Exhibit 1
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Prometheus Homebuilders LLC
Thirty Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
March 20, 2002
The Fortress Group, Inc.
0000 Xxxxxx Xxxxxxxxx
XxXxxx, Xxxxxxxx 00000
Dear Sirs:
Reference is made to the (i) Supplemental Warrant Agreement,
by and between The Fortress Group, Inc ("Fortress") and Prometheus Homebuilders
LLC ("Prometheus"), dated as of February 4, 1999, as amended by the Recognition
Agreement, dated July 3, 2001, between Prometheus, Xxxxxx Xxxxx and Fortress
(the "Warrant Agreement"); (ii) the Indenture, dated as of May 21, 1996, between
Fortress and IBJ Xxxxxxxx Bank & Trust Company, as Trustee (as supplemented
through the date hereof, the "Indenture"); and (iii) the letter agreement dated
January 28, 2002 (the "January Letter") between Fortress and Prometheus which
superceded the letter agreement dated October 25, 2001 between Fortress and
Prometheus. All of the capitalized terms used and not defined herein shall have
the respective meanings ascribed to them in the Warrant Agreement.
The Company and Prometheus hereby agree that the January
Letter is superceded by this letter agreement and shall no longer have any force
or effect and hereby further agree as follows:
(1) The term "Prometheus Warrant Holder," as used herein,
shall mean Prometheus or any person that controls, is controlled by or
is under common control with Prometheus so long as such person owns one
or more Warrants.
(2) Notwithstanding anything to the contrary set forth in the
Warrant Agreement or the Warrant Certificates (but subject to the
provisions of Paragraph (5) hereof), the maximum number of Warrants
which a Prometheus Warrant Holder shall have the right to exercise (and
the maximum number of shares of Common Stock which shall be issued to a
Prometheus Warrant Holder upon the exercise of such Warrants) at any
time prior to the "Extended Exercise Date" (as defined below) shall be
the maximum number of shares of Common Stock which such Prometheus
Warrant Holder may acquire at such time without then causing the
Prometheus Warrant Holder, or any "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) of which such Prometheus Warrant
Holder is then a member, to be deemed to have acquired "beneficial
ownership" (as determined in accordance with Rule 13d-3 under the
Exchange Act) of 50% or more of the aggregate voting power of all
The Fortress Group, Inc.
Page 2
March 20, 2002
classes of Common Equity (as defined in the Indenture) of the Company.
Without in any way limiting the generality of the foregoing, it is
expressly acknowledged and agreed by each of Fortress and Prometheus
that the limitation set forth in the preceding sentence of this
Paragraph (2) shall apply only to any person who is a Prometheus
Warrant Holder at the time of such person's exercise of any Warrant and
shall not apply to any transferee of a Warrant from a Prometheus
Warrant Holder that is not itself a Prometheus Warrant Holder.
(3) For purposes of this letter agreement:
(a) the "Extended Exercise Date" shall be the first
to occur of the following:
(i) January 1, 2003;
(ii) the date as of which the Indenture
shall for any reason (including, without limitation,
by reason of (A) an amendment of the Indenture, (B) a
waiver under the Indenture of the obligations of the
Company under Section 5.16 thereof or (C) the
satisfaction and discharge of the Indenture in
accordance with the terms thereof) cease to obligate
the Company to make a Change of Control Offer (as
defined in the Indenture) following the occurrence of
a Change of Control (as defined in the Indenture, "a
Change of Control");
(iii) the tenth day prior to any Material
Record Date (as defined below);
(iv) the tenth day prior to the announced
expiration date of any tender offer for shares of
Common Stock;
(v) the date as of which a Change of Control
occurs by reason of any circumstance or event (other
than by reason of the taking of any action by a
Prometheus Warrant Holder which causes an increase in
the number of shares of Common Stock beneficially
owned by such Prometheus Warrant Holder); and
(vi) the date on which a Prometheus Warrant
Holder enters into an agreement to sell the shares of
Common Stock issuable upon exercise of the Warrants
then held by the Prometheus Warrant Holder to an
unaffiliated purchaser which concurrently enters into
one or more agreements to acquire (by purchase,
The Fortress Group, Inc.
Page 3
March 20, 2002
merger or otherwise) all of the other outstanding
equity securities of Fortress; and
(b) a "Material Record Date" shall be any record date
for the taking of action by the holders of shares of the
Common Stock (whether by vote or by consent and whether by
such holders alone or by such holders together with the
holders of any other securities of the Company) with respect
to any proposal to authorize, approve or consent or agree to
(i) any transaction referred to in subparagraph (c) or (d) of
the second paragraph of Section 13 of the Warrant Agreement;
(ii) any sale of all or substantially all of the assets of the
Company; (iii) any increase in the number of authorized shares
of the capital stock of the Company or any issuance of any
such shares; or (iv) any action or transaction (or any series
of actions or transactions) which, individually or together,
could cause a Change of Control to occur.
(4) The Company hereby covenants and agrees that (a) prior to
the occurrence of the first to occur of (i) the date on which a
Material Record Date is established and (ii) the tenth day prior to a
Material Record Date and (b) immediately upon (i) the commencement of
any tender offer for shares of Common Stock or (ii) the occurrence of a
Change of Control, it will provide each Prometheus Warrant Holder with
notice, in accordance with the provisions of Section 14 of the Warrant
Agreement, of such Material Record Date, the commencement of such
tender offer or the occurrence of such Change of Control (as the case
may be).
(5) Notwithstanding anything to the contrary set forth in the
Warrant Agreement or the Warrant Certificates, a Prometheus Warrant
Holder may exercise the Warrants (and shall be deemed to have exercised
all of the Warrants automatically and without taking any action of any
nature whatsoever) on the occurrence of the first to occur of:
(i) the day preceding the day on which any
Event of Default (as defined in the Indenture) shall
have occurred; and
(ii) a Material Record Date, the
commencement of a tender offer or the occurrence of a
Change of Control, in respect of any of which the
Company shall have failed for any reason to provide
such Prometheus Warrant Holder with timely notice in
accordance with Paragraph (4) hereof,
unless, in any such case, such Prometheus Warrant Holder shall, within
ten days following the date on which such Prometheus Warrant Holder
shall otherwise have been deemed to have exercised all of the Warrants
The Fortress Group, Inc.
Page 4
March 20, 2002
(or such later date as the Company and the Warrant Holder may agree to
in writing), such Prometheus Warrant Holder shall provide the Company
with notice, in accordance with the provisions of Section 14 of the
Warrant Agreement, that such Prometheus Warrant Holder has determined
not to exercise any Warrant or to exercise less than all of the
Warrants, in which case, the election of such Prometheus Warrant Holder
shall control for all purposes hereof.
Please acknowledge your agreement to the foregoing in the
space provided for that purpose hereinbelow.
Very truly yours,
PROMETHEUS HOMEBUILDERS LLC
BY LF STRATEGIC REALTY
INVESTORS II L.P.
a managing member
By LAZARD FRERES REAL
ESTATE INVESTORS L.L.C.
its general partner
By: /s/ Xxxx X. Xxxxxxx
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Name: Xxxx X. Xxxxxxx
Title: Managing Principal
Agreement acknowledged as
of date first above written
THE FORTRESS GROUP, INC.
By: /s/ Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
Title: Chief Financial Officer
