EXECUTION COPY/3
Prometheus Homebuilders LLC
Thirty Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
March 29, 2001
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 and Prometheus Homebuilders
LLC, dated as of February 4, 1999 (the "Warrant Agreement") and (ii) the
Indenture, dated as of May 21, 1996, between The Fortress Group, Inc. and IBJ
Xxxxxxxx Bank & Trust Company, as Trustee (as supplemented through the date
hereof, the "Indenture"). All of the terms which are defined in the Warrant
Agreement and set forth in this letter agreement shall, when so set forth, have
the respective meanings ascribed to them in the Warrant Agreement.
The Company and the Warrant Holder hereby agree and amend
the Warrant Agreement and Warrant Certificates as follows:
(1) Notwithstanding anything to the contrary set forth in
the Warrant Agreement or the Warrant Certificates (but subject to the
provisions of Paragraph (4) of this letter agreement), the maximum
number of Warrants which the Warrant Holder shall have the right to
exercise (and the maximum number of shares of Common Stock which
shall be issued to the 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 the Warrant Holder may acquire at such time without then
causing the Warrant Holder, or any "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) of which the 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 classes of Common
Equity (as defined in the Indenture) of the Company.
(2) For purposes of this letter agreement:
(a) the "Extended Exercise Date" shall be the first
to occur of the following:
(i) January 2, 2002;
NY2:\1027874\05\M14205!.DOC\58120.0004
The Fortress Group, Inc.
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Xxxxx 00, 0000
(xx) 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
following the occurrence of a Change of Control (in each
case, as defined in the Indenture); and
(iii) the tenth day prior to any Material Record
Date (as defined below); 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 increase in the number of authorized shares of
the capital stock of the Company or any issuance of any such shares;
or (iii) any action or transaction (or any series of actions or
transactions) which, individually or together, could cause a Change
of Control (as defined in the Indenture) to occur.
(c) Notwithstanding anything to the contrary set forth in
this letter agreement (including, without limitation, Paragraph (4)
hereof), in no event shall the Extended Exercise Date be earlier than
September 30, 2001.
(3) The Company hereby covenants and agrees that, prior to the
occurrence of the first to occur of (a) the date on which a Material Record Date
is established and (b) the tenth day prior to a Material Record Date, it will
provide the Warrant Holder with notice, in accordance with the provisions of
Section 14 of the Warrant Agreement, of the establishment of such Material
Record Date.
(4) Subject to the provisions of Paragraph (2)(c) of this letter
agreement and notwithstanding anything to the contrary set forth in the Warrant
Agreement or the Warrant Certificates, the 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:
The Fortress Group, Inc.
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March 29, 2001
(i) the day preceding the day on which any Event of
Default shall have occurred; and
(ii) a Material Record Date in respect of which the
Company shall have failed for any reason to provide the
Warrant Holder with timely notice in accordance with
Paragraph (3) hereof,
unless, in any such case, the Warrant Holder shall, within ten days
following the date on which the Warrant Holder shall otherwise have
been deemed to have exercised all of the Warrants (or such later date
as the Company and the Warrant Holder may agree to in writing), the
Warrant Holder shall provide the Company with notice, in accordance
with the provisions of Section 14 of the Warrant Agreement, that the
Warrant Holder has determined to exercise less than all of the
Warrants.
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: Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Principal and
Executive Vice President
The Fortress Group, Inc.
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March 29, 2001
Agreement acknowledged as
of date first above written
THE FORTRESS GROUP, INC.
By: Xxxx Xxxxxxx
-------------------------------
Name: Xxxx Xxxxxxx
Title: CFO
