided for in such settlement to the extent that such liability relates
to issues other than Indemnity Issues, whereupon the Indemnitor shall
assume control over and responsibility for any proceeding related to such
matter and shall be fully liable for and shall fully indemnify and hold the
Responsible Party harmless from and against any and all liability for Taxes
with respect to such matter.
For purposes of this Agreement, "Responsible Party" shall mean (x) with respect
to a Tax Return that relates solely to the operations of the Homebuilding
Business, Lennar, and (y) with respect to a Tax Return that relates solely to
the operations of the Commercial Asset Management Business, LPC. With respect to
all Tax Returns other than those described in clauses (x) and (y), above, Lennar
and LPC shall attempt to separate the Indemnity Issues in controversy with
respect to such Tax Return into Indemnity Issues for which Lennar shall be the
Responsible Party and Indemnity Issues for which LPC shall be the Responsible
Party. If Lennar and LPC do not succeed in separating such Indemnity Issues,
Lennar and LPC shall jointly act as Responsible Party with respect to such Tax
Returns. Neither Lennar nor LPC shall take any action with respect to such Tax
Return without the other's written consent, which consent shall not be
unreasonably withheld, and Lennar and LPC shall agree as to any settlement or
compromise of Indemnity Issues on such Tax Return. If Lennar and LPC cannot
agree as to any action to be taken with respect to any Indemnity Issue on such
Tax Return, the parties shall take such action as shall be determined pursuant
to subparagraph (f) with respect to such Indemnity Issue. Notwithstanding the
foregoing, if the settlement of any Indemnity Issue would materially increase
the other party's liability for Taxes, the Responsible Party shall not enter
into a final settlement without the consent of the other party, which consent
shall not be unreasonably withheld. The right to participate referred to in this
subsection shall include the submission and content of documentation, protests,
memoranda of fact and law and briefs, the conduct of oral arguments or
presentations, the selection of witnesses and the negotiation of stipulations of
fact.
(d) (x) if as a result of any audit, amendment or other change in a
Tax Return with respect to any period ending on or before the Distribution
Date, any Tax Benefit or Tax Detriment is changed (a "Change"), then:
(i) If in connection with any such Change, the amount of the Tax
Detriments generated by or attributable to the Commercial Assets
Management Business with respect to the taxable period to which such
return relates ("LPC Business Tax Detriments") exceeds the amount of Tax
Benefits generated by or attributable to the Commercial Assets
Management Business with respect to such taxable period ("LPC Business
Tax Benefits"), LPC hereby assumes and agrees to pay to Lennar an amount
equal to the product of (x) the amount by which LPC Business Tax
Detriments exceed LPC Business Tax Benefits and (y) the actual marginal
Tax rate applicable with respect to the relevant Tax Return, with
appropriate adjustment to account for Tax credits generated by or
attributable to LPC Businesses included in such calculation and an
amount equal to all interest payable with respect thereto, which
interest shall be calculated at the rate the taxing jurisdiction imposes
upon tax deficiencies (the "Deficiency Rate") for the relevant periods.
(ii) If in connection with any such Change, the LPC Business Tax
Benefits exceed the LPC Business Tax Detriments, Lennar shall pay or
cause to be paid to LPC the product of (x) the amount by which LPC
Business Tax Benefits exceed LPC Business Tax Detriments and (y) the
actual marginal Tax rate applicable with respect to the relevant Tax
Return, with appropriate adjustment to account for Tax credits generated
by or attributable to LPC Businesses included in such calculation plus a
payment equal to any interest received by Lennar, with respect to such
amount.
(y) Lennar will pay and be responsible for, or benefit from,a s the
case may be, any Tax Benefits or Tax Detriments arising as a result of any
changes to Tax Items generated by or attributable to the Homebuilding
Businesses. Any Tax Benefits or Tax Detriments arising with respect to
items of Lennar
11
118
Land Partners will be allocated between Lennar and LPC in accordance with
the Partnership Agreement by which Lennar Land Partners is formed.
(z) "Tax Benefit" means any item of loss, deduction or credit or any
other Tax Item which decreases Taxes paid or payable. "Tax Detriment" means
any item of income, gain or recapture of credit or any other Tax Item which
increases Taxes paid or payable. "Tax Item" means any item of income, gain,
loss, deduction, credit or recapture of credit or any other item which
increases or decreases Taxes paid or payable, including an adjustment under
Code Section 481 resulting from a change in accounting method.
(e) Each of the Lennar Companies and each of the LPC Companies will be
responsible for the conduct after the Distribution Date of all examinations
of separate tax returns filed by it, whether before or after the
Distribution Date, and will pay all additional Taxes, interest and
penalties, and will be entitled to all refunds, with regard to Taxes to
which to those returns relate.
(f) Any disputes between the parties relating to this Paragraph 8.1
that cannot be resolved by good faith effort by the parties shall be
resolved by a "Big Six" public accounting firm or a law firm satisfactory
to LPC and Lennar, whose determination shall be final and binding on all
parties and whose fees and expenses shall be shared by LPC and Lennar in
accordance with the final allocation of the Tax liability in dispute.
(g) Unless it is apparent that Taxes are required to be paid at a
different rate, it will be assumed that all Taxes are payable, or were
paid, in the case of Income Taxes, at the highest applicable marginal rate,
and in the case of other Taxes, at the highest applicable rate.
8.2 Cooperation Regarding Taxes. Lennar and LPC each will, and will cause
its subsidiaries and their respective personnel to, cooperate fully with the
other of them in connection with the preparation of tax returns and in
connection with any examinations of any tax returns filed by either of them or
any of their subsidiaries.
ARTICLE IX
ACCESS TO INFORMATION
9.1 Access to Lennar Information. Lennar will give LPC and its
representatives access after the Distribution Date during normal business hours
to the books and records of Lennar relating to the conduct of the Commercial
Asset Management Business before the Distribution Date, and to personnel of
Lennar who are knowledgeable about those books and records or otherwise are
knowledgeable about the conduct of the Commercial Asset Management Business
before the Distribution Date, in order to permit LPC to prepare financial
statements and tax returns, in connection with audits of tax returns and for all
other purposes related to the business or activities of LPC and its
subsidiaries.
9.2 Access to LPC Information. LPC will give Lennar and its
representatives access after the Distribution Date during normal business hours
to the books and records of LPC and to personnel of LPC who are knowledgeable
about those books and records or otherwise are knowledgeable about the conduct
of the Commercial Asset Management Business before the Distribution Date, in
order to permit Lennar to prepare financial statements and tax returns, in
connection with audits of tax returns, and for all other purposes related to the
business or activities of Lennar and its subsidiaries.
ARTICLE X
LENNAR NET WORTH
10.1 Assurance of Minimum Net Worth. If within 30 days after the
Effective Time Balance Sheet described in Section 5.7 of the Merger Agreement
becomes final, the surviving corporation under the Merger Agreement (the
"Surviving Corporation"), as successor to Lennar delivers to LPC a notice (a
"Notice of
12
119
Deficiency") stating that the Lennar Net Worth reflected on the final Effective
Time Balance Sheet was less than the Minimum Lennar Net Worth (as defined in the
Merger Agreement) and setting forth the amount of such difference (the "Net
Worth Deficiency"), accompanied by a copy of the final Effective Time Balance
Sheet, within 10 days after LPC receives the Notice of Deficiency, LPC will pay
the Surviving Corporation (as successor to Lennar), as an adjustment of the
equity contributed by Lennar to LPC, a sum such that the amount received by the
Surviving Corporation, net of any taxes payable by the Surviving Corporation
with respect to such payment from LPC, is equal to the Net Worth Deficiency plus
interest on the Net Worth Deficiency at the rate of 10% per annum from the
Effective Time to the date of payment. LPC will have no right to dispute the
final Effective Time Balance Sheet or the Net Worth Deficiency stated in the
Notice of Deficiency if the Minimum Lennar Net Worth is determined pursuant to
the Merger Agreement.
10.2 Contribution of Excess Net Worth. If within 30 days after the
Effective Time Balance Sheet becomes final, LPC delivers to the Surviving
Corporation a notice (a "Notice of Excess") stating that the Lennar Net Worth
reflected on the final Effective Time Balance Sheet was more than the Minimum
Lennar Net Worth and setting forth the amount of such excess (the "Net Worth
Excess"), accompanied by a copy of the final Effective Time Balance Sheet,
within 10 days after the Surviving Corporation receives the Notice of Excess,
the Surviving Corporation (as successor to Lennar) will pay LPC, as an
adjustment of the equity contributed by Lennar to LPC, a sum equal to the Net
Worth Excess plus interest on the Net Worth Excess at the rate of 10% per annum
from the Effective Time to the date of payment. Lennar will have no right to
dispute the final Effective Time Balance Sheet or the Net Worth Excess stated in
the Notice of Excess if the Minimum Lennar Net Worth is determined pursuant to
the Merger Agreement.
ARTICLE XI
FURTHER ASSURANCES
11.1 Transfer Documents. Lennar and LPC each will execute, and each will
cause its subsidiaries to execute, any documents (which, at the request of
Pacific Greystone Corporation, will be in form and substance satisfactory to
Pacific Greystone Corporation) which may reasonably be requested by the other of
them in order to perfect the transfer of the Commercial Asset Management
Business to LPC and its subsidiaries and to perfect transfers prior to the
Distribution Date of assets used in the Homebuilding Business from subsidiaries
of LPC to Lennar or its subsidiaries which are engaged in the Homebuilding
Business.
11.2 Additional Agreements. To the extent either Lennar or LPC deems it
necessary or helpful, Lennar and LPC will agree upon and execute prior to the
Distribution Date (i) an Employee Matters Agreement, relating to benefits after
the Distribution Date of employees of Lennar and its subsidiaries who become
employees of LPC Companies and other matters relating to those employees, (ii) a
Shared Facilities Agreement, relating to the provision of administrative
services and access to computer or other facilities by Lennar Companies to LPC
Companies or by LPC Companies to Lennar Companies, and payment for those
services and facilities, and (iii) a Tax Sharing Agreement setting forth in
greater detail the tax sharing arrangement described in Paragraph 8.1.
ARTICLE XII
GENERAL
12.1 Expenses. Lennar and LPC each will pay 50% of the expenses
(including but not limited to transfer taxes) in connection with the
transactions which are the subject of this Agreement, including legal fees.
12.2 Press Releases. Lennar and LPC will consult with each other before
issuing at any time after Distribution Date any press releases, or otherwise
making any public statements after the Distribution Date, with respect to this
Agreement or the transactions which are the subject of it, except that nothing
in this
13
120
Paragraph will prevent either Lennar or LPC from making any statement when or as
required by law or by the rules of any securities exchange on which its
securities are listed.
12.3 Entire Agreement. This Agreement and the documents required to be
delivered in accordance with this Agreement contain the entire agreement between
Lennar and LPC relating to the transactions which are the subject of this
Agreement and those other documents, all prior negotiations, understandings and
agreements between Lennar and LPC regarding those transactions are superseded by
this Agreement and those other documents, and there are no representations,
warranties, understandings or agreements concerning the transactions which are
the subject of this Agreement or those other documents other than those
expressly set forth in this Agreement or those other documents. Without limiting
the foregoing, all agreements between any of the Lennar Companies, on the one
hand, and any of the LPC Companies, on the other hand, will terminate, except to
the extent this Agreement, the Merger Agreement or the Partnership Agreement
relating to Lennar Land Partners contemplates that particular agreements will be
in effect after the Distribution Date.
12.4 Survival of Agreement. This Agreement and the obligations of the
parties under it will survive the Distribution and the Merger. Upon consummation
of the Merger, all the rights and obligations of Lennar under this Agreement
will become rights and obligations of the Surviving Corporation.
12.5 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.
12.6 Prohibition Against Assignment. Neither this Agreement nor any right
of any party under it may be assigned by operation of law or otherwise.
12.7 Modification or Amendment. Subject to the provisions of applicable
law, Lennar and LPC may modify or amend this Agreement by written agreement
executed and delivered by duly authorized officers of the respective parties.
12.8 No Third Party Beneficiaries. This Agreement is not intended to
confer upon any person or entity other than Lennar and LPC any rights or
remedies hereunder, except to the extent there are indemnification obligations
which state they are for the benefit of other persons.
12.9 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 of America, to Lennar
or LPC, as the case may be, at its principal office or at the general facsimile
number at that principal office, to the attention of its Chief Financial
Officer.
12.10 Governing Law. This Agreement will be governed by, and construed
under, the laws of the State of Delaware applicable to agreements made and to be
performed in that state.
12.11 Counterparts. This Agreement may be executed in two or more
counterparts, some of which may bear the signatures of only some of the parties
to this Agreement. Each of those counterparts will be deemed an original copy of
this Agreement, but all of them together will be one and the same Agreement.
14
121
IN WITNESS WHEREOF, Lennar and LPC have executed this Agreement, intending
to be legally bound by it, on the day shown on the first page of this Agreement.
LENNAR CORPORATION
By: /s/ LEONARD MILLER
------------------------------------
Title: President
LPC, INC.
By: /s/ STUART A. MILLER
------------------------------------
Title: President
15
122
ANNEX IV
262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec. 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by
the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this tide is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a
123
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or 253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation. If the petition shall be filed
by the Surviving or resulting corporation, the petition shall be accompanied by
such a duly verified list. The Register in Chancery, if so ordered by the Court,
shall give notice of the time and place fixed for the hearing of such petition
by registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein
2
124
stated. Such notice shall also be given by 1 or more publications at least 1
week before the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by publication shall be
approved by the Court, and the costs thereof shall be borne by the surviving or
resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal of an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
262, L. '94, eff. 7-1-94.)
3
125
PROXY
LENNAR CORPORATION
PROXY FOR SPECIAL MEETING _____________, 1997
The undersigned hereby appoints Leonard Miller and Stuart Miller, and
each of them, with or without the others, proxies with full power of
substitution, to vote all shares of stock that the undersigned is entitled to
vote at the Special Meeting of Stockholders of Lennar Corporation, to be held at
the Doral Park Golf and Country Club, 5001 N.W. 104 Avenue, Miami, Florida, on
________________, 1997 at 1:00 p.m., local time, and at all adjournments thereof
as follows:
(1) ADOPTION OF THE PLAN AND AGREEMENT OF MERGER, DATED AS OF JUNE 10, 1997
BETWEEN LENNAR CORPORATION AND PACIFIC GREYSTONE CORPORATION, AND
APPROVAL OF THE MERGER CONTEMPLATED BY THAT AGREEMENT.
/ / FOR / / AGAINST / / ABSTAIN
(2) IN THEIR DISCRETION, UPON ANY OTHER BUSINESS WHICH MAY PROPERLY COME
BEFORE THE MEETING.
This proxy will be voted as you specify above. If no specification is
made, the Proxy will be voted FOR proposal 1 above. Receipt of the Notice of
Special Meeting and the Joint Proxy Statement/Prospectus is hereby acknowledge.
(Continued on other side)
126
THIS PROXY IS SOLICITED BY THE LENNAR BOARD OF DIRECTORS
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Please sign your name exactly as it appears below. Joint owners must
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as it appears. If held by a corporation, please
sign in the full corporate name by the president or other authorized officer. If
held by a partnership, please sign in the partnership's name by an authorized
officer.
Dated__________________________________
_______________________________________
Signature
_______________________________________
Signature, if held jointly or office or title held