Filed pursuant to Rule 424(b)(3)
Registration No. 333-104493
PROSPECTUS
LNR PROPERTY CORPORATION
5.5% CONTINGENT CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2023
This prospectus relates to $235,000,000 aggregate principal amount of
our 5.5% Contingent Convertible Senior Subordinated Notes Due 2023 and the
shares of our common stock into which those Notes are convertible. Notes and
shares may be offered and sold from time to time by the securityholders
specified in this prospectus or their successors in interest. See "Selling
Securityholders." The sales of Notes or shares are being registered pursuant to
an agreement with the initial purchasers of the Notes.
We will not receive any of the proceeds from sales of Notes or shares
offered by this prospectus. However, we have agreed to bear certain expenses in
connection with the registration of offers or sales by selling securityholders
of Notes or common stock into which Notes are converted.
Our common stock is listed on the New York Stock Exchange under the
symbol "LNR."
THE NOTES AND SHARES INVOLVE RISK. FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN NOTES OR SHARES,
SEE THE SECTION CAPTIONED "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
Our principal executive offices are located at 1601 Washington Avenue,
Suite 800, Miami Beach, Florida 33139 (telephone: 305-695-5500).
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is April 24, 2003
TABLE OF CONTENTS
PAGE
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FORWARD-LOOKING INFORMATION................................................................. 2
THE COMPANY................................................................................. 3
RISK FACTORS................................................................................ 4
USE OF PROCEEDS............................................................................. 6
RATIO OF EARNINGS TO FIXED CHARGES......................................................... 7
DESCRIPTION OF THE NOTES.................................................................... 7
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..................................... 28
SELLING SECURITYHOLDERS..................................................................... 34
PLAN OF DISTRIBUTION........................................................................ 36
LEGAL MATTERS............................................................................... 36
EXPERTS..................................................................................... 36
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................. 37
INFORMATION WE FILE......................................................................... 37
FORWARD-LOOKING INFORMATION
Some of the statements contained in this prospectus and the documents
we incorporate by reference are "forward-looking statements" as that term is
defined in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Generally, the words
"believe," "expect," "intend," "anticipate," "will," "may" and similar
expressions identify forward looking statements. Forward looking statements
inherently involve risks and uncertainties. The factors, among others, that
could cause actual results to differ materially from those anticipated by the
forward looking statements in this prospectus include, but are not limited to:
- changes in demand for commercial real estate nationally, in
areas in which we own properties, or in areas in which
properties securing mortgages directly or indirectly owned by
us are located;
- changes in international, national or regional business
conditions that affect the ability of mortgage obligors to pay
principal or interest when it is due;
- the cyclical nature of the commercial real estate business;
- changes in interest rates;
- changes in the market for various types of real estate based
securities;
- changes in the availability of capital or the terms on which
it is available;
- changes in the availability of qualified personnel;
- changes in government regulations, including, without
limitation, environmental regulations; and
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- the other matters described under "Risk Factors," beginning on
page 4.
Except as the context may otherwise require, when we refer to "LNR" or
the Company," "we," "us" or "our" in this prospectus, we mean LNR Property
Corporation and its consolidated subsidiaries.
THE COMPANY
We are a real estate investment, finance and management company, which
structures and makes real estate and real estate-related investments and,
through our expertise in developing and managing properties and working out
underperforming and non-performing commercial loans, seeks to enhance the value
of those investments.
Our real estate investment activities include:
- Real Estate Properties: acquiring, developing, repositioning,
managing and selling commercial and multi-family residential
real estate.
- Real Estate Loans: investing in high-yielding real estate
loans and acquiring at a discount portfolios of loans backed
by commercial or multi-family residential real estate.
- Real Estate Securities: investing in unrated and
non-investment grade rated commercial mortgage backed
securities, or CMBS, as to which we have the right to be
special servicer (i.e., to oversee workouts of underperforming
and non-performing loans).
We adjust our investment focus from time to time to adapt to changes in
markets and phases of the real estate cycle.
Lennar Corporation formed our company in June 1997 to separate Lennar's
real estate investment, finance and management business from its homebuilding
business. On October 31, 1997, Lennar distributed our stock to Lennar's
stockholders in a tax-free spin-off. We treat activities conducted by Lennar, as
our predecessor, of the type we currently conduct as our own historical
activities.
We have a stock repurchase program in place. Through March 31, 2003, we
have repurchased 9.1 million shares of our common stock, including shares of our
common stock that we purchased with a portion of the proceeds from our sale of
the Notes. We are authorized to buy back up to an additional 3.4 million shares
under a recent Board authorization.
We are a Delaware corporation, with our principal executive offices at
1601 Washington Avenue, Suite 800, Miami Beach, Florida 33139. Our main
telephone number at those offices is (305) 695-5500.
You can get more information regarding our business by reading our
Annual Report on Form 10-K for the fiscal year ended November 30, 2002 and other
reports we file with the SEC. See "Information We File" on page 37 of this
prospectus.
3
RISK FACTORS
Our Annual Report on Form 10-K for the fiscal year ended November 30,
2002, which is incorporated by reference into this prospectus, contains under
the caption "Some Things Which Could Adversely Affect Us" a discussion of some
factors which can significantly affect us. You should consider them before you
invest in Notes or shares of our common stock. In addition, you should consider
the following factors in determining whether or not to purchase Notes or shares
of our common stock.
WE ARE SUBJECT TO RISKS FROM HAVING SIGNIFICANT INDEBTEDNESS
We use borrowings to finance almost all the investments we make. At
November 30, 2002, we had total indebtedness of $1,485 million, which was
approximately 56.9% of our debt and stockholders' equity. In addition, we had
guaranteed $35.7 million of debt of partnerships that are not subsidiaries (and
which, therefore, is not reflected in our consolidated financial statements).
While this leverage substantially increases the potential returns on our cash
invested, it exposes us to increased risks if, because of changes in market
conditions, changes in interest rates or for any other reason, the value of our
investments declines.
OUR OBLIGATIONS UNDER THE NOTES ARE UNSECURED, ARE SUBORDINATE TO ALL OF OUR
EXISTING AND FUTURE SENIOR INDEBTEDNESS, AND ARE STRUCTURALLY SUBORDINATE TO
SUBSIDIARY DEBT
The Notes are unsecured and are subordinate to all of our existing and
future Senior Indebtedness. At November 30, 2002, giving pro forma effect to the
issuance of the Notes and the use of the net proceeds from their issuance to
repay indebtedness and repurchase common stock, we had $708.3 million of Senior
Indebtedness outstanding, including $621.8 million of our subsidiaries' debt
which we guaranteed. There is no restriction in the Indenture governing the
Notes on our ability to incur additional Senior Indebtedness. For a description
of the types of obligations that are Senior Indebtedness, see "Subordination"
beginning on page 12 of this prospectus.
In addition, we are a holding company whose primary assets consist of
shares of stock or other equity interests in our subsidiaries. Accordingly, we
will be dependent upon receipt of dividends or advances from our subsidiaries to
be able to meet our debt obligations, including our obligations under the Notes.
The Notes are not guaranteed by our subsidiaries and our subsidiaries are not
obligated to pay dividends or make advances to us. A significant amount of our
consolidated indebtedness at November 30, 2002, was indebtedness of our
subsidiaries, including $272.3 million principal amount which we had not
guaranteed (as well as indebtedness which we had guaranteed and which,
therefore, was Senior Indebtedness). Creditors of a subsidiary are entitled to
be paid what is due to them before assets of the subsidiary become available for
creditors of its parent. Therefore, even liabilities which are not Senior
Indebtedness, and preferred stock, of subsidiaries will, in effect, be prior in
right of payment to the Notes with regard to the assets of those subsidiaries.
This can substantially reduce the portion of our consolidated assets which are
available for payment of the Notes. Also, any agreements of subsidiaries which
prohibit or limit the subsidiaries' payment of dividends will eliminate or
reduce our access to cash flows of those subsidiaries to pay interest or
principal with regard to the Notes.
IF WE EXPERIENCE A CHANGE IN CONTROL, WE MAY BE UNABLE TO PURCHASE THE NOTES AS
REQUIRED UNDER THE INDENTURE
Upon a change in control prior to March 1, 2010, each holder of Notes
will have the right to require us to repurchase the holder's Notes. If there
were a change in control of us, but we did not have sufficient funds to pay the
repurchase price for all the Notes which are tendered, that failure would
constitute an event of default under the Indenture governing the Notes. In
addition, a change in control
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would breach a covenant under our existing revolving credit facility and is
otherwise restricted by that facility, and may be prohibited or limited by, or
create an event of default under, other agreements relating to borrowings into
which we may enter from time to time. The borrowings under the revolving credit
facility are, and other borrowings are likely to be, Senior Indebtedness.
Therefore, a change in control at a time when we cannot pay for Notes which are
tendered as a result of the change in control could result in holders of Notes'
receiving substantially less than the principal amount of the Notes.
OUR REPORTED EARNINGS PER SHARE MAY BE MORE VOLATILE BECAUSE OF THE CONVERSION
CONTINGENCY PROVISION OF THE NOTES
Holders of the Notes are entitled to convert the Notes into our common
stock, among other circumstances, if the common stock price for the periods
described in this prospectus is more than 120% of the conversion price per share
of our common stock. Until this contingency or another conversion contingency is
met, the shares underlying the Notes are not included in the calculation of our
basic or fully diluted earnings per share. Should this contingency be met, fully
diluted earnings per share would, depending on the relationship between the
interest on the Notes and the earnings per share of our common stock, be
expected to decrease as a result of the inclusion of the underlying shares in
the fully diluted earnings per share calculation. Volatility in our stock price
could cause this condition to be met in one quarter and not in a subsequent
quarter, increasing the volatility of fully diluted earnings per share.
YOU SHOULD CONSIDER THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING NOTES
We intend to treat the Notes as contingent payment debt instruments for
U.S. federal income tax purposes. As a result of this treatment, if you acquire
Notes, you will be required to include amounts in income, as ordinary income, in
advance of the receipt of cash or other property attributable to them. The
amount of interest income you are required to include each year will exceed the
stated interest (and contingent interest, if any) that accrues on the Notes. You
will recognize gain or loss on a sale, purchase by us at your option, exchange,
conversion or redemption of a Note in an amount equal to the difference between
the amount realized on the sale, purchase by us at your option, exchange,
conversion or redemption, including the fair market value of any of our common
stock received upon conversion, and your adjusted tax basis in the Note. Any
gain you recognize generally will be ordinary interest income; any loss will be
ordinary loss to the extent of interest on the Notes previously included in
income and, thereafter, capital loss. There is some uncertainty as to the proper
application of the Treasury regulations governing contingent payment debt
instruments, and if our treatment were successfully challenged by the Internal
Revenue Service, it might be determined that, among other things, you should
have accrued interest income at a lower rate, should not have recognized
ordinary income upon the conversion, and should have recognized capital, rather
than ordinary, income or loss upon a taxable disposition of the Notes. Certain
U.S. federal income tax consequences of ownership of the Notes are summarized in
this prospectus beginning on page 28 under the heading "Certain United States
Federal Income Tax Considerations."
WE EXPECT THAT THE TRADING VALUE OF THE NOTES WILL BE SIGNIFICANTLY AFFECTED BY
THE PRICE OF OUR COMMON STOCK AND OTHER FACTORS
The market price of the Notes is expected to be significantly affected
by the market price of our common stock. This may result in greater volatility
in the trading value of the Notes than would be expected for nonconvertible debt
securities. In addition, the Notes have a number of features, including
conditions to conversion, which, if not met, could result in a holder receiving
less than the value of our common stock into which a Note would otherwise be
convertible. These features could adversely affect the value and the trading
prices of the Notes.
5
ABSENCE OF PUBLIC MARKET FOR THE NOTES
If the Notes are traded, they may trade at a discount from their
principal amount, depending upon prevailing interest rates, the market for
similar securities, our performance and other factors. Historically, the market
for non-investment grade debt has been subject to disruptions that have caused
substantial volatility in the prices of securities similar to the Notes. It is
very possible that, if a market for the Notes develops, that market will be
subject to similar disruptions. Any such disruptions may have an adverse effect
on holders of the Notes. We do not intend to apply for listing of the Notes on
any securities exchange or for the inclusion of the Notes in any automated
quotation system.
THE FORMAT OF OUR INCOME STATEMENT IS GOING TO CHANGE
On December 1, 2002, we became subject to Statement of Financial
Accounting Standards No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 requires that whenever we sell or hold for sale,
a commercial real estate property that has its own operations and cash flows, we
must reclassify the revenues and expenses of that property, both with regard to
the current period and with regard to the past, as elements of earnings from
discontinued operations, and we must treat our profits or losses on sales of
those properties as gains or losses from discontinued operations. Because our
real estate property business consists of continuously acquiring properties,
enhancing their value and selling them, sales of individual properties are an
important part of our real estate property business. Therefore, we believe,
reclassifying our operating results from properties we sell or hold for sale,
and treating our gain or loss from sale of those properties as discontinued
operations, makes it difficult to determine and evaluate from our statements of
earnings the performance of our real estate property business. The effects of
our accounting for our commercial real estate properties in accordance with SFAS
No. 144 will include (a) virtually every quarter, our historical financial
statements will be revised to transfer the operating results we previously
recorded with regard to properties we sell or hold for sale during the current
quarter from continuing operations to discontinued operations, and (b) the
transfers of prior years' operating results to discontinued operations may make
it appear that current years' earnings before income taxes from our real estate
property business is greater in comparison to prior years than actually is the
case. We expect to provide, in our quarterly Management's Discussion and
Analysis of Financial Condition and Results of Operations, information that
combines revenues, expenses and gains on sales with regard to properties we have
sold or hold for sale, which are reflected on our statements of earnings as
discontinued operations, with the operating income from commercial properties we
continue to own which are not classified as held for sale. However, you will
have to read our MD&A to get this combined information. Further, our year end
MD&A does not cover all the periods that are the subject of the five year table
of Selected Financial Data that appears in our annual report to the SEC.
USE OF PROCEEDS
The selling securityholders will receive all of the net proceeds from
sales of Notes and shares offered by this prospectus. See "Selling
Securityholders" beginning on page 34 of this prospectus. We will not receive
any of the proceeds from resales. Nonetheless, we have agreed to bear certain
expenses in connection with the registration of the Notes and the shares of
common stock issuable upon conversion of the Notes so they can be offered and
sold to the general public by the selling securityholders.
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RATIO OF EARNINGS TO FIXED CHARGES
Years Ended November 30,
----------------------------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges (1) 3.3x 2.7x 2.2x 2.2x 2.9x
--------------------
(1) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of income from continuing operations before income
taxes plus "fixed charges" and certain other adjustments. "Fixed
charges" consist of interest incurred on all indebtedness related to
continuing operations, including amortization of original issue
discount (we did not have any material capitalized lease obligations
during the periods presented).
There was no preferred stock outstanding for any of the periods shown
above. Accordingly, the ratio of earnings to combined fixed charges and
preferred stock dividends is identical to the ratio of earnings to fixed
charges.
DESCRIPTION OF THE NOTES
We issued the Notes under an Indenture between us and U.S. Bank Trust
National Association, as trustee. The following description is only a summary of
the material provisions of the Notes, the related Indenture and the registration
rights agreement. We urge you to read the Indenture, the Notes and the
registration rights agreement in their entirety because they, and not this
description, define your rights as holders of the Notes. You may request copies
of these documents at our address shown under the caption "Incorporation of
Certain Documents by Reference" on page 37 of this prospectus. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended. For purposes of
this section, references to "we," "us," "our" and "LNR" include only LNR
Property Corporation and not its subsidiaries.
GENERAL
We issued the Notes in an aggregate principal amount of $235,000,000.
The Notes are our senior subordinated obligations and will mature on March 1,
2023, unless earlier redeemed at our option as described under "--Optional
Redemption of the Notes" beginning on page 15 of this prospectus, repurchased by
us at a holder's option on certain dates as described under "--Repurchase of
Notes at the Option of the Holder" beginning on page 15 of this prospectus, or
upon a change in control of LNR as described under "-- Right to Require Purchase
of Notes upon a Change in Control" beginning on page 18 of this prospectus or
converted at a holder's option as described under "--Conversion Rights"
beginning on page 9 of this prospectus.
Interest on the Notes will accrue at 5.5% per annum and will be payable
semiannually in arrears on March 1 and September 1 of each year, commencing on
September 1, 2003. Interest on the Notes accrues from the initial date of
issuance or, if interest has already been paid, from the date on which it was
most recently paid. We will make each interest payment to persons who are
holders of record of the Notes on the immediately preceding February 15 and
August 15, whether or not this day is a business day. Interest payable upon
redemption will be paid to the person to whom principal is payable unless the
redemption date is between the close of business on any record date for the
payment of interest and the opening of business on the related interest payment
date, in which case we will pay interest to the person
7
that is the record holder of the Notes on the record date. Interest on the Notes
is computed on the basis of a 360-day year comprised of twelve 30-day months. We
will pay the principal of, and interest (including contingent interest, if any)
on, the Notes at the office or agency maintained by us in the Borough of
Manhattan in New York City. Holders may register the transfer of their Notes at
the same location. We reserve the right to pay interest to holders of the Notes
by check mailed to the holders at their registered addresses. However, a holder
of Notes with an aggregate principal amount in excess of $1,000,000 may request
payment by wire transfer in immediately available funds. Except under the
limited circumstances described below, the Notes will be issued only in fully
registered book-entry form, without coupons, and may be represented by one or
more Global Notes. There is no service charge for any registration of transfer
or exchange of Notes. We may, however, require holders to pay a sum sufficient
to cover any tax or other governmental charge payable in connection with any
transfer or exchange.
The Indenture does not contain any restriction on the payment of
dividends, the incurrence of indebtedness or the repurchase of our securities,
and does not contain any financial covenants. Other than as described under
"--Right to Require Purchase of Notes upon a Change in Control" beginning on
page 18 of this prospectus, the Indenture contains no covenants or other
provisions that afford protection to holders of Notes in the event of a highly
leveraged transaction.
CONTINGENT INTEREST
Subject to the accrual and record date provisions described below, we
will pay contingent interest to the holders of Notes for any six-month period
from March 1 to, but excluding, September 1 and from September 1 to, but
excluding, March 1, commencing March 1, 2008, if the average of the note price
(as determined below) per $1,000 principal amount of Notes for the five trading
days ending on the second trading day immediately preceding the start of the
relevant six-month period equals $1,200 or more. Notwithstanding the above, if
we declare a dividend for which the record date falls prior to the first day of
a six-month period but the payment date falls within such six-month period, then
the five-trading-day period for determining the average note price will be the
five trading days ending on the second trading day immediately preceding such
record date.
The amount of contingent interest payable per $1,000 principal amount
of Notes in respect of any six-month period equals 0.1875% of the average note
price for the five-trading-day period referred to above.
Contingent interest for a six-month period, if any, accrues from the
first day of the six-month period and is payable on the last day of the
six-month period to the persons who are holders of record of Notes on the
February 15 or August 15, as the case may be, during the six-month period.
If we determine that Note holders will be entitled to receive
contingent interest during a six-month period, on or prior to the start of such
six-month period, we will issue a press release and publish the determination on
our web site at www.lnrproperty.com.
The "note price" of the Notes on any date of determination means the
average of the secondary market bid quotations per $1,000 principal amount of
Notes obtained by the conversion agent for $5,000,000 principal amount of the
Notes at approximately 3:30 p.m., New York City time, on such determination date
from three independent nationally recognized securities dealers we select,
provided that if at least three such bids cannot reasonably be obtained by the
conversion agent, but two such bids are obtained, then the average of the two
bids shall be used, and if only one such bid can reasonably be obtained by the
conversion agent, this one bid shall be used. If the conversion agent cannot
reasonably obtain at least one bid for $5,000,000 principal amount of the Notes
from a nationally recognized securities dealer or, in our reasonable judgment,
the bid quotations are not indicative of the secondary
8
market value of the Notes, then the note price will be determined in good faith
by the conversion agent acting as calculation agent taking into account in such
determination such factors as it, in its sole discretion after consultation with
us, deems appropriate.
CONVERSION RIGHTS
A holder may convert any outstanding Notes into shares of our common
stock at an initial conversion price per share of $45.28. This represents a
conversion rate of approximately 22.0848 shares per $1,000 principal amount of
the Notes. The conversion price (and resulting conversion rate) is, however,
subject to adjustment as described below. A holder may convert Notes only in
denominations of $1,000 and integral multiples of $1,000.
General
Holders may surrender Notes for conversion into shares of our common
stock prior to the maturity date in the following circumstances:
- during any quarter, if the closing common stock price
(described below) of our common stock for at least 20 trading
days in the period of 30 consecutive trading days ending on
the twelfth trading day of such quarter is more than 120% of
the conversion price per share on that 30th trading day;
- if we have called the particular Notes for redemption and the
redemption has not yet occurred;
- if none of Moody's Investors Service, Inc., Standard & Poor's
Ratings Services or Fitch Ratings Ltd. assigns a credit rating
to any of our debt securities; or
- upon the occurrence of specified corporate transactions.
In addition, in respect of any Note presented for conversion prior to
March 8, 2008, we may, at our option, in lieu of delivering shares of common
stock, elect to pay the holder surrendering such Note an amount of cash equal to
the average of the common stock price for the five consecutive trading days
immediately following (a) the date of our notice of our election to deliver cash
as described below if we have not given a notice of redemption with respect to
such Note, or (b) the conversion date, in the case of a conversion following our
notice of redemption with respect to such Note specifying that we intend to
deliver cash upon conversion, in either case multiplied by the number of shares
of common stock issuable upon conversion of such Note on that date. We will
inform Noteholders through the trustee no later than two business days following
the conversion date of our election to deliver shares of common stock or to pay
cash in lieu of the delivery of shares, unless we have already informed holders
of our election in connection with our optional redemption of the Notes as
described under -- Optional Redemption of the Notes" beginning on page 15 of
this prospectus. If we elect to deliver all of such payment in shares of common
stock, the shares will be delivered through the trustee no later than the fifth
business day following the conversion date. If we elect to pay all or a portion
of such payment in cash, the payment, including any delivery of common stock,
will be made to holders surrendering Notes no later than the tenth business day
following the applicable conversion date. If an event of default, as described
under "-- Events of Default" beginning on page 23 of this prospectus (other than
a default in a cash payment upon conversion of the Notes), has occurred and is
continuing, we may not pay cash upon conversion of any Notes (other than cash in
lieu of fractional shares).
9
The "common stock price" of our common stock on any date means the
closing sale price per share (or if no closing sale price is reported, the
average of the bid and ask prices or, if there is more than one reported bid or
ask price, the average of the average bid and the average ask prices) on such
date in composite transactions reported on the principal United States
securities exchange on which the common stock is traded or, if the common stock
is not listed on a United States national or regional securities exchange, as
reported by the Nasdaq System.
Conversion Upon Notice of Redemption
A Noteholder may surrender for conversion any Note called for
redemption at any time prior to the close of business on the day that is two
business days prior to the redemption date, even if the Notes are not otherwise
convertible at such time.
Conversion Upon Specified Corporate Transactions
If we elect to:
- distribute to all holders of our common stock rights, warrants
or options entitling them to subscribe for or purchase, for a
period expiring within 60 days of the date of distribution,
shares of our common stock at less than the then current
market price; or
- distribute to all holders of shares of our common stock any
assets, debt securities or certain rights to purchase our
securities, which distribution has a per share value exceeding
15% of the closing price of our common stock on the day
preceding the declaration date for such distribution,
we must notify the holders of Notes at least 20 days prior to the ex-dividend
date for such distribution. Once we have given such notice, holders may
surrender their Notes for conversion until the earlier of the close of business
on the business day prior to the ex-dividend date or our announcement that such
distribution will not take place. This provision shall not apply if the holder
of a Note otherwise participates in the distribution without conversion.
In addition, if we are a party to a consolidation, merger, share
exchange, sale of all or substantially all of our assets or other similar
transaction, in each case pursuant to which the shares of our common stock would
be converted into cash, securities or other property, a Noteholder may surrender
its Notes for conversion at any time from and after the date which is 15 days
prior to the anticipated effective date of such transaction until and including
the date which is 15 days after the actual effective date of such transaction.
If we are a party to a consolidation, merger, share exchange, sale of all or
substantially all of our assets or other similar transaction, in each case
pursuant to which the shares of our common stock are converted into cash,
securities, or other property, then at the effective time of the transaction, a
Noteholder's right to convert its Notes into shares of our common stock will be
changed into a right to convert such Notes into the kind and amount of cash,
securities and other property which such holder would have received if such
holder had converted such Notes immediately prior to the transaction. If the
transaction also constitutes a change in control, such holder can require us to
repurchase all or a portion of its Notes as described under "--Right to Require
Purchase of Notes upon a Change in Control" beginning on page 18 of this
prospectus.
If a holder of a Note has delivered notice of its election to have such
Note repurchased at the option of such holder or as a result of a change in
control, such Note may be converted only if the notice of election is withdrawn
as described beginning on pages 15 and 18 of this prospectus respectively, under
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"--Repurchase of Notes at the Option of the Holder" or "--Right to Require
Purchase of Notes upon a Change in Control."
We will adjust the conversion price if (without duplication):
(1) we issue to all holders of shares of our common stock common
stock or other capital stock as a dividend or distribution on
our common stock;
(2) we subdivide, combine or reclassify our common stock;
(3) we issue to all holders of our common stock rights, warrants
or options entitling them to subscribe for or purchase shares
of our common stock at less than the then current market
price;
(4) we distribute to all holders of our common stock evidences of
our indebtedness, shares of capital stock (other than shares
of our common stock), securities, cash, property, rights,
warrants or options, excluding:
- those rights, warrants or options referred to in
clause (3) above;
- any dividend or distribution paid exclusively in cash
not referred to below; and
- any dividend or distribution referred to in clause
(1) above;
(5) we make a cash distribution to all holders of shares of our
common stock that together with all other all-cash
distributions and consideration payable in respect of any
tender or exchange offer by us or one of our subsidiaries for
shares made within the preceding 12 months exceeds 10% of our
aggregate market capitalization on the date of the declaration
of the distribution; or
(6) during any twelve-month period we or one of our subsidiaries
complete a repurchase by way of a tender or exchange offer of
shares of our common stock which involves an aggregate
consideration that, together with:
- any cash and other consideration payable in respect
of any tender or exchange offer by us or one of our
subsidiaries for shares of our common stock concluded
within the preceding 12 months; and
- the amount of any all-cash distributions to all
holders of our common stock made within the preceding
12 months;
exceeds 10% of our aggregate market capitalization on the
expiration of the tender or exchange offer.
For purposes of the foregoing, the term "market capitalization" as of
any date of calculation means the closing sale price of our common stock on the
trading day immediately prior to such date of calculation multiplied by the
aggregate number of shares of our common stock outstanding on the trading day
immediately prior to such date of calculation.
11
The conversion price will not be adjusted until adjustments amount to
1% or more of the conversion price as last adjusted. We will carry forward any
adjustment we do not make and will include it in any future adjustment.
We will not issue fractional shares of common stock to a holder who
converts a Note. In lieu of issuing fractional shares, we will pay cash based
upon the common stock price on the date of conversion.
Except as described in this paragraph, no holder of Notes will be
entitled, upon conversion of the Notes, to any payment or adjustment on account
of accrued but unpaid interest, including contingent interest and liquidated
damages, if any, or on account of dividends on shares issued in connection with
the conversion. If any holder surrenders a Note for conversion between the close
of business on any record date for the payment of an installment of interest
(including contingent interest, if any) and the opening of business on the
related interest payment date, when the holder surrenders the note for
conversion, the holder must deliver payment to us of an amount equal to the
interest payable on the interest payment date (including contingent interest, if
any) on the principal amount to be converted. The foregoing sentence shall not
apply to Notes called for redemption on a redemption date within the period
between and including the record date and the interest payment date.
If we make a distribution of property to our stockholders which would
be taxable to them as a dividend for federal income tax purposes and the
conversion price of the Notes is decreased, this decrease may be deemed to be
the receipt of taxable income by holders of the Notes.
We may from time to time reduce the conversion price if our Board of
Directors determines that this reduction would be in the best interests of LNR.
Any such determination by our Board of Directors will be conclusive. Any such
reduction in the conversion price must remain in effect for at least 20 trading
days. In addition, we may from time to time reduce the conversion price if our
Board of Directors deems it advisable to avoid or diminish any income tax to
holders of our common stock resulting from any stock or rights distribution on
our common stock.
SUBORDINATION
The payment of the Obligations (as defined below) on the Notes is
subordinated in right of payment to the prior payment in full in cash or cash
equivalents of all Obligations on Senior Indebtedness (as defined below),
whether outstanding on the Issue Date (as defined below) or thereafter incurred,
including without limitation our obligations under our Credit Agreement. Upon
any payment or distribution of our assets of any kind or character, whether in
cash, property or securities, to creditors upon any total or partial
liquidation, dissolution, winding-up, reorganization, assignment for the benefit
of creditors or marshaling of our assets or in a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding, whether voluntary or
involuntary, all Obligations upon all Senior Indebtedness shall first be paid in
full in cash or cash equivalents, or such payment duly provided for to the
satisfaction of the holders of Senior Indebtedness, before any payment or
distribution is made on account of any Obligations on the Notes, or for the
acquisition of any of the Notes for cash or property or otherwise.
If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unreimbursed drawings for letters of credit issued in
respect of, or regularly occurring fees with respect to any Senior Indebtedness,
no payment of any kind or character shall be made by us or on our behalf or by
any other person on our or that person's behalf with respect to any Obligations
on the Notes or to acquire any of the Notes for cash or property or otherwise.
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In addition, if
- any other event of default occurs and is continuing with
respect to any Designated Senior Indebtedness permitting the
holders of such Designated Senior Indebtedness then
outstanding to accelerate the maturity thereof; and
- the holders, or the trustee or agent on behalf of the holders,
of the Designated Senior Indebtedness as to which such default
relates gives written notice of the event of default to the
Trustee (a "Default Notice"),
then, unless and until all events of default with respect to that issue of
Designated Senior Indebtedness have been cured or waived or have ceased to exist
or the Trustee receives notice from the holders, or the trustee or agent on
behalf of the holders, of that issue of Designated Senior Indebtedness
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), we and any of our
subsidiaries or any obligor under the Notes will not:
- make any payment of any kind or character with respect to any
Obligations on the Notes; or
- acquire any of the Notes for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a
Blockage Period extend beyond 180 days from the date the payment on the Notes
was due and only one such Blockage Period may be commenced with respect to all
issues of Designated Senior Indebtedness within any 360 consecutive days. No
event of default which existed or was continuing on the commencement date of any
Blockage Period shall be the basis for commencement of a second Blockage Period
by the holders, or the trustee or agent on behalf of the holders, of an issue of
Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days. Any subsequent action, or any
breach of financial covenants for a period commencing after the commencement
date of a Blockage Period, that in either case, would give rise to an event of
default pursuant to any provisions under which an event of default previously
existed or was continuing shall constitute a new event of default for this
purpose.
As a result of this subordination, in the event of our insolvency, our
creditors who are not holders of Senior Indebtedness, including the holders of
the Notes, may recover less, ratably, than holders of Senior Indebtedness.
At November 30, 2002, after giving effect to the sale of $235 million
principal amount of Notes and application of the proceeds of that sale, we would
have had approximately $708.3 million of Senior Indebtedness.
We are principally a holding company whose primary assets consist of
shares of stock issued by our subsidiaries. Accordingly, we are dependent upon
the cash flows of, and receipt of dividends and advances from, or repayments of
advances by, our subsidiaries in order to meet our debt obligations, including
our obligations under the Notes. The Notes are not guaranteed by our
subsidiaries and, consequently, our subsidiaries are not obligated or required
to pay any amounts pursuant to the Notes or to make funds available therefor in
the form of dividends or advances. See "Risk Factors--Our obligations under the
Notes are unsecured, are subordinate to all of our existing and future Senior
Indebtedness, and are structurally subordinate to subsidiary debt" on page 4 of
this prospectus.
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"Designated Senior Indebtedness" means:
- any indebtedness under or in respect of our Credit Agreement
(as defined below); and
- any other indebtedness constituting Senior Indebtedness, the
principal amount of which is $25 million or more and that we
have designated "Designated Senior Indebtedness."
"Credit Agreement" means the Third Amended and Restated Revolving
Credit Agreement, dated as of November 27, 2002, among LNR and certain of its
subsidiaries, the lenders named therein and Bank of America, N.A., as
administrative agent, together with the related documents thereto, as such
agreement may be amended, supplemented or otherwise modified from time to time.
The Credit Agreement includes any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including increasing the
amount of available borrowings or adding our subsidiaries as additional
borrowers or guarantors thereunder) all or any portion of the indebtedness under
such agreement or any successor or replacement agreement whether by the same or
any other agent, lender or group of lenders.
"Issue Date" means the date of original issuance of the Notes.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any indebtedness.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on any of our indebtedness, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Indebtedness" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of:
(1) all of our monetary obligations (including guarantees thereof)
of every nature under our Credit Agreement, including, without
limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees,
expenses and indemnities;
(2) all interest swap obligations (including guarantees thereof);
and
(3) all obligations (including guarantees) under currency
agreements, in each case whether outstanding on the date of
the Indenture or thereafter incurred.
Notwithstanding the foregoing, "Senior Indebtedness" will not include:
(1) any of our indebtedness to any of our subsidiaries or any of
our affiliates or any of such affiliate's subsidiaries;
(2) indebtedness to, or guaranteed on behalf of, our or any of our
subsidiaries' shareholders, directors, officers or employees
(including, without limitation, amounts owed for
compensation);
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(3) indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(4) indebtedness represented by disqualified capital stock;
(5) any liability for federal, state, local or other taxes we owe;
(6) any indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States
Code is without recourse to us; and
(7) any indebtedness which is, by its express terms, subordinated
in right of payment to any of our other indebtedness.
OPTIONAL REDEMPTION OF THE NOTES
Beginning on March 8, 2008, we may redeem the Notes, in whole at any
time, or in part from time to time, for cash. If we redeem the Notes during the
twelve-month period commencing on March 8, 2008 or on March 1 of any of the
years thereafter, the redemption price will equal the percentage of the amount
of the redeemed Notes opposite that year below, plus accrued but unpaid interest
(including contingent interest, if any) up to but not including the date of
redemption:
YEAR PERCENTAGE
---- ----------
2008.................................................................................... 101.57%
2009.................................................................................... 100.79
2010 and thereafter..................................................................... 100.00
We will give not less than 30 days' nor more than 60 days' notice of
redemption by mail to holders of the Notes. If we opt to redeem less than all of
the Notes at any time, the trustee will select or cause to be selected the Notes
to be redeemed by any method that it deems fair and appropriate. In the event of
a partial redemption, the trustee may provide for selection for redemption of
portions of the principal amount of any Note of a denomination larger than
$1,000.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER
A holder has the right to require us to repurchase all or a portion of
the holder's Notes on March 1, 2010 and March 1, 2017. We will repurchase the
Notes for an amount equal to 100% of the principal amount of the Notes on the
date of purchase, plus accrued but unpaid interest (including contingent
interest, if any) to the date of repurchase. We may choose to pay the purchase
price in cash, with shares of our common stock, valued at 97.5% of the Market
Price, or with a combination of cash and our common stock (valued in that
manner).
We will be required to give notice on a date not less than 30 business
days prior to each purchase date to all holders at their addresses shown in the
register of the registrar, and to beneficial owners as required by applicable
law, stating among other things:
- whether we will pay the purchase price of Notes in cash or
common stock or any combination thereof, specifying the
percentages of each;
- if we elect to pay in common stock, the method of calculating
the Market Price of the common stock; and
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- the procedures that holders must follow to require us to
purchase their Notes.
The purchase notice given by each holder electing to require us to
purchase Notes shall state:
- the certificate numbers of the holder's Notes to be delivered
for purchase;
- the portion of the principal amount Notes to be purchased,
which must be $1,000 or an integral multiple of $1,000;
- that the Notes are to be purchased by us pursuant to the
applicable provisions of the Notes and the Indenture; and
- in the event we elect, pursuant to the notice that we are
required to give, to pay the purchase price in common stock,
in whole or in part, but the purchase price is ultimately to
be paid to the holder entirely in cash because any condition
to payment of the purchase price or portion of the purchase
price in common stock is not satisfied prior to the close of
business on the purchase date, as described below, whether the
holder elects: (1) to withdraw the purchase notice as to some
or all of the Notes to which it relates, or (2) to receive
cash in respect of the entire purchase price for all Notes or
portions of Notes subject to such purchase notice.
If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder shall be deemed
to have elected to receive cash in respect of the entire purchase price for all
Notes subject to the purchase notice in these circumstances. For a discussion of
the tax treatment of a holder exercising the right to require us to purchase
Notes, see "Certain United States Federal Income Tax Considerations--Sale,
Exchange, Conversion or Redemption" beginning on page 31 of this prospectus.
Any purchase notice may be withdrawn by the holder by a written notice
of withdrawal delivered to the paying agent prior to the close of business on
the purchase date.
The notice of withdrawal shall state:
- the principal amount being withdrawn; and
- the principal amount of the Notes that remain subject to the
purchase notice, if any.
In connection with any purchase offer, we will:
- comply with the provisions of Rule 13e-4, Rule 14e-l and any
other tender offer rules under the Exchange Act which may then
be applicable; and
- file a Schedule TO or any other required schedule under the
Exchange Act.
Payment of the purchase price for a Note for which a purchase notice
has been delivered and not validly withdrawn is conditioned upon delivery of the
Note, together with necessary endorsements, to the paying agent at any time
after delivery of the purchase notice. Payment of the purchase price for the
Notes will be made promptly following the later of the purchase date or the time
of delivery of the Notes.
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If we elect to pay the purchase price, in whole or in part, in shares
of common stock, the number of shares of common stock to be delivered by us
shall be equal to the portion of the purchase price to be paid in common stock
divided by 97.5% of the Market Price of a share of common stock.
We will pay cash based on the Market Price for all fractional shares of
common stock in the event we elect to deliver common stock in payment, in whole
or in part, of the purchase price. See "Certain United States Federal Income Tax
Considerations--Sale, Exchange, Conversion or Redemption" beginning on page 31
of this prospectus.
The "Market Price" means the average of the closing stock price of our
common stock for the 20 trading-day period ending on the third business day (if
the third business day prior to the applicable purchase date is a trading day
or, if not, then on the last trading day) prior to the applicable purchase date,
appropriately adjusted to take into account the occurrence, during the period
commencing on the first of such trading days during such 20 trading day period
and ending on such purchase date, of certain events with respect to the common
stock that would result in an adjustment of the conversion rate.
Because the Market Price of the common stock is determined prior to the
applicable purchase date, holders of Notes bear the market risk with respect to
the value of the common stock to be received from the date such Market Price is
determined to such purchase date. We may pay the purchase price or any portion
of the purchase price in common stock only if the information necessary to
calculate the Market Price is published in a daily newspaper of national
circulation.
Our right to purchase Notes, in whole or in part, with common stock is
subject to our satisfying various conditions, including:
- the registration of the common stock under the Securities Act
and the Exchange Act, if required; and
- any necessary qualification or registration under applicable
state securities law or the availability of an exemption from
such qualification and registration.
If such conditions are not satisfied with respect to a holder prior to
the close of business on the purchase date, we will pay the purchase price of
the Notes of such holder entirely in cash. See "Certain United States Federal
Income Tax Considerations--Sale, Exchange, Conversion or Redemption" beginning
on page 31 of this prospectus. We may not change the form or components or
percentages of components of consideration to be paid for the Notes once we have
given the notice that we are required to give to holders of Notes, except as
described in the first sentence of this paragraph.
If the paying agent holds cash or securities sufficient to pay the
purchase price of the Note on the business day following the purchase date in
accordance with the terms of the Indenture, then, immediately after the purchase
date, the Note will cease to be outstanding, whether or not the Note is
delivered to the paying agent. Thereafter, all other rights of the holder shall
terminate, other than the right to receive the purchase price upon delivery of
the Note.
Our ability to purchase Notes may be limited by the terms of our then
existing indebtedness or financing agreements.
No Notes may be purchased at the option of holders if there has
occurred and is continuing an event of default with respect to the Notes, other
than a default in the payment of the purchase price with respect to such Notes.
17
MANDATORY REDEMPTION
Except as described in this prospectus beginning on pages 18 and 15,
respectively, under the captions "--Right to Require Purchase of Notes upon a
Change in Control" and "--Repurchase of Notes at the Option of the Holder," we
are not required to make mandatory redemption of, or sinking fund payments with
respect to, the Notes.
RIGHT TO REQUIRE PURCHASE OF NOTES UPON A CHANGE IN CONTROL
If a change in control (as defined below) occurs before March 1, 2010,
each holder of Notes may require that we repurchase the holder's Notes on the
date fixed by us that is not less than 30 days nor more than 45 days after we
give notice of the change in control. We will repurchase the Notes at a purchase
price equal to 100% of the principal amount of the Notes, plus accrued but
unpaid interest, including contingent interest, if any, to the date of
repurchase.
We may, at our option, pay the change in control repurchase price in
cash or, as long as our common stock is then listed on a national securities
exchange or traded on the Nasdaq National Market, shares of our common stock or
a combination of cash and common stock. The value of a share of our common stock
for such purposes shall be 97.5% of the Market Price.
"Change in control" means the occurrence of one or more of the
following events:
- any person (including any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended), other than us, any of our subsidiaries,
any of our or our subsidiaries' employee benefit plans or a
permitted holder (as defined below) is or becomes the
beneficial owner, directly or indirectly, through a purchase
or other acquisition transaction or series of transactions
(other than a merger or consolidation involving us), of shares
of our capital stock entitling such person to exercise in
excess of 50% of the total voting power of all shares of our
capital stock entitled to vote generally in the election of
directors;
- we consolidate with, or merge into, any other person, any
person consolidates with, or merges into us, or we sell or
transfer our assets, as an entirety or substantially as an
entirety, to another person, other than
(a) any such merger pursuant to which the holders of our
voting stock, immediately prior to such transaction
have, directly or indirectly, shares of capital stock
of the continuing or surviving corporation
immediately after such transaction which entitle such
holders to exercise in excess of 50% of the total
voting power of all shares of capital stock of the
continuing or surviving corporation or its parent
entitled to vote generally in the election of
directors; and
(b) any merger which is effected solely to change our
jurisdiction of incorporation and results in a
reclassification, conversion or exchange of
outstanding shares of voting stock solely into shares
of stock carrying substantially the same relative
rights as the voting stock; or
- a change in our Board of Directors in which the individuals
who constituted our Board of Directors at the beginning of the
two-year period immediately preceding such change (together
with any other director whose election to our Board of
Directors or whose nomination for election by our stockholders
was approved by a vote of at least a majority
18
of the directors then in office either who were directors at
the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason
to constitute a majority of the directors then in office.
A change in control will not be deemed to have occurred, however, if
either:
(1) the common stock price for (a) any 10 trading days within the
20 consecutive trading days ending immediately before the
change in control, and (b) at least five trading days within
the 10 consecutive trading days ending immediately before the
change in control shall equal or exceed 105% of the conversion
price, or
(2) both
(a) at least 90% of the consideration (excluding cash
payments for fractional shares) in the transaction or
transactions constituting the change in control
consists of shares of common stock with full voting
rights traded on a national securities exchange or
quoted on the Nasdaq National Market (or which will
be so traded or quoted when issued or exchanged in
connection with such change in control) (such
securities being referred to as "publicly traded
securities") and as a result of such transaction or
transactions the Notes become convertible solely into
such publicly traded securities and
(b) the consideration in the transaction or transactions
constituting the change in control consists of cash,
publicly traded securities or a combination of cash
and publicly traded securities and the amount of such
consideration to which a holder of a share of common
stock shall be entitled in such transaction or
transactions have an aggregate fair market value
(which, in the case of publicly traded securities,
shall be equal to the average closing price of such
publicly traded securities during the five
consecutive trading days commencing with the trading
day following consummation of the transaction or
transactions constituting the change in control) of
at least 105% of the conversion price then in effect.
The term "permitted holders" means any current holder of our Class B
common stock and any permitted transferee of our Class B common stock under the
terms of our Certificate of Incorporation as it exists on the date of this
prospectus.
The definition of "change in control" includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of our assets. Although there is a developing body of case law interpreting
the phrase "substantially all," there is no precise established definition of
the phrase under applicable law. Accordingly, the ability of a holder of Notes
to require us to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of our assets to another person
or group may be uncertain.
On or before the 30th day after the change in control, we must mail to
the trustee and all holders of the Notes a notice of the occurrence of the
change in control offer, stating:
- whether we will pay the repurchase price in cash or common
stock or any combination thereof, specifying the percentages
of each;
- if we elect to pay in common stock, the method of calculating
the Market Price of the common stock; and
19
- the procedures which a holder of Notes must follow to exercise
the repurchase right.
To exercise the repurchase right, holders of Notes must deliver, on or
before the repurchase date specified in our notice of a change in control, the
Notes to be repurchased, duly endorsed for transfer, together with a written
repurchase notice and the form entitled "Option to Elect Repurchase Upon a
Change in Control" on the reverse side of the Note duly completed, to the paying
agent. The repurchase notice given by each holder electing to require us to
repurchase Notes shall state:
- the certificate numbers of the holder's Notes to be delivered
for repurchase;
- the portion of the principal amount of Notes to be
repurchased, which must be $1,000 or an integral multiple of
$1,000;
- that the Notes are to be repurchased by us pursuant to the
applicable provisions of the Notes and the Indenture; and
- in the event we elect, pursuant to the notice that we are
required to give, to pay the repurchase price in common stock,
in whole or in part, but the repurchase price is ultimately to
be paid to the holder entirely in cash because any condition
to payment of the repurchase price or portion of the
repurchase price in common stock is not satisfied prior to the
close of business on the purchase date, as described below,
whether the holder elects: (1) to withdraw the repurchase
notice as to some or all of the Notes to which it relates or
(2) to receive cash in respect of the entire repurchase price
for all Notes or portions of Notes subject to such repurchase
notice.
If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder shall be deemed
to have elected to receive cash in respect of the entire repurchase price for
all Notes subject to the repurchase notice in these circumstances. For a
discussion of the tax treatment of a holder receiving cash instead of common
stock, see "Certain United States Federal Income Tax Considerations--Sale,
Exchange, Conversion or Redemption" beginning on page 31 of this prospectus.
Any repurchase notice may be withdrawn by the holder by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the repurchase date. The notice of withdrawal shall state:
- the principal amount being withdrawn;
- the certificate numbers of the Notes being withdrawn; and
- the principal amount of the Notes that remain subject to the
repurchase notice, if any.
If we elect to pay the repurchase price, in whole or in part, in shares
of common stock, the number of shares of common stock to be delivered by us
shall be equal to the portion of the repurchase price to be paid in common stock
divided by 97.5% of the Market Price of a share of common stock.
We will pay cash based on the Market Price for all fractional shares of
common stock in the event we elect to deliver common stock in payment, in whole
or in part, of the repurchase price. See "Certain United States Federal Income
Tax Considerations--Sale, Exchange, Conversion or Redemption" beginning on page
31 of this prospectus.
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Because the Market Price of the common stock is determined prior
to the applicable repurchase date, holders of Notes bear the market risk with
respect to the value of the common stock to be received from the date such
Market Price is determined to such repurchase date. We may pay the repurchase
price or any portion of the repurchase price in common stock only if the
information necessary to calculate the Market Price is published in a daily
newspaper of national circulation.
Our right to repurchase Notes, in whole or in part, with common stock
is subject to our satisfying various conditions, including:
- the registration of the common stock under the Securities Act
and the Exchange Act, if required; and
- any necessary qualification or registration under applicable
state securities law or the availability of an exemption from
such qualification and registration.
If such conditions are not satisfied with respect to a holder prior to
the close of business on the repurchase date, we will pay the repurchase price
of the Notes of such holder entirely in cash. See "Certain United States Federal
Income Tax Considerations--Sale, Exchange, Conversion or Redemption" beginning
on page 31 of this prospectus. We may not change the form or components or
percentages of components of consideration to be paid for the Notes once we have
given the notice that we are required to give to holders of Notes, except as
described in the first sentence of this paragraph.
We will comply with the provisions of Rule l3e-4 and any other tender
offer rules under the Exchange Act which may then be applicable in connection
with the repurchase of the Notes in the event of a change in control.
In connection with any change in control, we will within 30 days
following any change in control:
(1) obtain the consents under our Credit Agreement and all other
Senior Indebtedness required to permit the repurchase of the
Notes pursuant to a change in control offer; or
(2) repay in full all indebtedness and terminate all commitments,
under our Credit Agreement and all other Senior Indebtedness
the term of which would prohibit the purchase of the Notes
under a change in control offer.
If we are obligated to make a change in control offer, there can be no
assurance that we will be able to obtain all required consents under Senior
Indebtedness or have available funds sufficient to repay Senior Indebtedness and
to pay the change in control purchase price for all the Notes tendered in the
Notes under a change in control offer, we would need to seek third party
financing to the extent we do not have available funds to meet our purchase
obligations. However, there can be no assurance that we would be able to obtain
any such financing.
The effect of these provisions granting the holders the right to
require us to repurchase the Notes upon the occurrence of a change in control
may make it more difficult for any person or group to acquire control of us or
to effect a business combination with us. Our ability to pay cash to holders of
Notes following the occurrence of a change in control may be limited by our then
existing financial resources. We cannot assure you that sufficient funds will be
available when necessary to make any required repurchases. See "Risk Factors--If
we experience a change in control, we may be unable to purchase the Notes you
hold as required under the Indenture" beginning on page 4 of this prospectus.
21
Our obligation to make a change in control offer will be satisfied if a
third party makes the change in control offer in the manner and at the times and
otherwise in compliance in all material respects with the requirements
applicable to a change in control offer made by us and purchases all Notes
properly tendered and not withdrawn under the change in control offer.
The term "beneficial owner" will be determined in accordance with Rules
13d-3 and 13d-5 promulgated by the SEC under the Exchange Act or any successor
provision, except that a person shall be deemed to have "beneficial ownership"
of all shares of our common stock that the person has the right to acquire,
whether exercisable immediately or only after the passage of time.
PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT
We will not incur or permit to exist indebtedness that by its terms (or
by the terms of any agreement governing such indebtedness) is senior in right of
payment to the Notes and expressly subordinate in right of payment to any of our
other indebtedness.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of any of the Notes,
consolidate with, or merge into any other person or convey, transfer or lease
our properties and assets substantially as an entirety to, any other person, if:
- we are the resulting or surviving corporation or the
successor, transferee or lessee, if other than us, is a
corporation organized under the laws of any U.S. jurisdiction
and expressly assumes our obligations under the Indenture and
the Notes by means of a supplemental Indenture entered into
with the trustee; and
- after giving effect to the transaction, no event of default
and no event which, with notice or lapse of time, or both,
would constitute an event of default, shall have occurred and
be continuing.
Under any consolidation, merger or any conveyance, transfer or lease of
our properties and assets as described in the preceding paragraph, the successor
company will be our successor and shall succeed to, and be substituted for, and
may exercise every right and power of, LNR under the Indenture. If the
predecessor is still in existence after the transaction, it will be released
from its obligations and covenants under the Indenture and the Notes, except in
connection with a lease of all or substantially all of our properties and
assets.
MODIFICATION AND WAIVER
We and the trustee may enter into one or more supplemental Indentures
that add, change or eliminate provisions of the Indenture or modify the rights
of the holders of the Notes with the consent of the holders of at least a
majority in principal amount of the Notes then outstanding. However, without the
consent of each holder of an outstanding Note, no supplemental Indenture may,
among other things:
- change the stated maturity of the principal of, or payment
date of any installment of interest (including contingent
interest, if any) on, any Note;
- reduce the principal amount or redemption price of, or the
rate of interest (including contingent interest, if any) on,
any Note;
22
- change the currency in which the principal of any Note or
interest is payable or adversely affect the price or ratio at
which common stock may be substituted for currency in
connection with any payments made;.
- impair the right to institute suit for the enforcement of any
payment on or with respect to any Note when due;
- adversely affect the right provided in the Indenture to
convert any Note;
- modify the provisions of the Indenture relating to our
requirement to repurchase Notes upon a change in control or on
specified dates in a manner adverse to the holders of the
Notes;
- reduce the percentage in principal amount of the outstanding
Notes necessary to modify or amend the Indenture or to consent
to any waiver provided for in the Indenture; or
- waive a default in the payment of any amount or shares of
common stock due in connection with any Note.
The holders of a majority in principal amount of the outstanding Notes
may, on behalf of the holders of all Notes:
- waive compliance by us with restrictive provisions of the
Indenture other than as provided in the preceding paragraph;
and
- waive any past default under the Indenture and its
consequences, except a default in the payment of the principal
of or any interest (including contingent interest, if any) on
any Note or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of
the holder of each outstanding Note affected.
Without the consent of any holders of Notes, we and the trustee may
enter into one or more supplemental Indentures for any of the following
purposes:
- to cure any ambiguity, omission, defect or inconsistency in
the Indenture;
- to evidence a successor to us and the assumption by the
successor of our obligations under the Indenture and the
Notes;
- to make any change that does not adversely affect the rights
of any holder of the Notes;
- to comply with any requirement in connection with the
qualification of the Indenture under the Trust Indenture Act;
or
- to complete or make provision for certain other matters
contemplated by the Indenture.
EVENTS OF DEFAULT
Each of the following are events of default under the Indenture:
(1) if we fail to pay interest (including contingent interest) on
any Notes when it becomes due and payable and the default
continues for a period of 30 days, whether or not such
23
failure shall be due to the subordination provisions of the
Indenture or agreements with respect to any other indebtedness
or any other reason;
(2) if we fall to pay the principal on any Notes, when it becomes
due and payable, at maturity, upon acceleration, upon
redemption or otherwise (including the failure to make a
change in control offer or make a payment to purchase Notes
tendered pursuant to a change in control offer), whether or
not such failure shall be due to the subordination provisions
of the Indenture or agreements with respect to any other
Indebtedness or any other reason;
(3) if we fail to observe or perform any other covenant or
agreement contained in the Indenture which continues for a
period of 30 days after we received written notice specifying
the default (and demanding that such default be remedied) from
the Trustee or the holders of at least 25% of the outstanding
principal amount of the Notes (except in the case of our
default with respect to the "Merger, Consolidation and Sale of
Assets" covenant, which will constitute an event of default
with such notice requirement but without such passage of time
requirement);
(4) if we fail to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the
principal amount of any of our or our subsidiaries' recourse
indebtedness, or the acceleration of the final stated maturity
of any such recourse indebtedness if the aggregate principal
amount of such indebtedness, together with the principal
amount of any other such recourse indebtedness in default for
failure to pay principal at final maturity or which has been
accelerated, aggregates $5.0 million or more at any time;
(5) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against us or any of our
subsidiaries and remain undischarged, unpaid or unstayed for a
period of 60 days after such judgment or judgments become
final and nonappealable; and
(6) certain events of bankruptcy affecting us or any of our
subsidiaries.
The events of default described in clauses (4), (5) and (6) above with
respect to a subsidiary shall not apply if that person was not a subsidiary at
the time such event or condition occurred unless, in the case of clause (4) or
(5) above, we or another of our subsidiaries assumes or otherwise becomes liable
for the liability referred to therein or the liabilities generally of such
person.
If an event of default (other than an event of default specified in
clause (6) above) shall occur and be continuing, the Trustee or the holders of
at least 25% in principal amount of outstanding Notes may declare the principal
of and accrued interest on all the Notes to be due and payable by written notice
to us and, if it is given by holders, the Trustee specifying the respective
event of default and that it is a "notice of acceleration" (the "Acceleration
Notice"). Upon delivery of an Acceleration Notice, the principal of and accrued
interest on all the Notes:
- shall become immediately due and payable; or
- if there are any amounts outstanding under our Credit
Agreement, shall become immediately due and payable upon the
first to occur of an acceleration under our credit agreement
or five business days after receipt by us and the
representative under our
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Credit Agreement of such Acceleration Notice but only if such
event of default is then continuing.
If an event of default specified in clause (6) above occurs and is
continuing with respect to us, then all unpaid principal of, and premium, if
any, and accrued but unpaid interest on all of the outstanding Notes shall
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder.
At any time after a declaration of acceleration with respect to the
Notes, the holders of a majority in aggregate principal amount of the Notes may
rescind and cancel such declaration and its consequences:
- if the rescission would not conflict with any judgment or
decree;
- if all existing events of default have been cured or waived
except nonpayment of principal or interest that has become due
solely because of such acceleration;
- if interest on overdue installments of interest (to the extent
the payment of such interest is lawful) and on overdue
principal, which has become due otherwise than by such
declaration of acceleration, has been paid;
- if we have paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expense, disbursements and
advances; and
- in the event of the cure or waiver of an event of default of
the type described in clause (4) of the description above of
events of default, the Trustee has received an officers'
certificate and an opinion of counsel that such event of
default has been cured or waived.
No such rescission shall affect any subsequent default or impair any
rights arising from a subsequent default.
The holders of a majority in aggregate principal amount of the Notes
may waive any existing default or event of default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any Notes.
The holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture and under the Trust Indenture Act. Subject
to the provisions of the Indenture relating to the duties of the Trustee, the
Trustee is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the holders, unless such
holders have offered to the Trustee reasonable indemnity. Subject to all
provisions of the Indenture and applicable law, the holders of a majority in
aggregate principal amount of the then outstanding Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
We are required to provide an officers' certificate to the Trustee
promptly upon our obtaining knowledge of any default or event of default that
has occurred and, if applicable, describe such default or event of default and
the status thereof. In addition, we must provide an annual certification as to
the existence of defaults and events of default.
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CONCERNING THE TRUSTEE
U.S. Bank Trust National Association, the trustee under the Indenture,
also is the trustee under the indentures relating to our 9 3/8% Senior
Subordinated Notes due 2008 and our 10 1/2% Senior Subordinated Notes due 2009.
An affiliate of the trustee has extended a construction loan to us and is one of
the lenders under our Credit Agreement. We also may maintain custodial and
deposit accounts and conduct other banking transactions with the trustee or its
affiliates in the ordinary course of business. The trustee and its affiliates
may from time to time in the future provide banking and other services to us in
the ordinary course of their business.
BOOK-ENTRY SYSTEM
The Notes are issued in the form of global securities held in
book-entry form. DTC or its nominee is the sole registered holder of the Notes
for all purposes under the Indenture. Owners of beneficial interests in the
Notes represented by the global securities hold their interests pursuant to the
procedures and practices of DTC. As a result, beneficial interests in any such
securities are shown on, and transfers are effected only through, records
maintained by DTC and its direct and indirect participants. Any such interests
may not be exchanged for certificated securities, except in limited
circumstances. Owners of beneficial interests must exercise any rights in
respect of their interests, including any right to convert or require repurchase
of their interests in the Notes, in accordance with the procedures and practices
of DTC. Beneficial owners are not holders and are not entitled to any rights
under the global securities or the Indenture. We and the trustee, and any of our
respective agents, may treat DTC as the sole holder and registered owner of the
global securities.
EXCHANGE OF GLOBAL SECURITIES
The Notes, represented by one or more global securities, will be
exchangeable for certificated securities with the same terms only if:
- DTC is unwilling or unable to continue as depositary or if DTC
ceases to be a clearing agency registered under the Exchange
Act and we do not appoint a successor depositary within 90
days;
- we decide to discontinue use of the system of book-entry
transfer through DTC or any successor depositary, or
- a default under the Indenture occurs and is continuing.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency" for
registered participants, and it facilitates the settlement of transactions among
its participants in those securities through electronic computerized book-entry
changes in participants' accounts, eliminating the need for physical movement of
securities certificates. DTC's participants include securities brokers and
dealers, including the agent, banks, trust companies, clearing corporation and
other organizations, some of whom and/or their representatives owns DTC. Access
to DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
26
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial
purchasers of the Notes for the benefit of the holders of the Notes and the
shares of our common stock issuable on conversion of the Notes in which we
agreed to file the registration statement of which this prospectus is a part.
Under this agreement, we also agreed at our cost to:
- use all reasonable efforts to cause the registration statement
of which this prospectus is a part to be declared effective
under the Securities Act no later than 180 days after the
first date of original issuance of the Notes; and
- use all reasonable efforts to keep the registration statement
effective after its effective date until the earlier of:
- the sale pursuant to the registration statement of
all of the Notes and any shares of our common stock
issued upon conversion of the Notes; and
- the expiration of the holding period applicable to
the Notes and the shares of our common stock issuable
upon conversion of the Notes held by non-affiliates
of LNR under Rule 144(k) under the Securities Act, or
any successor provision, subject to certain
exceptions.
We have the right to suspend use of the registration statement during
specified periods of time relating to pending corporate developments and public
filings with the SEC and similar events. If we fail to keep the registration
statement effective or usable in accordance with and during the periods
specified in the registration rights agreement, then, in each case, we will pay
liquidated damages to all holders of Notes and all holders of our common stock
issued on conversion of Notes equal to (i) in respect of each $1,000 principal
amount of Notes, the sum per annum equal to 0.50% of that principal amount, and
(ii) in respect of any shares of common stock issued upon conversion of Notes,
the sum per annum equal to 0.50% of the principal amount of Notes that would
then be convertible into that number of shares. While the failure to file or
become effective or any unavailability continues, we will pay liquidated damages
in cash on March 1 and September 1 of each year to the person who is the holder
of record of the Notes or common stock issuable in respect of the Notes on the
immediately preceding February 15 or August 15. After a registration default is
cured, we will pay any previously unpaid liquidated damages in cash on the
subsequent interest payment date to the record holder on the date of the cure.
A holder who elects to sell any securities pursuant to the registration
statement:
- must be named as selling security holder;
- will be required to deliver a prospectus to purchasers;
- will be subject to the civil liability provisions under the
Securities Act in connection with any sales; and
- will be bound by the applicable provisions of the registration
rights agreement, including indemnification obligations.
Promptly upon request from any holder of Notes or common stock issued
on conversion of Notes (which are the registrable securities), we will provide a
form of notice and questionnaire, which must be completed and delivered by that
holder to us at least five business days before any intended distribution of
27
registrable securities under the registration statement. If we receive from a
holder of registrable securities a completed questionnaire, together with such
other information as we may reasonably request, we will file an amendment to the
registration statement, or a supplement to this prospectus, to permit the holder
to deliver a prospectus to purchasers of registrable securities. Any holder that
does not complete and deliver a questionnaire or provide such other information
will not be named as a selling security holder in this prospectus and therefore
will not be permitted to sell any registrable securities under the registration
statement of which it is a part.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflict
of laws.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following describes the material United States federal income tax
consequences to holders of the acquisition, disposition and ownership of the
Notes. This discussion, and an opinion that has been given with regard to it,
are based upon certificates and representations as to the possible payments of
contingent interest, as well as estimates and projections of certain other
future events, and upon United States Federal income tax laws, regulations,
rulings and decisions now in effect, all of which are subject to change
(including retroactive changes) or possible differing interpretations. The
discussion below deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, tax-exempt entities, persons holding Notes in a
tax-deferred or tax-advantaged account, or persons holding Notes as a hedge
against currency risks, as a position in a "straddle" or as part of a "hedging"
or "conversion" transaction for tax purposes. It is also limited to holders of
Notes who buy or sell the Notes offered by this prospectus. Persons considering
the purchase of Notes should consult their own tax advisors concerning the
application of the United States federal income tax laws to their particular
situations as well as any consequences of the purchase, ownership and
disposition of Notes arising under the laws of any other taxing jurisdiction.
We do not address all of the tax consequences that may be relevant to a
holder of Notes. In particular, we do not address:
- the United States federal income tax consequences to
shareholders in, or partners or beneficiaries of, an entity
that is a holder of Notes;
- the United States federal estate, gift or alternative minimum
tax consequences of the purchase, ownership or disposition of
Notes;
- persons who hold the Notes whose functional currency is not
the United States dollar;
- any state, local or foreign tax consequences of the purchase,
ownership or disposition of Notes; or
- any federal, state, local or foreign tax consequences of
owning or disposing of common stock acquired by converting
Notes.
28
For purposes of this discussion, a U.S. Holder is a beneficial owner of
Notes who or which is:
- a citizen or individual resident of the United States for
United States federal income tax purposes;
- a corporation, including any entity treated as a corporation
for United States federal income tax purposes, created or
organized in or under the laws of the United States, any state
thereof or the District of Columbia;
- an estate if its income is subject to United States federal
income taxation regardless of its source; or
- a trust if (1) a United States court can exercise primary
supervision over its administration and (2) one or more United
States persons have the authority to control all of its
substantial decisions.
Notwithstanding the preceding sentence, certain trusts in existence on
August 20, 1996, and treated as a United States person prior to such date, may
also be treated as U.S. Holders. A Non-U.S. Holder is a beneficial owner of the
Notes other than a U.S. Holder.
No statutory or judicial authority directly addresses the treatment of
the Notes or instruments similar to the Notes for United States federal income
tax purposes. No rulings have been sought or are expected to be sought from the
Internal Revenue Service (which we refer to as the IRS) with respect to any of
the United States federal income tax consequences discussed below, and no
assurance can be given that the IRS will not take contrary positions. As a
result, no assurance can be given that the IRS will agree with the tax
characterizations and the tax consequences described below.
WE URGE PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF NOTES OR COMMON STOCK THEY ACQUIRE BY CONVERTING NOTES, IN LIGHT
OF THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE NOTES
The Notes are treated as indebtedness for United States federal income
tax purposes. Pursuant to the terms of the Indenture, we and each holder of the
Notes are deemed to agree, for United States federal income tax purposes, to
treat the Notes as debt instruments that are subject to the regulations
governing contingent payment debt instruments (which we refer to as the CPDI
regulations) with a "comparable yield" calculated in the manner described below.
However, because the tax treatment of the Notes under the CPDI regulations is
uncertain, no assurance can be given that the IRS will not assert that the Notes
should be treated differently. Different treatment could affect the amount,
timing and character of income, gain or loss in respect of the Notes.
ACCRUAL OF INTEREST ON THE NOTES
Pursuant to the CPDI regulations, a U.S. Holder of Notes will be
required to accrue interest income on the Notes in the amounts described below,
regardless of whether the U.S. Holder uses the cash or accrual method of tax
accounting. Accordingly, U.S. Holders will be required to include interest in
taxable income in each year in excess of the accruals on the Notes for non-tax
purposes and in excess of any interest payments actually received in that year.
29
The CPDI regulations provide that a U.S. Holder must accrue an amount
of ordinary interest income, as original issue discount for United States
federal income tax purposes, for each accrual period prior to and including the
maturity date of the Notes that equals:
(1) the product of (i) the adjusted issue price (as defined below)
of the Notes as of the beginning of the accrual period; and
(ii) the comparable yield to maturity (as defined below) of
the Notes, adjusted for the length of the accrual period;
(2) divided by the number of days in the accrual period; and
(3) multiplied by the number of days during the accrual period
that the U.S. Holder held the Notes.
A Note's issue price is the first price at which a substantial amount
of the Notes is sold to the public, excluding sales to bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The adjusted issue price of a Note is its issue
price increased by any interest income previously accrued, determined without
regard to any adjustments to interest accruals described below, and decreased by
the amount of any noncontingent payments and the projected amount of any
contingent payments whose scheduled payment date has passed.
Under the CPDI regulations, we are required to establish the
"comparable yield" for the Notes. The comparable yield for the Notes is the
annual yield we would pay, as of the initial issue date, on a fixed-rate
nonconvertible debt security with no contingent payments, but with terms and
conditions otherwise comparable to those of the Notes. We intend to take the
position that the comparable yield for the Notes is 9.5%, compounded
semiannually.
The CPDI regulations require that we provide to U.S. Holders, solely
for United States federal income tax purposes, a schedule of the projected
amounts of payments (which we refer to as projected payments) on the Notes. This
schedule must produce the comparable yield. The projected payment schedule
includes estimates for certain contingent interest payments and an estimate for
a payment at maturity taking into account the conversion feature.
The comparable yield and the projected payment schedule are set forth
in the Indenture. U.S. Holders may also obtain the projected payment schedule by
submitting a written request for it to: LNR Property Corporation, 1601
Washington Avenue, Suite 800, Miami Beach, Florida 33139, Attn: General Counsel.
For United States federal income tax purposes, a U.S. Holder must use
the comparable yield and the projected payment schedule in determining its
interest accruals, and the adjustments to them described below in respect of the
Notes, unless the U.S. Holder timely discloses and justifies the use of other
estimates to the IRS. This requirement for holders to use the comparable yield
and projected payment schedule determined by us is imposed by the CPDI
regulations and is in addition to each holder's deemed agreement in the
Indenture to treat the Notes consistently with our treatment.
THE COMPARABLE YIELD AND THE PROJECTED PAYMENT SCHEDULE ARE NOT
DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S
INTEREST ACCRUALS AND ADJUSTMENTS TO THOSE ACCRUALS IN RESPECT OF THE NOTES FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES. THEY DO NOT CONSTITUTE A PROJECTION
OR REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE ON THE NOTES.
Amounts treated as interest under the CPDI regulations are treated as
original issue discount for all purposes of the Code.
30
ADJUSTMENTS TO INTEREST ACCRUALS ON THE NOTES
If, during any taxable year, a U.S. Holder receives actual payments
with respect to the Notes for that taxable year that in the aggregate exceed the
total amount of projected payments for that taxable year, the U.S. Holder will
incur a "net positive adjustment" under the CPDI regulations equal to the amount
of such excess. The U.S. Holder will treat a "net positive adjustment" as
additional interest income. For this purpose, the payments in a taxable year
include the fair market value of property (including any of our common stock
received on conversion of the Notes) received in that year.
If a U.S. Holder receives in a taxable year actual payments with
respect to the Notes for that taxable year that in the aggregate are less than
the amount of projected payments for that taxable year, the U.S. Holder will
incur a "net negative adjustment" under the CPDI regulations equal to the amount
of such deficit. This adjustment will (a) reduce the U.S. Holder's interest
income on the Notes for that taxable year, and (b) to the extent of any excess
after the application of (a), give rise to an ordinary loss to the extent of the
U.S. Holder's interest income on the Notes during prior taxable years, reduced
to the extent such interest was offset by prior net negative adjustments.
If the adjusted issue price of a U.S. Holder's Note is greater than the
price paid by the U.S. Holder for the Note, the U.S. Holder must make positive
adjustments increasing the amount of interest that the U.S. Holder would
otherwise accrue and include in income each year, and increase the amount of
ordinary income (or decreasing the amount of ordinary loss) recognized upon
redemption or maturity by the amounts allocated among the daily portions of
interest and projected payments, respectively; if the adjusted issue price of
the Note is less than the price the U.S. Holder paid for the Note, the U.S.
Holder must make negative adjustments, decreasing the amount of interest that
the U.S. Holder must include in income each year, and the amount of ordinary
income (or increasing the amount of ordinary loss) recognized upon redemption or
maturity by the amounts allocated among the daily portions of interest and
projected payments, respectively. Adjustments allocated to the interest amount
are not made until the date the daily portion of interest accrues.
SALE, EXCHANGE, CONVERSION OR REDEMPTION
Generally, the sale or exchange of a Note or the redemption of a Note
for cash will result in taxable gain or loss to a U.S. Holder. As described
above, our calculation of the comparable yield and the projected payment
schedule for the Notes includes the receipt of stock upon conversion as a
contingent payment with respect to the Notes. Accordingly, we intend to treat
the receipt of our common stock by a U.S. Holder upon the conversion of a Note
or upon the redemption of a Note where we elect to pay in common stock as a
payment under the CPDI regulations. As described above, holders are generally
bound by our determination of the comparable yield and the projected payment
schedule.
The amount of gain or loss on a taxable sale, exchange, conversion or
redemption will be equal to the difference between (a) the amount of cash plus
the fair market value of any other property received by the U.S. Holder,
including the fair market value of any of our common stock received, and (b) the
U.S. Holder's adjusted tax basis in the Note.
A U.S. Holder's adjusted tax basis in a Note will generally be equal to
the U.S. Holder's original purchase price for the Note, increased by any
interest income previously accrued by the U.S. Holder (determined without regard
to any adjustments to interest accruals described above), and decreased by the
amount of any noncontingent payment and the projected amount of any contingent
payment whose scheduled payment date has passed, and increased or decreased by
the amount of any positive or negative adjustment, respectively, that the U.S.
Holder is required to make if it purchases the Note at a price other than the
adjusted issue price.
31
Gain recognized upon a sale, exchange, conversion or redemption of a
Note will generally be treated as ordinary interest income; any loss will be
ordinary loss to the extent of interest on the Note previously included in
income, and thereafter capital loss (which will be long term if the note is held
for more than one year). The deductibility of net capital losses by individuals
and corporations is subject to limitations.
A U.S. Holder's tax basis in our common stock received upon a
conversion of a Note or upon a U.S. Holder's exercise of a put right that we
elect to pay in common stock will equal the then current fair market value of
that common stock. The U.S. Holder's holding period for the common stock
received will commence on the day immediately following the date of conversion
or redemption.
CONSTRUCTIVE DIVIDENDS
If at any time we were to make a distribution of property to our
stockholders that would be taxable to the stockholders as a dividend for United
States federal income tax purposes and, in accordance with the anti-dilution
provisions of the Notes, the conversion rate of the Notes was increased, that
increase might be deemed to be the payment of a taxable dividend to holders of
the Notes.
TREATMENT OF NON-US. HOLDERS
Payments of contingent interest made to Non-U.S. Holders will not be
exempt from United States federal income or withholding tax and, therefore,
Non-U.S. Holders will be subject to withholding on payments of contingent
interest at a rate of 30%, subject to reduction by an applicable treaty or upon
the receipt of a Form W-8ECI from a Non-U.S. Holder claiming that the payments
are effectively connected with the conduct of a United States trade or business.
A Non-U.S. Holder that is subject to the withholding tax should consult its own
tax advisors as to whether it can obtain a refund of a portion of the
withholding tax, either on the grounds that some portion of the contingent
interest represents a return of principal under the CPDI regulations, or on some
other grounds.
All other payments on the Notes made to a Non-U.S. Holder, including a
payment in common stock upon a conversion, and any gain realized on a sale or
exchange of the Notes (other than gain attributable to accrued contingent
interest payments), will be exempt from United States income or withholding tax,
provided that:
with respect to interest (including original issue discount)
(1) the Non-U.S. Holder does not own, actually or constructively,
10 percent or more of the total combined voting power of all
classes of our stock entitled to vote, and is not a controlled
foreign corporation related, directly or indirectly, to us
through stock ownership;
(2) the statement requirement set forth in section 871(b) or
section 881(c) of the Code has been fulfilled with respect to
the beneficial owner, as discussed below;
(3) the payments and gain are not effectively connected with the
conduct by such Non-U.S. Holder of a trade or business in the
United States.
The statement requirement referred to in subparagraph (2) will be
fulfilled if the beneficial owner of a Note certifies on IRS Form W-8BEN, under
penalties of perjury, that it is not a United States person and provides its
name and address or otherwise satisfies applicable documentation requirements.
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In addition, with respect to any gain to a Non-U.S. Holder from a sale,
exchange, conversion, or redemption of Notes, that gain (other than gain
attributable to accrued contingent interest payments) will be exempt from United
States income or withholding tax, provided that:
(1) our common stock continues to be regularly traded on the New
York Stock Exchange or another established securities market
within or outside the United States, and, during the five-year
period ending on the date of any payment on or sale or
exchange of a Note, as applicable, such Non-U.S. Holder does
not beneficially own more than 5% of our common stock.
(2) such Non-U.S. Holder is not an individual who has been present
in the United States for 183 days or more during the taxable
year of the disposition.
A constructive distribution on a Note may be subject to United States
withholding tax at a rate of 30%, subject to reduction by an applicable treaty.
We (or the applicable withholding agent) may withhold on other payments made on
a Non-U.S. Holder's Notes between the date of the constructive distribution and
the due date for our filing of IRS Form 1042-S (including extensions) for the
tax year in which the constructive distribution is made if we (or the applicable
withholding agent) have knowledge of the facts that give rise to the
withholding.
If a Non-U.S. Holder of Notes is engaged in a trade or business in the
United States, and if interest on the Notes is effectively connected with the
conduct of that trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed in the preceding paragraphs, will generally be subject
to regular U.S. federal income tax on interest and on any gain realized on the
sale or exchange of the Notes in the same manner as if it were a U.S. Holder. In
lieu of the certificate described above, such a Non-U.S. Holder will be required
to provide to the withholding agent a properly executed IRS Form W-8ECI in order
to claim an exemption from withholding tax. In addition, if such a Non-U.S.
Holder is a foreign corporation, such holder may be subject to a branch profits
tax equal to 30% (or a lower rate provided by an applicable treaty) of its
effectively connected earnings and profits for the taxable year, subject to
certain adjustments.
TAX SHELTER REGULATIONS
Recently finalized Treasury regulations intended to address so-called
tax shelters and other potentially tax-motivated transactions require
participants in a "reportable transaction" to disclose certain information about
the transaction on IRS Form 8886 and retain information relating to the
transaction. Organizers and sellers of reportable transactions are required to
maintain lists identifying the transaction investors and furnish to the IRS upon
demand such investor information as well as detailed information regarding the
transactions. A transaction may be a "reportable transaction" based upon any of
several indicia, including the existence of confidentiality agreements, certain
indemnity arrangements, potential for recognizing investment or other losses,
and significant book-tax differences, one or more of which may be present with
respect to or in connection with our offering of the Notes. Prospective
investors should consult their own tax advisors as to any possible disclosure
obligation with respect to their investment in the Notes and should be aware
that we and other participants in the offering intend to comply with the
disclosure and maintenance requirements under the Treasury regulations, to the
extent the Treasury regulations are determined to be applicable.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Payments of principal, premium (if any) and interest (including
original issue discount) on, and the proceeds of dispositions of, Notes may be
subject to information reporting and United States federal
33
backup withholding tax at the applicable rate (currently 30%) if the holder of
Notes fails to supply an accurate taxpayer identification number or otherwise
fails to comply with applicable United States information reporting or
certification requirements. All amounts so withheld will be allowed as a refund
with respect to, or credit against, such holder's United States federal income
tax liability.
SELLING SECURITYHOLDERS
The Notes were originally issued by us and resold by the initial
purchasers of the Notes in transactions exempt from the registration
requirements of the Securities Act, to persons reasonably believed by the
initial purchasers to be "qualified institutional buyers" (as defined in
Rule144A under the Securities Act) in compliance with Rule 144A. These qualified
institutional buyers, together with persons who acquired or acquire Notes from
them or from subsequent owners in transactions that were or are not registered
under the Securities Act, are the "selling securityholders" under this
prospectus. They may from time to time use this prospectus to offer and sell
Notes or shares of our common stock that are issued upon conversion of Notes.
The following table sets forth with respect to each of the listed
selling securityholders the principal amount of Notes and the number of shares
of our common stock that the selling securityholder owned at a recent date
(including shares of common stock that the selling securityholder would own if
it converted all its Notes). We obtained that information from the selling
securityholders, and have not attempted to verify it. None of the selling
securityholders has, or has had within the past three years, any position,
office or other material relationship with us or, insofar as we are aware, any
of our predecessors or affiliates. Because a selling securityholder may sell
with this prospectus any portion of its Notes or shares acquired on conversion
of Notes, we cannot estimate the principal amount of Notes or shares of our
common stock any selling securityholder will beneficially own after it completes
particular sales. In addition, selling securityholders may, since the dates as
of which they provided information to us, have sold or otherwise disposed of
some of the Notes or common stock listed below.
We will supplement this prospectus from time to time to add holders of
Notes to, or delete holders of Notes from, the list of Selling Securityholders
or to reflect changes in the principal amount of Notes particular Selling
Securityholders may offer by this prospectus.
PRINCIPAL AMOUNT OF NOTES
BENEFICIALLY OWNED AND NUMBER OF SHARES
THAT MAY BE OFFERED BY OF COMMON STOCK
SELLING SECURITYHOLDER THIS PROSPECTUS BENEFICIALLY OWNED(1)
---------------------- ------------------------- ---------------------
Innovest Finanzdienstle $ 1,500,000 33,127
S.A.C. Capital Associates, LLC $ 2,000,000 44,169
BNP Paribas Equity Strategies, SNC $11,571,000 255,543
CooperNeff Convertible Strategies (Cayman)
Master Fund, LP $ 7,917,000 174,845
Context Convertible Arbitrage Offshore Ltd. $ 415,000 9,165
Context Convertible Arbitrage Fund, LP $ 665,000 14,686
Arkansas PERS $ 385,000 8,502
ICI American Holdings Trust $ 125,000 2,760
Zeneca Holdings Trust $ 135,000 2,981
Delaware PERS $ 540,000 11,925
Syngenta AG $ 90,000 1,987
Prudential Insurance Co of America $ 35,000 772
Boilermakers Blacksmith Pension Trust $ 500,000 11,042
State of Oregon/Equity $ 1,700,000 37,544
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PRINCIPAL AMOUNT OF NOTES
BENEFICIALLY OWNED AND NUMBER OF SHARES
THAT MAY BE OFFERED BY OF COMMON STOCK
SELLING SECURITYHOLDER THIS PROSPECTUS BENEFICIALLY OWNED(1)
---------------------- ------------------------- ---------------------
Duke Endowment $ 95,000 2,098
Louisiana CCRF $ 70,000 1,545
Delta Airlines Master Trust $ 225,000 4,969
Froley Revy Investment Convertible Security Fund $ 55,000 1,214
Sturgeon Limited $ 1,512,000 33,392
JP Morgan Securities Inc. $ 12,750,000 281,581
Akela Capital Master Fund, Ltd. $ 5,000,000 110,424
Laurel Ridge Capital LP $ 1,000,000 22,084
Alpine Associates $ 9,700,000 214,222
Alpine Partners, L.P. $ 1,300,000 28,710
Tribeca Investments L.T.D $ 2,000,000 44,169
Grace Convertible Arbitrage Fund, Ltd. $ 5,000,000 110,424
LLT Limited $ 156,000 3,445
Wachovia Securities Inc. $ 8,500,000 187,720
Common Fund Event Driven Co, Ltd. c/o Levco $ 65,000 1,435
Levco Alternative Fund Ltd. $ 2,197,000 48,520
Citi JL Ltd. $ 87,000 1,921
Lyxor/JLC Fund Ltd. $ 167,000 3,688
Purchase Associates, L.P. $ 484,000 10,689
Highbridge International LLC $ 33,000,000 728,798
Forest Fulcrum Fund LLP $ 404,000 8,922
BGI Global Investors c/o Forest Investment
Management LLC $ 168,000 3,710
Forest Multi-Strategy Master Fund SFC, on behalf of
Series F, Multi-Strategy Segregated Portfolio $ 204,000 4,505
Zurich Master Hedge Fund c/o Forest Investment
Management LLC $ 260,000 5,742
Forest Global Convertible Fund Series A-5 $ 1,896,000 41,872
Lyxor Master Fund c/o Forest Investment Management
LLC $ 632,000 13,957
Relay 11 Holdings c/o Forest Investment Management
LLC $ 80,000 1,766
RBC Alternative Assets LP c/o Forest Investment
Management LLC $ 160,000 3,533
RBC Alternative Assets LP $ 500,000 11,042
Sphinx Convertible Arbitrage c/o Forest Investment
Management LLC $ 40,000 883
Banc of America Securities LLC $ 3,250,000 71,775
Sunrise Partners Limited Partnership $ 13,875,000 306,426
Man Convertible Bond Master Fund, Ltd. $ 3,622,000 79,991
St. Thomas Trading, Ltd. $ 10,378,000 229,196
------------ ---------
$146,410,000 3,233,416
(1) Including the shares the selling securityholder would acquire if the
selling securityholder converted all its Notes.
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PLAN OF DISTRIBUTION
The Notes and the shares of our common stock issued upon conversion of
Notes covered by this prospectus will be offered and sold solely by or on behalf
of the selling securityholders. We have agreed to bear the costs of registering
sales of those Notes and shares under the Securities Act. However, the selling
securityholders must bear any brokerage commissions or similar selling expenses
relating to the sale of Notes or shares of common stock issued upon conversion
of Notes.
The selling securityholders may sell Notes or shares of common stock in
one or more transactions at a fixed price or prices (which may be changed), at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at prices determined on a negotiated or competitive bid basis.
Selling securityholders may effect these transactions by selling Notes or common
stock directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Those broker-dealers may receive compensation in the form
of discounts, concessions, or commissions from the selling securityholders
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
The selling securityholders and any broker-dealers that act in
connection with the sale of the Notes or shares of common stock issuable upon
conversion of the Notes may be deemed to be "underwriters" as that term is
defined in the Securities Act, and any commissions received by broker-dealers
and any profit on the sale of the Notes or shares of common stock issued upon
conversion of Notes sold by broker-dealers while acting as principals may be
deemed to be underwriting discounts or commissions for purposes of the
Securities Act.
Because selling securityholders may be deemed to be "underwriters" for
purposes of the Securities Act, the selling securityholders will be subject to
the prospectus delivery requirements of the Securities Act, which may include
delivery through the facilities of the New York Stock Exchange pursuant to Rule
153 under the Securities Act. We have informed the selling securityholders that
the anti-manipulation provisions of Regulation M under the Securities Exchange
Act may apply to their sales.
The selling securityholders may from time to time deliver Notes or
shares of common stock to cover short sales or upon the exercise, settlement or
closing of call equivalent positions or put equivalent positions.
LEGAL MATTERS
Clifford Chance US LLP, 200 Park Avenue, New York, New York 10166, has
passed upon the validity of the securities offered by this prospectus.
EXPERTS
Our consolidated financial statements as of November 30, 2002 and 2001,
and for each of the three years in the period ended November 30, 2002, and the
related financial statement schedules, that are incorporated by reference into
this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing in our Annual Report on Form 10-K
for the year ended November 30, 2002, and have been so incorporated by reference
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
The combined financial statements of Lennar Land Partners and Lennar
Land Partners II as of November 30, 2002 and 2001, and for each of the three
years in the period ended November 30, 2002, that are incorporated by reference
into this prospectus have been audited by Deloitte & Touche LLP,
36
independent auditors, as stated in their report appearing in our Annual Report
on Form 10-K for the year ended November 30, 2002, and have been so incorporated
by reference in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The financial statements of Madison Square Company LLC as of December
31, 2002 and 2001, and for each of the three years in the period ended December
31, 2002, that are incorporated by reference into this prospectus have been
audited by Ernst & Young LLP, independent auditors, as stated in their report
appearing in our Annual Report on Form 10-K for the year ended November 30,
2002, and have been so incorporated by reference in reliance on the report of
such firm given upon their authority as experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We are incorporating by reference in this prospectus the following
documents which we have previously filed with the Securities and Exchange
Commission under the File Number 1-13223:
(1) Our Annual Report on Form 10-K for the fiscal year ended
November 30, 2002 filed February 27, 2003;
(2) Our Quarterly Report on Form 10-Q for the quarterly period
ended February 28, 2003 filed April 14, 2003;
(3) Our definitive proxy statement filed March 12, 2003; and
(4) The description of our common stock contained in our
registration statement under Section 12 of the Securities Exchange Act of 1934,
as amended, including any amendment or report filed for the purpose of updating
that description.
Whenever after the date of this prospectus we file reports or documents
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, those reports and documents will be deemed to be part of this
prospectus from the time they are filed. If anything in a report or document we
file after the date of this prospectus changes anything in it, this prospectus
will be deemed to be changed by that subsequently filed report or document
beginning on the date the report or document is filed.
WE WILL PROVIDE TO EACH PERSON TO WHOM A COPY OF THIS PROSPECTUS IS
DELIVERED, INCLUDING BENEFICIAL OWNERS OF NOTES, A COPY OF ANY OR ALL OF THE
DOCUMENTS OR INFORMATION THAT HAVE BEEN INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, BUT NOT DELIVERED WITH THIS PROSPECTUS. WE WILL PROVIDE THIS AT NO
COST TO THE REQUESTOR UPON WRITTEN OR ORAL REQUEST ADDRESSED TO LNR PROPERTY
CORPORATION, 1601 WASHINGTON AVENUE, MIAMI BEACH, FLORIDA 33139, ATTENTION:
DIRECTOR OF INVESTOR RELATIONS (TELEPHONE: 305-695-5500).
INFORMATION WE FILE
We file annual, quarterly and current reports, proxy statements and
other materials with the SEC. The public may read and copy any materials we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers (including us) that file
electronically with the SEC. The address of that site is http://www.sec.gov.
Reports, proxy
37
statements and other information we file also can be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
38