FILED PURSUANT TO RULE 424(B)3
REGISTRATION NO. 333-113164
PROSPECTUS
OFFER TO EXCHANGE
7.25% SERIES B SENIOR SUBORDINATED NOTES DUE 2013
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL
OUTSTANDING 7.25% SERIES A SENIOR SUBORDINATED NOTES DUE 2013
($400,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
LNR PROPERTY CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
APRIL 16, 2004 (UNLESS WE EXTEND THE EXCHANGE OFFER)
We are offering to exchange our 7.25% Series B Senior Subordinated Notes
due 2013 for the identical principal amount of our 7.25% Series A Senior
Subordinated Notes due 2013. The aggregate principal amount at maturity of the
Series A Notes, and therefore the principal amount at maturity of Series B Notes
which would be issued if all the Series A Notes were exchanged, is $400,000,000.
The terms of the Series B Notes will be identical with the terms of the Series A
Notes, except that the issuance of the Series B Notes is being registered under
the Securities Act of 1933, as amended, and therefore the Series B Notes will
not be subject to restrictions on transfer which apply to the Series A Notes.
The Series A Notes were issued in transactions which were exempt from the
registration requirements of the Securities Act solely to qualified
institutional buyers, as that term is defined in Rule 144A under the Securities
Act, or outside the United States in compliance with Regulation S under the
Securities Act. The exchange offer is being made in accordance with the
following registration rights agreements: (i) a registration rights agreement
dated as of October 29, 2003, among us, Deutsche Bank Securities Inc., Citigroup
Global Markets Inc., Banc of America Securities LLC and Fleet Securities, Inc.,
(ii) a registration rights agreement dated as of October 29, 2003, between us
and Deutsche Bank Securities Inc., and (iii) a registration rights agreement
dated as of December 2, 2003, between us and Deutsche Bank Securities Inc. Based
on interpretations by the staff of the Securities and Exchange Commission, we
believe a holder (other than a broker-dealer who acquired Series A Notes
directly from us for resale or an affiliate of ours) may offer and sell Series B
Notes issued in exchange for Series A Notes without registration under the
Securities Act and without the need to deliver a prospectus, if the holder
acquired the Series B Notes in the ordinary course of its business and the
holder has no arrangement to participate, and is not otherwise engaged, in a
distribution of the Series B Notes.
Prior to the exchange offer, there has been no public market for the Series
B Notes. We do not currently intend to list the Series B Notes on a securities
exchange or seek approval for quotation of the Series B Notes on an automated
quotation system. Therefore, it is unlikely that an active trading market for
the Series B Notes will develop.
The exchange agent for the exchange offer is U.S. Bank Trust National
Association.
SEE "RISK FACTORS," WHICH BEGIN ON PAGE 8, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is March 10, 2004.
FORWARD LOOKING INFORMATION
Some of the statements contained or incorporated by reference in this
prospectus 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. Factors, among others, that could cause our actual results to
differ materially from those anticipated in this prospectus include, but are not
limited to:
- changes in demand for commercial real estate nationally and
internationally, in areas in which we own properties, or in areas
(including areas outside of the United States) in which properties
securing mortgages directly or indirectly owned by us are located;
- changes in international, national or regional business conditions which
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
- other factors described under "Risk Factors," beginning on page 8.
The reports we file with the SEC describe additional risks and
uncertainties which are applicable to our business. You can obtain them as
described under "Where You Can Find More Information" on page 50.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR
MADE, THAT INFORMATION OR THOSE REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO OR
SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the financial statements, including the notes to them,
appearing elsewhere, or incorporated by reference, in this prospectus.
LNR
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, repositioning 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.
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 obtain more information regarding our business by reading our
Annual Report on Form 10-K for the fiscal year ended November 30, 2003, and
other reports we file with the SEC. See "Where You Can Find More Information" on
page 50.
RECENT DEVELOPMENTS
On January 27, 2004, we acquired The Newhall Land and Farming Company
("Newhall"), through a joint venture entity 50% owned by us and 50% owned by
Lennar Corporation, for approximately $1.0 billion. Newhall is primarily engaged
in the planning and development of the Valencia and Newhall Ranch communities in
Los Angeles County, California. It owns over 48,000 acres of land in California,
including 34,000 acres in northern Los Angeles County, primarily related to real
estate and agricultural operations. Simultaneously with the closing of the
Newhall transaction, we purchased existing income producing commercial assets
from Newhall for approximately $217 million and Lennar agreed to purchase, and
obtained options to purchase, homesites from Newhall.
In November 2003, we and Lennar formed LandSource Communities Development
LLC ("LandSource"), to acquire and act as a holding company for several property
development entities that had been 50% owned by us and 50% owned by Lennar. We
and Lennar contributed our interests in these property development entities to
LandSource in exchange for 50% interests in LandSource.
The funds for the purchase of Newhall came from capital contributions of
approximately $200 million each from Lennar and from us, $400 million of
borrowings under a $600 million senior credit facility secured by the assets of
Newhall and LandSource (which will also be a source of working capital), and the
$217 million we paid for the purchase of the income producing commercial assets.
We are not obligated with regard to the borrowings of Newhall and LandSource,
except that we and Lennar have committed to complete any property development
commitments on which Newhall or LandSource default and have guaranteed that, in
the event of fraud or similar unlawful activities by the borrowers, or
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distributions by the borrowers that are not permitted by the loan documents, we
will pay the lenders the amount of any resulting damages they suffer and we will
pay anything that is required to reduce the loan balances to specified
percentages of the appraised values of the properties that secure the
borrowings.
ISSUANCE OF THE SERIES A NOTES
On October 29, 2003, we sold $300 million aggregate principal amount of
7.25% Series A Senior Subordinated Notes due 2013 ("Series A Notes") to Deutsche
Bank Securities Inc., Citigroup Global Markets Inc., Banc of America Securities
LLC and Fleet Securities Inc., as initial purchasers, pursuant to a Purchase
Agreement dated October 15, 2003, among those parties and us.
On October 29, 2003, we sold an additional $50 million aggregate principal
amount of Series A Notes to Deutsche Bank Securities Inc., as initial purchaser,
pursuant to a Purchase Agreement dated October 22, 2003, between Deutsche Bank
Securities Inc. and us.
On December 2, 2003, we sold an additional $50 million aggregate principal
amount of Series A Notes to Deutsche Bank Securities Inc., as initial purchaser,
pursuant to a Purchase Agreement dated November 17, 2003, between Deutsche Bank
Securities Inc. and us.
Each of the initial purchasers subsequently resold the Series A Notes in
reliance on Rule 144A under the Securities Act and other available exemptions
under the Securities Act. We and the initial purchasers entered into
registration rights agreements pursuant to which we agreed to offer to exchange
Series B Notes for the Series A Notes and also granted holders of Series A Notes
rights under certain circumstances to have resales of Series A Notes registered
under the Securities Act. The exchange offer is intended to satisfy our
principal obligations under the registration rights agreements. See "The
Exchange Offer -- Purpose and Effects."
We issued the Series A Notes under an indenture dated as of October 29,
2003, between us and U.S. Bank Trust National Association, as trustee. The
Series B Notes also are being issued under that indenture and are entitled to
the benefits of the indenture. The form and terms of the Series B Notes will be
identical in all material respects with the form and terms of the Series A
Notes, except that (1) the Series B Notes will have been registered under the
Securities Act and, therefore, the global certificate (and any individual
certificates) will not bear legends describing restrictions on transferring the
Notes represented by such global certificates, and (2) holders of Series B Notes
will not be, and upon the consummation of the exchange offer, holders of Series
A Notes will no longer be, entitled to rights under the registration rights
agreements intended for the holders of unregistered securities. See "The
Exchange Offer -- Termination of Certain Rights" and "-- Procedures for
Tendering" and "Description of the Series B Notes."
The proceeds we received from the issuance of the Series A Notes were used
to retire our 10 1/2% Senior Subordinated Notes Due 2009 (including payment of
redemption premium and accrued interest), to repay secured senior debt and for
general corporate purposes. We will receive no proceeds from the exchange of
Series B Notes for the Series A Notes pursuant to the exchange offer.
When we refer to "the Notes" in this prospectus, we refer to both the
Series A Notes and the Series B Notes, unless it is clear from what we are
saying that the term refers only to a particular series of Notes.
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THE EXCHANGE OFFER
The Exchange Offer............ We are offering to exchange our 7.25% Series B
Senior Subordinated Notes due 2013 for
identical principal amounts of our 7.25% Series
A Senior Subordinated Notes due 2013. At the
date of this prospectus, $400 million aggregate
principal amount of Series A Senior
Subordinated Notes are outstanding. See "The
Exchange Offer -- Terms of the Exchange Offer."
Expiration of Exchange
Offer......................... 5:00 p.m., New York time, on April 16, 2004,
unless the exchange offer is extended (the day
on which the exchange offer expires being the
expiration date). See "The Exchange
Offer -- Expiration Date; Extension;
Termination; Amendments." We expect that after
the expiration date, there will be a subsequent
exchange offering period of up to twenty
business days (but in no event beyond May 29,
2004).
Conditions of the Exchange
Offer......................... The exchange offer is not conditioned upon any
minimum principal amount of Series A Notes
being tendered for exchange. However, the
exchange offer is subject to certain customary
conditions, which we may waive. See "The
Exchange Offer -- Terms of the Exchange Offer."
Accrued Interest on the Series
A Notes....................... The Series B Notes will bear interest at the
rate of 7.25% per annum from and including
their date of issuance. When the first interest
payment is made with regard to the Series B
Notes, we will also pay interest on the Series
A Notes which are exchanged, from the date they
were issued or the most recent interest date on
which interest had been paid to, but not
including, the day the Series B Notes are
issued. Interest on the Series A Notes which
are exchanged will cease to accrue on the day
prior to the day on which the Series B Notes
are issued. See "Description of the Series B
Notes."
Procedures for Tendering
Series A Notes................ A holder of Series A Notes who wishes to accept
the exchange offer must (1) complete, sign and
date a letter of transmittal, or a facsimile of
one, in accordance with the instructions
contained in the section of this prospectus
captioned "The Exchange Offer -- Procedures for
Tendering" and in the letter of transmittal,
and (2) deliver the letter of transmittal, or a
facsimile, together with any other required
documentation to the exchange agent at the
address set forth in "The Exchange
Offer -- Exchange Agent." Series A Notes must
be delivered by confirmation of book-entry
delivery of the Series A Notes to the exchange
agent's account at The Depository Trust Company
("DTC"). By executing a letter of transmittal,
a holder will represent to us that, among other
things, the person acquiring the Series B Notes
will be doing so in the ordinary course of the
person's business, whether or not the person is
the holder, that neither the holder nor any
other person (i) is engaged in, or intends to
engage in, or has an arrangement or
understanding with any person to participate
in, the distribution of the Series B Notes,
(ii) is an initial purchaser who acquired
Series A Notes
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from us in the initial offering of those Notes,
or (iii) is an "affiliate," as defined under
Rule 405 of the Securities Act, of ours. Each
broker or dealer that receives Series B Notes
for its own account in exchange for Series A
Notes which were acquired by the broker or
dealer as a result of market-making activities
or other trading activities, must acknowledge
that it will deliver a prospectus in connection
with any resale of the Series B Notes. See "The
Exchange Offer -- Procedures for Tendering" and
"Sales of Series B Notes Received by
Broker-Dealers."
Guaranteed Delivery
Procedures.................... Eligible holders of Series A Notes who wish to
tender their Series A Notes but who cannot
deliver their Series A Notes or any other
documents required by the letter of transmittal
to the exchange agent prior to the expiration
date (or complete the procedure for book-entry
transfer on a timely basis), may tender their
Series A Notes according to the guaranteed
delivery procedures described in the letter of
transmittal. See "The Exchange
Offer -- Guaranteed Delivery Procedures."
Acceptance of Series A Notes
and Delivery of Series B
Notes......................... Upon satisfaction or waiver of all conditions
to the exchange offer, we will accept any and
all Series A Notes that are properly tendered
and not properly withdrawn in response to the
exchange offer prior to 5:00 p.m., New York
City time, on the expiration date. The Series B
Notes issued pursuant to the exchange offer
will be delivered promptly after acceptance of
the Series A Notes. See "The Exchange
Offer -- Procedures for Tendering."
Withdrawal Rights............. Tenders of Series A Notes may be withdrawn at
any time prior to 5:00 p.m., New York City
time, on the expiration date. See "The Exchange
Offer -- Withdrawal of Tenders."
The Exchange Agent............ U.S. Bank Trust National Association is the
exchange agent. The address and telephone
number of the exchange agent are set forth in
the section of this prospectus captioned "The
Exchange Offer -- Exchange Agent."
Fees and Expenses............. We will bear the expenses of soliciting tenders
pursuant to the exchange offer. We will also
pay any transfer taxes, if any, applicable to
the exchange of Series A Notes for Series B
Notes pursuant to the exchange offer. See "The
Exchange Offer -- Fees and Expenses."
Resales of the Series B
Notes......................... Based on interpretations by the staff of the
SEC set forth in no-action letters issued to
third parties, we believe Series B Notes issued
pursuant to the exchange offer in exchange for
Series A Notes may be offered for resale,
resold and otherwise transferred by the holder
(other than (1) a broker-dealer who purchased
the Series A Notes directly from us for resale
pursuant to Rule 144A under the Securities Act
or another exemption under the Securities Act
or (2) a person that is an affiliate of ours,
as that term is defined in Rule 405 under the
Securities Act), without registration or the
need to deliver a prospectus under the
Securities Act, provided that the holder is
acquiring the Series B Notes in the ordinary
course of business and is not participating,
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and has no arrangement or understanding with
any person to participate, in a distribution of
the Series B Notes. Each broker-dealer that
receives Series B Notes for its own account in
exchange for Series A Notes that were acquired
by the broker as a result of market-making or
other trading activities, must acknowledge that
it will deliver a prospectus in connection with
any resale of the Series B Notes. See "The
Exchange Offer -- Purpose and Effects" and
"Sales of Series B Notes Received By
Broker-Dealers."
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THE SERIES B NOTES
The exchange offer applies to $400 million aggregate principal amount of
Series A Notes. The terms of the Series B Notes are identical in all material
respects with those of the Series A Notes, except for certain transfer
restrictions and rights relating to the exchange of the Series A Notes for
Series B Notes. The Series B Notes will evidence the same debt as the Series A
Notes and will be entitled to the benefits of the indenture under which both the
Series A Notes were, and the Series B Notes will be, issued. See "Description of
the Series B Notes."
Securities Offered............ $400,000,000 aggregate principal amount of
7.25% Series B Senior Subordinated Notes due
2013.
Maturity Date................. October 15, 2013.
Interest Payment Dates........ Payable semi-annually on April 15 and October
15 of each year, beginning on April 15, 2004.
Sinking Fund.................. None.
Ranking....................... The Notes are our unsecured senior subordinated
obligations. The Notes rank junior in right of
payment to all of our existing and future
senior indebtedness and rank equal in right of
payment to our existing and future senior
subordinated indebtedness. We are not
restricted by the Notes from incurring
additional senior or senior subordinated
indebtedness, except that we may not incur
indebtedness that, when incurred, would cause
the ratio of our EBITDA to fixed charges to be
less than a specified ratio, or cause
particular types of our indebtedness to exceed
specified multiples of our net worth, or our
net worth plus subordinated indebtedness. In
addition, we and our subsidiaries have
significant ability to grant liens. The Notes
are in effect subordinate to the obligations of
our subsidiaries and to our obligations that
are secured to the extent of the security. At
November 30, 2003, after giving effect to the
sale of the Series A Notes and the application
of the proceeds of the sale, we had $220.7
million of senior indebtedness.
Optional Redemption........... We may redeem some or all of the Notes at any
time on or after October 15, 2008 at the
redemption prices set forth in this prospectus,
plus accrued but unpaid interest. We may also
redeem a portion of the Notes on or prior to
October 15, 2006 in connection with Public
Equity Offerings. See "Description of the
Series B Notes -- Redemption."
Change in Control Offer....... If a change in control of our company occurs,
we must give holders of the Notes the
opportunity to sell us their Notes at 101% of
their face amount, plus accrued but unpaid
interest. See "Description of the Series B
Notes -- Right to Require Purchase of Notes
upon a Change in Control."
Certain Indenture
Provisions.................... The Indenture governing the Notes contains
covenants limiting our and some of our
subsidiaries' ability to incur indebtedness,
issue preferred stock of subsidiaries, pay
dividends or make other distributions,
repurchase equity interests or subordinated
indebtedness, make certain other restricted
payments, incur indebtedness that is
subordinate in right of payment to any senior
indebtedness but senior in right of payment to
the Notes, merge
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or consolidate with another person, or sell,
lease or otherwise dispose of all or
substantially all of our assets. These
covenants are subject to important limitations,
exceptions and qualifications. See "Description
of The Series B Notes -- Certain Covenants.
Risk Factors.................. See "Risk Factors" and other information in
this prospectus and the documents incorporated
by reference into it for discussions of factors
you should consider particularly carefully
before deciding to invest or continuing to
invest in the Notes.
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RISK FACTORS
Our Annual Report on Form 10-K for the fiscal year ended November 30, 2003,
which is incorporated by reference into this prospectus, contains a discussion
of factors of which you should be aware before purchasing the Notes. In
addition, you should consider the following factors if you are considering an
investment in the Notes.
IF YOU FAIL TO EXCHANGE YOUR SERIES A NOTES, THEY WILL CONTINUE TO BE RESTRICTED
SECURITIES AND YOU MAY EXPERIENCE DIFFICULTY SELLING THEM FOLLOWING THE EXCHANGE
OFFER
Series A Notes which you do not tender in the exchange offer will continue
to be restricted securities. After the completion of the exchange offer, we will
not have any further obligation to issue Series B Notes to you in exchange for
your Series A Notes. You may not offer or sell Series A Notes except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Because we anticipate that most holders of
Series A Notes will elect to exchange those notes for Series B Notes, and that
most potential investors in the Notes will prefer to purchase registered Series
B Notes rather than unregistered Series A Notes, you may experience difficulty
selling your Series A Notes following the exchange offer.
WE ARE SUBJECT TO RISKS FROM HAVING SIGNIFICANT INDEBTEDNESS
We use borrowings to finance almost all the investments we make. At
November 30, 2003, we had total indebtedness of $1,382.8 million, which was
approximately 57% of our debt and stockholders' equity. In addition, we had
guaranteed $46.2 million of debt of entities 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 in right of payment to all of
our existing and future Senior Indebtedness. At November 30, 2003, after giving
effect to the retirement of Senior Indebtedness with proceeds of the issuance of
the Series A Notes, we had $220.7 million of Senior Indebtedness outstanding,
including $158.7 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, except that we may not incur indebtedness that,
when incurred, would cause the ratio of our EBITDA to fixed charges to exceed a
specified ratio, or cause particular types of our indebtedness to exceed
specified multiples of our net worth, or our net worth plus subordinated
indebtedness. For a description of the types of obligations that are Senior
Indebtedness, see "Description of the Series B Notes -- Subordination."
In addition, we are a holding company whose primary assets consist of
shares of stock or other equity interests in our subsidiaries. Accordingly, we
are 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 in respect of the Notes. A
significant amount of our consolidated indebtedness was indebtedness of our
subsidiaries, including $244.3 million principal amount which we had not
guaranteed (as well as indebtedness which we had guaranteed and which,
therefore, was Senior Indebtedness) at November 30, 2003, after giving effect to
the retirement of Senior Indebtedness with proceeds of the issuance of the
Series A Notes. 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 senior 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
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subsidiaries which prohibit or limit the subsidiaries' payment of dividends or
advances will eliminate or reduce our access to cash flows of those subsidiaries
to pay interest or principal with regard to the Notes.
HOLDERS OF OUR SECURED DEBT COULD FORCE US TO DO THINGS THAT MIGHT NOT BE IN OUR
BEST INTERESTS
A substantial amount of our debt (including reverse repurchase obligations)
was incurred to purchase particular assets and is secured by those assets.
Almost all our secured debt is either Senior Indebtedness or indebtedness of
subsidiaries that must be paid before the subsidiaries' assets can be used to
pay the Notes and other senior subordinated debt. Therefore, holders of our
secured debt probably would have to be paid before we could access assets that
secure it to make payments with regard to the Notes, even if those assets were
not subject to liens. However, if we have difficulty meeting our obligations
with regard to secured debt, or if the value of the collateral for some of our
secured debt fell below required levels, we might be required either to give
previously unencumbered assets as additional collateral or to sell assets at
times when it might not be opportune for us to do so.
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, each holder of Notes will have the right to
require us to repurchase the holder's Notes. If there were a change in control,
but we did not have sufficient funds to pay the repurchase price for all the
Notes that are tendered, that failure would constitute an event of default under
the Indenture governing the Notes. In addition, a change in control 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 that 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. See "Description of
the Series B Notes -- Right to Require Purchase of Notes upon a Change in
Control."
THERE IS NO PUBLIC MARKET FOR THE NOTES
There is currently no public market for the Notes. If the Notes are traded
after their initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for similar
securities, our performance and certain other factors. Historically, the market
for non-investment grade debt such as the Notes has been subject to disruptions
that have caused substantial volatility in their prices. There can be no
assurance that if a market for the Notes develops, that market will not 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.
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USE OF PROCEEDS
We will not receive any proceeds from the issuance of Series B Notes in
exchange for Series A Notes pursuant to the exchange offer. We used the net
proceeds from the sale of the Series A Notes to retire our 10 1/2% Senior
Subordinated Notes Due 2009 (including payment of redemption premium and accrued
interest), to repay secured senior debt and for general corporate purposes.
ABSENCE OF PUBLIC MARKET
The Series B Notes will be new securities for which there is no established
trading market. We currently do not intend to list the Series B Notes on any
securities exchange or to arrange for the Series B Notes to be quoted on any
quotation system. Although the Initial Purchasers have informed us that they
currently intend to make a market in the Notes, they are not obligated to do so
and they may discontinue market-making activity at any time without notice. In
addition, market-making activities may be limited during the exchange offer or
the pendency of a shelf registration statement required by the registration
rights agreements, if it is filed. Accordingly, it is not likely that an active
trading market for the Series B Notes will develop or, if such a market
develops, that it will provide significant liquidity to holders of notes.
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SELECTED CONSOLIDATED CONDENSED FINANCIAL DATA
The following table presents selected consolidated condensed financial data
for us and our subsidiaries which has been derived from our consolidated
financial statements. Due to the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 144, Accounting for Impairment or Disposal of Long Lived
Assets, effective December 1, 2002, the financial statements for the year ended
November 30, 2002 and prior years have been restated to reflect the impact of
the reclassification of several operating properties disposed of after November
30, 2002 as discontinued operations. SFAS No. 144 requires us to present all
operating properties we sell or classify as held for sale after November 30,
2002, separately on our balance sheet, and to reflect such properties as
discontinued operations in our statements of earnings. Prior periods have been
restated for comparative purposes. The following financial information should be
read in conjunction with our Annual Report on Form 10-K for fiscal year ended
November 30, 2003, which is incorporated by reference into this prospectus.
SELECTED CONSOLIDATED CONDENSED FINANCIAL DATA
AS OF NOVEMBER 30,
----------------------------------------------------------
2003 2002 2001 2000 1999
---------- --------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS
Revenues and other operating income:
Real estate properties............. $ 190,879 180,252 205,347 211,054 191,828
Real estate loans.................. 51,827 44,848 52,150 80,507 45,483
Real estate securities............. 191,932 225,206 214,290 176,435 107,315
---------- --------- --------- --------- ---------
Total revenues and other
operating income.............. $ 434,638 450,306 471,787 467,996 344,626
========== ========= ========= ========= =========
Interest expense..................... $ 102,254 92,054 109,742 120,722 83,199
Earnings from continuing operations,
net of tax......................... $ 81,169 140,192 133,402 114,392 94,608
Earnings from discontinued
operations, net of tax............. 28,413 3,686 1,711 1,479 952
---------- --------- --------- --------- ---------
Net earnings.................. $ 109,582 143,878 135,113 115,871 95,560
========== ========= ========= ========= =========
Earnings per share -- basic:
From continuing operations......... $ 2.77 4.19 4.00 3.42 2.66
From discontinued operations....... 0.97 0.11 0.05 0.04 0.02
---------- --------- --------- --------- ---------
Net earnings.................. $ 3.74 4.30 4.05 3.46 2.68
========== ========= ========= ========= =========
Earnings per share -- diluted:
From continuing operations......... $ 2.64 4.04 3.82 3.28 2.61
From discontinued operations....... 0.93 0.11 0.05 0.04 0.02
---------- --------- --------- --------- ---------
Net earnings.................. $ 3.57 4.15 3.87 3.32 2.63
========== ========= ========= ========= =========
Cash dividends per share:
Common stock....................... $ 0.05 0.05 0.05 0.05 0.05
Class B common stock............... $ 0.045 0.045 0.045 0.045 0.045
11
AS OF NOVEMBER 30,
----------------------------------------------------------
2003 2002 2001 2000 1999
---------- --------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FINANCIAL DATA
EBITDA(1)............................ $ 333,240 340,414 347,332 329,246 242,964
Cash flows provided by (used in):
Operating activities............... $ 78,638 71,131 115,907 121,726 110,316
Investing activities............... $ 265,161 63,374 (83,843) (150,619) (404,590)
Financing activities............... $ (319,843) (135,372) (27,472) 22,292 274,444
FINANCIAL POSITION
Total assets....................... $2,633,014 2,834,874 2,836,647 2,348,856 2,283,001
Assets by business segment:
Real estate properties.......... $1,053,839 1,123,214 1,037,098 1,153,608 1,290,149
Real estate loans............... $ 468,394 441,652 398,614 314,162 274,694
Real estate securities.......... $1,015,113 1,248,709 1,355,923 826,092 640,791
Total debt......................... $1,382,786 1,339,962 1,318,392 1,382,059 1,382,124
Stockholders' equity............... $1,050,867 1,126,156 1,119,169 778,444 710,332
Stockholders' equity per share..... $ 35.36 34.15 32.54 22.75 20.18
Shares outstanding:
Common stock.................... 19,941 23,189 24,445 24,215 25,142
Class B common stock............ 9,775 9,784 9,949 9,999 10,058
---------- --------- --------- --------- ---------
Total......................... 29,716 32,973 34,394 34,214 35,200
========== ========= ========= ========= =========
---------------
(1) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and loss on early extinguishment of debt, and is calculated as
follows:
YEARS ENDED NOVEMBER 30,
------------------------------------------------
2003 2002 2001 2000 1999
-------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Continuing operations:
Earnings...................................... $ 81,169 140,192 133,402 114,392 94,608
Add back:
Income tax expense............................ 38,285 66,918 70,136 51,112 34,732
Interest expense.............................. 102,254 92,054 109,742 120,722 83,199
Depreciation expense.......................... 21,256 21,395 24,545 35,519 27,018
Amortization expense.......................... 9,465 5,665 5,228 3,693 762
Loss on early extinguishment of debt.......... 28,672 -- -- -- --
-------- ------- ------- ------- -------
EBITDA from continuing operations............. 281,101 326,224 343,053 325,438 240,319
======== ======= ======= ======= =======
Discontinued operations:
Earnings...................................... 28,413 3,686 1,711 1,479 952
Add back:
Income tax expense............................ 18,166 2,357 1,094 945 608
Interest expense.............................. 3,093 4,556 752 765 710
Depreciation expense.......................... 2,467 3,591 722 619 375
-------- ------- ------- ------- -------
EBITDA from discontinued operations........... 52,139 14,190 4,279 3,808 2,645
-------- ------- ------- ------- -------
EBITDA...................................... $333,240 340,414 347,332 329,246 242,964
======== ======= ======= ======= =======
12
Our management uses EBITDA as a supplemental measure for making decisions
and believes it provides relevant information about our operations and our
ability to service debt, to make investments and to fund other items as needed
and, along with net earnings, is useful in understanding our operating results.
Also, many of our debt instruments have covenants relating to our EBITDA or
similar measures. Our management believes investors may find information about
our EBITDA helpful, because prices of securities of companies in real estate
related businesses often are affected by changes in EBITDA. Because of the
nature of our business, we believe net earnings (consisting of earnings from
continuing operations, net of tax and earnings from discontinued operations, net
of tax) is the measure of financial performance calculated in accordance with
generally accepted accounting principles that is most comparable to EBITDA.
EBITDA should not be interpreted as an alternative measure of net earnings or
cash flows from operating activities, both as determined in accordance with
generally accepted accounting principles. Additionally, EBITDA is not
necessarily indicative of cash available to fund cash needs. Trends or changes
in items excluded from EBITDA (including income tax expense, interest expense,
depreciation expense, amortization expense and loss on early extinguishment of
debt) are not captured in EBITDA. These excluded items must also be considered
when assessing or understanding our financial performance. Because EBITDA is not
a measure governed by generally accepted accounting principles, there are no
required standards for calculating EBITDA. Therefore, EBITDA as calculated by us
may not be comparable to similarly titled measures employed by other companies.
13
CAPITALIZATION
The table below shows our capitalization at November 30, 2003. The exchange
of Series B Notes for Series A Notes will not affect this capitalization, except
that at least some of the 7.25% Notes will be Series B Notes instead of Series A
Notes.
NOVEMBER 30, 2003
-----------------
(IN THOUSANDS)
DEBT:
Short-term debt, including current portion of long-term
debt(1)................................................... $ 29,106
Unsecured revolving credit facility(2)...................... --
Long-term debt (net of current portion):
Secured revolving credit facilities(3).................... 98,786
Other long-term debt(4)................................... 275,057
10 1/2% Senior Subordinated Notes Due 2009 (net of $445
discount)................................................. 44,837
5.5% Contingent Convertible Senior Subordinated Notes Due
2023...................................................... 235,000
7.625% Senior Subordinated Notes Due 2013................... 350,000
7.25% Senior Subordinated Notes Due 2013(5)................. 350,000
----------
Total debt................................................ 1,382,786
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, 150,000 shares authorized,
19,941 shares issued and outstanding...................... 1,994
Class B common stock, $.10 par value, 40,000 shares
authorized, 9,775 shares issued and outstanding........... 977
Additional paid-in capital.................................. 459,378
Retained earnings........................................... 538,799
Unamortized value of restricted stock grants................ (28,890)
Accumulated other comprehensive earnings.................... 78,609
----------
Total stockholders' equity................................ 1,050,867
----------
Total capitalization...................................... $2,433,653
==========
---------------
(1) Short-term debt consists of $8.1 million of borrowings under reverse
repurchase obligation (repo) facilities secured by B-notes and $18.4 million
of mortgage notes secured by operating properties and land. The current
portion of long-term debt at November 30, 2003 as $2.6 million.
(2) This facility permits up to $400 million of borrowings as of November 30,
2003.
(3) These facilities are secured by CMBS and mortgages.
(4) Other long-term debt consists of mortgage notes secured by operating
properties and land.
(5) Does not include $50.0 million principal amount of 7.25% notes issued on
December 2, 2003 at a price of 100.5%, proceeds of which were used primarily
to redeem the remaining 10 1/2% Senior Subordinated Notes due 2009.
14
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of our earnings to our fixed
charges for each of the years in the five-year period ended November 30, 2003.
YEARS ENDED NOVEMBER 30,
--------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges(1)....................... 2.2x 3.4x 2.8x 2.2x 2.2x
---------------
(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.
Because of Statement of Financial Accounting Standards No. 144, Accounting
for Impairment or Disposal of Long-Lived Assets, to which we became subject
beginning in the first quarter of fiscal 2003, whenever we sell, or categorize
as held for sale, a commercial real estate property that has its own operations
and cash flows, we must reclassify the current and prior period revenues and
expenses of that property from continuing to discontinued operations and treat
the gain or loss on sale of that property as income or loss from discontinued
operations. This has the effect of removing the earnings (including the gain or
loss from sale) and the fixed charges related to the property from the
calculation of the ratio of earnings to fixed charges, both for the current
period and for all prior periods. Through November 30, 2003, the application of
SFAS No. 144 had only a minimal effect on the ratio of earnings to fixed charges
for prior periods. However, the effect of SFAS No. 144 on the ratio for prior
periods may become more significant as we sell more properties and are required
to restate prior periods for comparative purposes.
15
THE EXCHANGE OFFER
PURPOSE AND EFFECTS
We issued Series A Notes on October 29, 2003 and December 2, 2003 to
initial purchasers, who resold the Series A Notes to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) and to non-U.S.
persons in accordance with Regulation S under the Securities Act. In connection
with the sale of the Series A Notes, we and the initial purchasers entered into
registration rights agreements pursuant to which we agreed to file with the SEC
a registration statement with respect to an offer to exchange Series B Notes for
the Series A Notes by February 28, 2004. In addition, we agreed to use our best
efforts to cause the registration statement to become effective under the
Securities Act by April 29, 2004 and to issue the Series B Notes pursuant to the
exchange offer. A copy of each of the registration rights agreements has been
filed as an exhibit to the registration statement of which this prospectus is a
part.
The exchange offer is being made pursuant to the registration rights
agreements. When we complete the exchange offer, we will have no further
obligation to register Notes. Therefore, holders of Series A Notes who do not
tender their Series A Notes or whose Series A Notes are not accepted would have
to rely on exemptions from registration requirements under the securities laws,
including the Securities Act, if they wish to sell their Series A Notes.
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to persons unrelated to us, we believe the Series B Notes issued
pursuant to the exchange offer in exchange for Series A Notes may be offered for
sale, sold and otherwise transferred by any holder (other than a person that is
an "affiliate" of ours within the meaning of Rule 405 under the Securities Act
and except as set forth below) without registration or the delivery of a
prospectus under the Securities Act, provided the holder acquires the Series B
Notes in the ordinary course of the holder's business and the holder is not
participating and does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the Series
B Notes.
If a person were to participate in the exchange offer for the purpose of
distributing securities in a manner not permitted by the SEC's interpretation,
(1) the position of the staff of the SEC enunciated in the no-action letters
would not be applicable to that person and (2) that person would probably be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a sale of the Series B Notes.
Each broker-dealer that receives Series B Notes for its own account in
exchange for Series A Notes which the broker-dealer acquired as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any sale of those Series B Notes.
See "Sales of Series B Notes Received by Broker-Dealers."
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of Series B Notes with addresses in any jurisdiction in
which the exchange offer or the issuance of Series B Notes pursuant to it would
violate applicable securities or blue sky laws. Prior to the exchange offer,
however, we will register or qualify, or cooperate with the holders of the
Series A Notes and their respective counsel in connection with the registration
or qualification of, the Series B Notes for offer and sale under the securities
or blue sky laws of such jurisdictions as are necessary to permit consummation
of the exchange offer and do anything else which is necessary or advisable to
enable the offer and issuance of the Series B Notes in those jurisdictions.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will issue Series B Notes in
exchange for all Series A Notes which are validly tendered prior to 5:00 p.m.,
New York City time, on the expiration date (as defined below) and not withdrawn.
The principal amount of the Series B Notes issued in the exchange will be the
same as the
16
principal amount of the Series A Notes for which they are exchanged. Holders may
tender some or all of their Series A Notes in response to the exchange offer.
However, Series A Notes may be tendered only in multiples of $1,000. See
"Description of the Series B Notes."
The form and terms of the Series B Notes will be the same in all material
respects as the form and terms of the Series A Notes, except that (1) the Series
B Notes will be registered under the Securities Act and therefore will not bear
legends regarding restrictions on transfer and (2) because the Series B Notes
will be registered, holders of Series B Notes will not be entitled to rights
under the registration rights agreements intended for holders of unregistered
securities.
Series A Notes which are not tendered for exchange or are tendered but not
accepted in the exchange offer will remain outstanding and be entitled to the
benefits of the indenture, but will not be entitled to any registration rights
under the registration rights agreements.
We will be deemed to accept all the Series A Notes which are validly
tendered and not withdrawn when we give oral or written notice to that effect to
the exchange agent. The exchange agent will act as agent for the tendering
holders for the purpose of receiving Series B Notes from us.
If any tendered Series A Notes are not accepted for exchange because of an
invalid tender or otherwise, certificates for those Series A Notes will be
returned, without expense, to the tendering holder as promptly as practicable
after the expiration date.
Holders who tender Series A Notes in response to the exchange offer will
not be required to pay brokerage commissions or fees or, except as described in
the instructions in the letter of transmittal, transfer taxes. We will pay all
charges and expenses, other than certain taxes described below, in connection
with the exchange offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time, on April
16, 2004, unless we extend it by notice to the exchange agent. We reserve the
right to extend the exchange offer at our discretion. If we extend the exchange
offer, the term "expiration date" will mean the time and date on which the
exchange offer as extended will expire. We will notify the exchange agent of any
extension by oral or written notice and will make a public announcement of any
extension not later than 9:00 a.m., New York City time, on the business day
after the previously scheduled expiration date. Immediately after the expiration
date, we will accept all Series A Notes that have been properly tendered and not
withdrawn.
We expect that on the day after the expiration date, we will institute a
subsequent exchange offering period of up to 20 business days (but not beyond
May 29, 2004), during which we will accept Series A Notes as they are tendered.
We will notify the exchange agent of any subsequent exchange offering period and
will make a public announcement of it not later than 9:00 a.m., New York City
time, on the business day after the expiration date.
TERMINATION OF CERTAIN RIGHTS
The registration rights agreements provide that, with certain exceptions,
if (1)(A) the exchange offer registration statement has not been filed with the
SEC on or prior to February 28, 2004, or (B) a shelf registration statement has
not been filed with the SEC on or prior to the 30th day after a shelf notice is
delivered under any of the registration rights agreements; (2)(A) the exchange
offer Registration Statement has not been declared effective on or prior to
April 29, 2004, or (B) a shelf registration statement has not been declared
effective on or prior to the 75th day following a shelf registration filing
date; (3)(A) the exchange offer is not consummated on or prior to May 29, 2004,
or (B) after a shelf registration statement has been declared effective, the
shelf registration statement ceases to be effective or usable in connection with
resales of the notes at any time when we are obligated by the registration
rights agreements to maintain its effectiveness (each event referred to in
clauses (1) through (3) above being a "registration default"), the interest rate
on all the Notes will be increased by one quarter of one percent per annum when
the registration default occurs and will increase by an additional one quarter
of one
17
percent at the end of each 90 days that there continues to be a registration
default, with an aggregate maximum increase in the interest rate equal to one
percent per annum. Following the cure of all registration defaults, the accrual
of additional interest will cease.
Holders of Series B Notes will not be and, upon consummation of the
exchange offer, holders of Series A Notes will no longer be, entitled to rights
under the registration rights agreements intended for holders of Series A Notes
which are restricted as to transferability. The exchange offer will be deemed
consummated when we deliver to the exchange agent Series B Notes in the same
aggregate principal amount as that of the Series A Notes which are validly
tendered and not withdrawn.
PROCEDURES FOR TENDERING
Only a holder of Series A Notes may tender Series A Notes in response to
the exchange offer. To tender Series A Notes, the holder must complete, sign and
date the letter of transmittal, or a facsimile of one, have the signatures
guaranteed if required by the letter of transmittal, and mail or otherwise
deliver the letter of transmittal or facsimile of one, together with the Series
A Notes (unless the tender is being effected using the procedure for book-entry
transfer described below) and any other required documents, to the exchange
agent prior to 5:00 p.m., New York City time, on the expiration date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility System may make book-entry delivery of Series A Notes by
causing DTC to transfer the Series A Notes into the exchange agent's account at
DTC in accordance with DTC's transfer procedure. Because the only outstanding
Notes are Global Notes held by DTC, all tenders of Series A Notes must be made
in that manner. Even though delivery of Series A Notes is effected through
book-entry transfer into the exchange agent's account at DTC, the letter of
transmittal (or a facsimile of one), with any required signature guarantees and
any other required documents, must be transmitted to and received or confirmed
by the exchange agent at its addresses as set forth under the caption
"-- Exchange Agent" below prior to 5:00 p.m., New York City time, on the
expiration date. DELIVERY OF A DOCUMENT TO DTC DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
A tender of Series A Notes by a holder will constitute an agreement by the
holder to transfer the Series A Notes to us in exchange for Series B Notes on
the terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
The method of delivering Series A Notes and the letter of transmittal and
any other required documents to the exchange agent is at the election and risk
of the holder. It is recommended that holders use overnight or hand delivery
services. In all cases, sufficient time should be allowed to assure delivery to
the exchange agent before the expiration time. No letter of transmittal or
Series A Notes should be sent to us. Holders may ask their brokers, dealers,
commercial banks, trust companies or nominees to assist them in effecting
tenders.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution unless the Series A
Notes are being tendered for the account of an eligible institution. An eligible
institution is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program.
If the letter of transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, they should so indicate when signing, and we may require that evidence
satisfactory to us of their authority to sign be submitted with the letter of
transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Series A Notes will be
determined by us in our sole discretion, and that determination will be final
and binding. We reserve the right to reject any Series A Notes which are not
properly tendered or the acceptance of which we believe might be unlawful. We
also reserve the right to waive any defects, irregularities or conditions of
tender as to particular Series A Notes, without being required to waive the same
defects, irregularities or conditions as to other Series A Notes. Our
18
interpretation of the terms and conditions of the exchange offer (including the
instructions in the letter of transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Series A Notes must be cured by the expiration date, or by such later time as
we may determine. Although we intend to request the exchange agent to notify
holders of defects or irregularities with respect to tenders of Series A Notes,
neither we, the exchange agent nor any other person will incur any liability for
failure to give such notification. Tenders of Series A Notes will not be deemed
to have been made until all defects and irregularities have been cured or
waived. Any Series A Notes received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holders, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
We have the right (subject to limitations contained in the indenture) (1)
to purchase or make offers for any Series A Notes that remain outstanding after
the expiration date and (2) to the extent permitted by applicable law, to
purchase Series A Notes in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
exchange offer.
By tendering Series A Notes, a holder will be representing to us that the
person who will acquire the Series B Notes being issued as a result of the
exchange offer (whether or not that is the holder) will be acquiring them in the
ordinary course of that person's business and that neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in a distribution of the Series B Notes or is an "affiliate" of ours
(as defined in Rule 405 under the Securities Act). If the holder is a
broker-dealer that will receive Series B Notes for its own account in exchange
for Series A Notes that were acquired as result of market-making activities or
other trading activities, the holder will, by tendering, acknowledge that it
will deliver a prospectus in connection with any resale of those Series B Notes.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (1) whose Series A
Notes are not immediately available, or (2) who cannot deliver their Series A
Notes or any other required documents to the exchange agent or cannot complete
the procedure for book-entry transfer prior to the expiration date, may effect a
tender if:
(a) The tender is made through an eligible institution;
(b) Prior to the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery (by facsimile transmission, mail or hand) setting forth
the name and address of the eligible holder, and the principal amount of
Series A Notes tendered, together with a duly executed letter of
transmittal (or a facsimile of one), stating that the tender is being made
by that notice of guaranteed delivery and guaranteeing that, within five
business days after the expiration date, or confirmation of a book-entry
transfer into the exchange agent's account at DTC and any other documents
required by the letter of transmittal will be delivered to the exchange
agent; and
(c) Confirmation of a book-entry transfer into the exchange agent's
account at DTC and all other documents required by the letter of
transmittal are received by the exchange agent within five business days
after the expiration date.
Upon request to the exchange agent, a form of notice of guaranteed delivery
will be sent to holders who wish to use the guaranteed delivery procedures
described above.
WITHDRAWAL OF TENDERS
Except as otherwise described below, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date, unless the Series A Notes have already been accepted for exchange, except
that Series A Notes tendered during the subsequent exchange offering period, if
there is one, may not be withdrawn.
19
To withdraw a tender of Series A Notes, a written or facsimile transmission
notice of withdrawal must be received by the exchange agent prior to 5:00 p.m.,
New York City time, on the expiration date, and before the Series A Notes have
been accepted for exchange by us. Any notice of withdrawal must (i) specify the
name of the person who deposited the Series A Notes to be withdrawn, (ii)
identify the Series A Notes to be withdrawn (including the principal amounts of
the Series A Notes), (iii) be signed by the depositor in the same manner as the
signature on the letter of transmittal by which the Series A Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the trustee register the transfer of the Series A
Notes into the name of the person who withdraws the tender, and (iv) specify the
name in which the withdrawn Series A Notes are to be registered, if different
from that of the depositor. All questions as to the validity, form and
eligibility (including time of receipt) of withdrawal notices will be determined
by us in our sole discretion, and that determination will be final and binding
on all parties. Any Series A Notes which are withdrawn will be deemed not to
have been validly tendered for purposes of the exchange offer, and no Series B
Notes will be issued with respect to those Series A Notes unless they are
validly re-tendered. Any Series A Notes which have been tendered but which are
not accepted for exchange or which are withdrawn will be returned to the holder
without cost to the holder as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn Series A Notes
may be re-tendered at any time prior to the expiration date.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders pursuant to the exchange
offer. The principal solicitation of tenders is being made by mail. However,
solicitations also may be made by telecopy, telephone or in person by officers
and regular employees of ours and our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others for
soliciting acceptances of the exchange offer. We will, however, pay the exchange
agent reasonable and customary fees for its services and reimburse it for its
reasonable out-of-pocket expenses in connection with the exchange offer. We may
also reimburse brokerage houses and other custodians, nominees and fiduciaries
for the reasonable out-of-pocket expenses they incur in forwarding copies of
this prospectus, letters of transmittal and related documents to the beneficial
owners of the Series A Notes and in handling or forwarding tenders for exchange.
We will pay the other expenses incurred in connection with the exchange offer,
including fees and expenses of the trustee, accounting and legal fees and
printing costs.
We will pay all transfer taxes, if any, applicable to the exchange of
Series A Notes for Series B Notes pursuant to the exchange offer. If, however,
Series B Notes or Series A Notes for principal amounts which are not tendered or
accepted for exchange are to be issued in the name of, a person other than the
registered holder of the Series A Notes tendered, or if tendered Series A Notes
are registered in the name of a person other than the person who signs the
letter of transmittal, or if a transfer tax is imposed for any other reason,
other than the exchange of Series A Notes for Series B Notes pursuant to the
exchange offer, the tendering holder must pay the transfer taxes (whether
imposed on the registered holder or any other person). Unless satisfactory
evidence of payment of transfer taxes or exemption from the need to pay them is
submitted with the letter of transmittal, the amount of the transfer taxes will
be billed directly to the tendering holder. We may refuse to issue Series B
Notes in exchange for Series A Notes, or to return certificates evidencing
Series A Notes which are not exchanged, until we receive evidence satisfactory
to us that any transfer taxes payable by the holder have been paid.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The exchange of the Series A Notes for the Series B Notes in the exchange
offer should not constitute an exchange for federal income tax purposes.
Consequently, (1) no gain or loss should be realized by a U.S. Holder upon
receipt of a Series B Note; (2) the holding period of the Series B Note should
include the holding period of the Series A Note for which it is exchanged; and
(3) the adjusted tax basis of the Series B Note should be the same as the
adjusted tax basis of the Series A Note for which it
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is exchanged, immediately before the exchange. Even if the exchange of a Series
A Note for a Series B Note were treated as an exchange, the exchange should
constitute a tax-free recapitalization for federal income tax purposes.
Accordingly, a Series B Note should have the same issue price as a Series A Note
and a U.S. Holder should have the same adjusted basis and holding period in the
Series B Note as it had in the Series A Note immediately before the exchange. A
"U.S. Holder" means a person who is, for United States federal income tax
purposes, (1) a citizen or resident of the United States; (2) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision of the United States; or (3) an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.
CONSEQUENCES OF FAILURE TO EXCHANGE SERIES A NOTES
If a holder does not exchange Series A Notes for Series B Notes in response
to the exchange offer, the Series A Notes will continue to be subject to the
restrictions on transfer described in the legend on the global certificate (or
any individual certificates) evidencing the Series A Notes, and will not have
the benefit of any agreement by us to register Series A Notes under the
Securities Act. In general, notes may not be offered or sold, unless the sale is
registered under the Securities Act, or unless the offer and sale are exempt
from, or not subject to, the Securities Act or any applicable state securities
laws.
Participation in the exchange offer is voluntary and holders should
carefully consider whether to accept the exchange offer and tender their Series
A Notes. Holders of Series A Notes are urged to consult their financial and tax
advisors in making their own decisions on what action to take.
ACCOUNTING TREATMENT
The Series B Notes will be recorded in our accounting records at the same
carrying value as the Series A Notes on the date of the exchange. Accordingly,
we will not recognize any gain or loss for accounting purposes as a result of
the exchange offer. We will amortize the expenses of the exchange offer over the
term of the Series B Notes.
EXCHANGE AGENT
U.S. Bank Trust National Association has been appointed as exchange agent
for the exchange offer. All correspondence in connection with the exchange offer
and the letter of transmittal should be addressed to the exchange agent, as
follows:
BY FACSIMILE: BY OVERNIGHT COURIER: BY REGISTERED OR CERTIFIED
MAIL:
(212) 361-2893 U.S. Bank Trust National
Attn: Beverly Freeney Association U.S. Bank Trust National
100 Wall Street, Suite 1600 Association
New York, NY 10005 100 Wall Street, Suite 1600
Attn: Beverly Freeney New York, NY 10005
Attn: Beverly Freeney
Requests for additional copies of this prospectus or the letter of
transmittal should be directed to the exchange agent.
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DESCRIPTION OF THE SERIES B NOTES
We issued the Series A Notes, and will issue the Series B Notes, under an
Indenture (the "Indenture") dated October 29, 2003, between us and U.S. Bank
Trust National Association, as trustee (the "Trustee"). The form and terms of
the Series B Notes will be identical in all material respects with the form and
terms of the Series A Notes, except that (1) the Series B Notes will have been
registered under the Securities Act and, therefore, will not bear legends
describing restrictions on transferring them, and (2) holders of Series B Notes
will not be, and upon the consummation of the exchange offer, holders of Series
A Notes will no longer be, entitled to certain rights under the registration
rights agreements intended for the holders of unregistered securities. We have
summarized in this section the principal terms of the Notes and the Indenture
under which they were issued. This summary is not complete. You should read the
Indenture and the Series B Notes for additional information before you decide to
invest in the Series B Notes because they, and not this description, define your
rights as holders of the Series B Notes. You may request copies of these
documents at our address shown under the caption "Incorporation by Reference" on
page 51 of this prospectus. The Indenture is subject to, and governed by, the
Trust Indenture Act of 1939, as amended (the "TIA"). Any Series A Notes that
remain outstanding after the completion of the exchange offer, together with the
Series B Notes, will be treated as a single series of securities under the
Indenture. Capitalized terms used but not defined in this section have the
meanings specified in the Indenture. For purposes of this "Description of the
Series B Notes," "LNR," "we," "our" or "us" refers to LNR Property Corporation
and does not include our subsidiaries except in references to consolidated
financial data.
GENERAL
The Notes are our general unsecured obligations and are subordinated in
right of payment to all existing and future Senior Indebtedness. The Notes rank
equal in right of payment with any of our other senior subordinated indebtedness
and rank senior in right of payment to any of our other subordinated
indebtedness. In addition, as obligations of a holding company, the Notes are
effectively subordinated to all present and future indebtedness of our
subsidiaries. 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."
PRINCIPAL, MATURITY AND INTEREST
There is no limit on the principal amount of Notes that can be issued.
However, we must comply with the covenant described under "Limitation of
Incurrence of Additional Indebtedness" to issue any additional Notes. The
aggregate principal amount of the Notes that are outstanding is $400 million.
The Notes will mature on October 15, 2013. Interest on the Notes accrues at
7.25% per annum and is payable semi-annually in arrears on each April 15 and
October 15 commencing on April 15, 2004. We will pay interest to the persons in
whose names the Notes are registered at the close of business on the fifteenth
day immediately preceding each interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance. There is no
sinking fund applicable to the Notes.
REDEMPTION
Optional Redemption. Beginning October 15, 2008, we may redeem the Notes,
in whole at any time, or in part from time to time, for cash, upon not less than
30 nor more than 60 days' notice. If the Notes are redeemed during the
twelve-month period commencing on October 15 of any of the years indicated
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below, the redemption price will equal the percentage of the principal amount of
the redeemed Notes shown opposite that year, plus accrued and unpaid interest to
the applicable redemption date:
YEAR PERCENTAGE
---- ----------
2008...................................................... 103.625%
2009...................................................... 102.417%
2010...................................................... 101.208%
2011 and thereafter....................................... 100.000%
Optional Redemption upon Public Equity Offerings. In addition to the
foregoing, at any time on or prior to October 15, 2006, we may redeem up to 35%
of the aggregate principal amount of the Notes with net cash proceeds of one or
more Public Equity Offerings. The redemption price will equal 107.25% of the
aggregate principal amount to be redeemed, plus accrued and unpaid interest, if
any, to the redemption date. However, immediately following any such redemption,
at least 65% of the aggregate principal amount of the Notes we issued must
remain outstanding. The redemption must occur within 60 days after the date of
the closing of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of our Qualified Capital Stock under an effective
registration statement filed with the SEC in accordance with the Securities Act.
SELECTION AND NOTICE OF REDEMPTION
If less than all of the Notes are to be redeemed at any time, the Trustee
will select the particular Notes or portions of Notes to be redeemed (1) in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, (2) if the Notes are not then listed,
on a pro rata basis, by lot or by such method as the Trustee deems fair and
appropriate. Notes of $1,000 or less will not be redeemed in part. If a partial
redemption is made with the proceeds of a Public Equity Offering, the Trustee
will select the particular Notes to be redeemed on a pro rata basis or on as
nearly a pro rata basis as is practicable (subject to DTC procedures), unless
such method is otherwise prohibited.
Notice of redemption must be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to that Note must state the portion of the
principal amount of that Note to be redeemed. A new Note in a principal amount
equal to the unredeemed portion will be issued in the name of the Holder upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption as long
as we have deposited with the paying agent funds in satisfaction of the
applicable redemption price.
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.
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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.
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, 2003, after giving effect to the sale of $400 million
principal amount of Series A Notes and application of the proceeds of the sale,
we had approximately $220.7 million of Senior Indebtedness.
We are principally a holding company whose primary assets consist of shares
of stock and other equity interests 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."
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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 us and certain of our
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 October 29, 2003.
"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);
(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) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness";
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(7) any indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11 of the United States Code is
without recourse to us; and
(8) any indebtedness which is, by its express terms, subordinated in
right of payment to any of our other indebtedness.
RIGHT TO REQUIRE PURCHASE OF NOTES UPON A CHANGE IN CONTROL
If a Change in Control (as defined below) occurs, 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 101% of
the principal amount of the Notes, plus accrued but unpaid interest to the date
of repurchase.
"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
(the "Exchange Act")), 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 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.
The term "permitted holder" 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 the Issue Date.
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.
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
26
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 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. 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; and
- that the Notes are to be repurchased by us pursuant to the applicable
provisions of the Notes and the Indenture.
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.
We will comply with the provisions of Rule l4e-1 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 terms 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 a
Change in Control offer. It is possible that 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 holders' 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 be
sure that we will have sufficient available funds to make any required
repurchases. See "Risk Factors -- If we experience a change in control, we may
be unable to purchase the Notes as required under the Indenture."
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.
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CERTAIN COVENANTS
Limitation on Incurrence of Additional Indebtedness. We will not, and will
not cause or permit any of our Subsidiaries to, directly or indirectly, create,
incur, assume, guarantee, acquire, become liable, contingently or otherwise,
with respect to, or otherwise become responsible for payment of (collectively,
"incur"), any Indebtedness (including, without limitation, Acquired Indebtedness
and any Notes in excess of $300,000,000 aggregate principal amount outstanding)
other than Permitted Indebtedness.
Notwithstanding the foregoing, if no Default or Event of Default shall have
occurred and be continuing at the time of or as a consequence of the incurrence
of any such Indebtedness, we and our Subsidiaries may incur Indebtedness
(including, without limitation, Acquired Indebtedness and Notes in excess of
$300,000,000 aggregate principal amount outstanding) if on the incurrence of
such Indebtedness, after giving effect to the incurrence thereof:
- our Consolidated Fixed Charge Coverage Ratio is greater than 1.5 to 1.0;
- the ratio of the aggregate amount of Recourse Indebtedness outstanding on
a consolidated basis to our Consolidated Net Worth is less than 5.0 to
1.0; and
- the ratio of the aggregate amount of Senior Recourse Indebtedness
outstanding on a consolidated basis to the sum of (1) our Consolidated
Net Worth and (2) the aggregate amount of the Subordinated Indebtedness
outstanding on a consolidated basis is less than 2.75 to 1.0; provided,
that the Subordinated Indebtedness included in this calculation is not in
excess of our Consolidated Net Worth.
No Indebtedness incurred pursuant to the preceding paragraph shall be
included in calculating any limitation set forth in the definition of Permitted
Indebtedness. Neither the accrual of interest nor the accretion of original
issue discount shall be deemed an incurrence of Indebtedness. Prior to any
incurrence of Indebtedness pursuant to the preceding paragraph (other than an
advance under a committed facility), we must deliver to the Trustee an officers'
certificate setting forth the calculations by which such incurrence was
determined to be permitted. If, during any month, we incur Indebtedness pursuant
to the preceding paragraph through advances under a committed facility, we must
deliver to the Trustee on the last day of such month an officers' certificate
setting forth the calculations by which each such incurrence was determined to
be permitted.
Limitation on Restricted Payments. We will not, and will not cause or
permit any of our Subsidiaries to, directly or indirectly, make a Restricted
Payment (as defined below), if at the time of the Restricted Payment or
immediately after giving effect to it:
- a Default or an Event of Default shall have occurred and be continuing;
- we are not able to incur at least $1.00 of additional Indebtedness (other
than additional Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant above;
- the aggregate amount of all Restricted Payments (including the current
Restricted Payment) made subsequent to the Base Date (the amount expended
for such purposes, if other than in cash, being the fair market value of
such property as determined reasonably and in good faith by our Board of
Directors) shall exceed the sum of:
(1) 50% of our cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) earned
during the period beginning on the first day of the fiscal quarter
including the Base Date and ending on the last day of the most recent
fiscal quarter ending at least 30 days prior to the date the Restricted
Payment occurs (the "Reference Date") (treating such period as a single
accounting period); plus
(2) 100% of the aggregate net cash proceeds received by us from the
issuance and sale to any Person (other than our Subsidiaries) subsequent
to the Base Date and on or prior to the Reference Date of our Qualified
Capital Stock, including treasury stock; plus
28
(3) without duplication of any amounts included in clause (2) above,
100% of the aggregate net cash proceeds of any equity contribution
received by us from a holder of our Capital Stock subsequent to the Base
Date and on or prior to the Reference Date (excluding, in the case of
clauses (2) and (3), any net cash proceeds from a Public Equity Offering
to the extent used to redeem the Notes); plus
(4) $75,000,000.
The following actions are "Restricted Payments":
- the declaration or payment of any dividend or any distribution (other
than dividends or distributions made by a Subsidiary to us or any of our
Subsidiaries and, if such Subsidiary is not a Wholly Owned Subsidiary, to
such Subsidiary's other stockholders or interest holders on a pro rata
basis, and other than any dividend or distribution payable solely in our
Qualified Capital Stock) on or in respect of shares of our Capital Stock
to holders of such Capital Stock;
- the purchase, redemption, acquisition or retirement for value of any of
our Capital Stock or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock (other than the
exchange of such Capital Stock or any warrants, rights or options to
acquire shares of any class of our Capital Stock for our Qualified
Capital Stock); or
- any principal payment on, purchase, defeasance, redemption, prepayment,
decrease, acquisition or retirement for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment,
any of our or our Subsidiaries' Indebtedness that is subordinate or
junior in right of payment to the Notes or any guarantee thereof.
Notwithstanding the foregoing, the provisions of the first paragraph of
this section will not prohibit:
(1) the payment of any dividend or the consummation of any irrevocable
redemption within 60 days after the date of declaration of such dividend or
the giving of such irrevocable redemption notice if the dividend or
redemption would have been permitted on the date of declaration or giving
of irrevocable redemption notice;
(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of our Capital Stock, either:
(i) solely in exchange for shares of our Qualified Capital Stock;
or
(ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to any of our Subsidiaries) of
shares of our Qualified Capital Stock;
(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any of our Indebtedness that is subordinate
or junior in right of payment to the Notes either:
(i) solely in exchange for shares of our Qualified Capital Stock;
or
(ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to any of our Subsidiaries) of:
(A) shares of our Qualified Capital Stock; or
(B) Refinancing Indebtedness; and
(4) if no Default or Event of Default shall have occurred and be
continuing, the repurchase of shares of, or options to purchase shares of,
our Common Stock from our employees, former employees, directors or former
directors pursuant to the terms of agreements or plans approved by our
Board of Directors under which such individuals purchased or sold, or were
granted the option to purchase or sell shares of Common Stock, provided,
however, that the aggregate amount of such repurchases or Restricted
Payments shall not exceed $250,000 any calendar year.
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In determining the aggregate amount of Restricted Payments made subsequent
to the Base Date, amounts expended pursuant to clauses (1), (2)(ii) and
(3)(ii)(A) shall be included in such calculation.
Not later than three business days before making any Restricted Payment, we
will deliver to the Trustee an officers' certificate stating that such
Restricted Payment complies with the Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. We will not, and will not cause or permit any of our Subsidiaries
to, directly or indirectly, create or otherwise cause or permit to exist or
become effective any encumbrance or restriction on the ability of any of our
Subsidiaries to:
- pay dividends or make any other distributions on or in respect of its
Capital Stock;
- make loans or advances or pay any Indebtedness or other obligation owed
to us or any of our other Subsidiaries; or
- transfer any of its property or assets to us or any of our other
Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:
(1) applicable law;
(2) the Indenture with respect to the Notes;
(3) the Credit Agreement;
(4) nonassignment provisions of any contract or any lease governing a
leasehold interest of any of our Subsidiaries;
(5) any instrument governing Acquired Indebtedness, which encumbrance
or restriction is not applicable to any Person, or the properties or assets
of any Person, other than the Person or the properties or assets of the
Person so acquired;
(6) agreements existing on the Base Date to the extent and in the
manner such agreements are in effect on the Base Date;
(7) restrictions on the transfer of assets subject to any Lien
permitted under the Indenture to secure Non-Recourse Indebtedness imposed
by the holder of such Lien;
(8) restrictions imposed by any agreement to sell assets permitted
under the Indenture to any Person pending the closing of such sale;
(9) any agreement or instrument governing Capital Stock of any Person
that is acquired; or
(10) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred
to in clause (2), (3), (5) or (6) above, provided, however, that the
provisions relating to such encumbrance or restriction contained in any
such Indebtedness incurred to Refinance the Indebtedness are not less
favorable to us in any material respect as determined by our Board of
Directors in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (3), (5) or (6), respectively.
Limitation on Preferred Stock of Subsidiaries. We will not permit any of
our Subsidiaries to issue any Preferred Stock (other than to us or to any of our
Wholly Owned Subsidiaries) or permit any Person (other than us or any of our
Wholly Owned Subsidiaries) to own any Preferred Stock of any of our
Subsidiaries.
Limitation on Liens and Guarantees. We will not, and will not cause or
permit any of our Subsidiaries to, directly or indirectly, create, incur, assume
or permit or suffer to exist any Liens securing our Indebtedness that is
expressly subordinate or junior in right of payment to the Notes or is equal in
right of payment to the Notes against or upon any of our or our Subsidiaries'
property or assets (whether owned on the Issue Date or acquired after the Issue
Date), or any proceeds therefrom, or assign or
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otherwise convey any right to receive income or profits therefrom, or to grant
any guarantees of such Indebtedness, unless:
- in the case of Liens securing our Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens;
- in the case of guarantees of our Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are
subject to a guarantee from the same guarantor or guarantors that is
senior in priority to such guarantees; and
- in all other cases, the Notes are equally and ratably secured or
guaranteed as applicable.
For purposes of clarification, (i) any Lien against property, assets,
proceeds or rights to receive income or profits securing Indebtedness which has
been guaranteed will be considered to be a Lien securing the Indebtedness and
not a Lien securing the guarantee and (ii) the legal or covenant defeasance of
any Indebtedness of us that is expressly subordinated or junior in right of
payment or is equal in right of payment to the Notes shall not be deemed to
involve a Lien securing such Indebtedness so long as such defeasance is not
prohibited under the terms of the section entitled "Limitation on Restricted
Payments."
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.
Merger, Consolidation and Sale of Assets. We will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of our assets (determined on a consolidated basis for us
and our Subsidiaries) unless:
- either:
(1) we are the surviving or continuing corporation; or
(2) the Person (if other than us) formed by such consolidation or into
which we are merged or which acquires our and our Subsidiaries' properties
and assets substantially as an entirety (the "Surviving Entity") (i) is a
corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia and (ii) expressly
assumes, by supplemental indenture, the due and punctual payment of our
payment obligations under the Notes and the performance of all of our
covenants under the Notes and the Indenture;
- immediately after giving effect to such transaction and the assumption
contemplated by clause (2)(ii) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), we or
such Surviving Entity, as the case may be:
(1) shall have a Consolidated Net Worth equal to or greater than our
Consolidated Net Worth immediately prior to such transaction; and
(2) shall be able to incur at least $1.00 of additional Indebtedness
(other than additional Permitted Indebtedness) pursuant to the "Limitation
on Incurrence of Additional Indebtedness" covenant above;
- immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (2)(ii) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default
or Event of Default shall have occurred or be continuing; and
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- we or the Surviving Entity, as the case may be, shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, each
stating that such transaction and any required supplemental indenture
comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have
been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more of our
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
our properties and assets shall be deemed to be the transfer of all or
substantially all of our properties and assets.
If we are not the continuing corporation in any transaction in accordance
with the foregoing, the successor Person formed by such consolidation or into
which we are merged or to which such conveyance, lease or transfer is made shall
(upon the required assumption described above) succeed to, and be substituted
for, and may exercise every right and power we have under the Indenture and the
Notes with the same effect as if such surviving entity had been named as such.
Limitations on Transactions with Affiliates. We will not, and will not
cause or permit any of our Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), other than:
- Permitted Affiliate Transactions (as defined below); and
- Affiliate Transactions on terms that are no less favorable to us or such
Subsidiary than those that might reasonably have been obtained or are
obtainable in a comparable transaction at such time on an arm's-length
basis from a Person that is not our or such Subsidiary's Affiliate.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan), other than Permitted Affiliate
Transactions, involving aggregate payments or other property with a fair market
value in excess of $5.0 million must be approved by our Board of Directors (or,
in the case of transactions with Lennar Corporation, or any of its Subsidiaries,
by a committee of the Board composed entirely of directors who are not officers
or directors of Lennar Corporation, or any of its Subsidiaries,) or the Board of
our Subsidiary, as the case may be. The Board's approval is to be evidenced by a
Board Resolution stating that such Board of Directors (including a majority of
the directors who do not have any interest in the Affiliate Transaction) has
determined that such transaction complies with the foregoing provisions. In
addition, if we or any of our Subsidiaries enter into an Affiliate Transaction
(or a series of related Affiliate Transactions related to a common plan), other
than Permitted Affiliate Transactions, involving aggregate payments or other
property with a fair market value in excess of $7.5 million, we or such
Subsidiary, as the case may be, shall, prior to the consummation of that
transaction or transactions, obtain a favorable opinion as to the fairness of
such transaction or transactions to us or the relevant Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor,
except that a fairness opinion will not be required for Additional Partnership
Transactions between us or any of our Subsidiaries and Lennar Corporation, or
any of its Subsidiaries, that in the aggregate involve payments or other
property with a fair market value of $50 million or less during the entire
period that Notes are outstanding.
The following transactions are "Permitted Affiliate Transactions":
- payment of reasonable fees and compensation to, and indemnity provided on
behalf of, our or any of our Subsidiaries' officers, directors,
employees, consultants or agents, as determined in good faith by our
Board of Directors or senior management;
- transactions between or among us and any of our Wholly Owned Subsidiaries
or between or among such Wholly Owned Subsidiaries provided such
transactions are not otherwise prohibited by the Indenture;
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- any agreement as in effect as of the Base Date or any amendment thereto
or any transaction contemplated thereby (including pursuant to any
amendment thereto) or in any replacement agreement thereto so long as any
such amendment or replacement agreement is not more disadvantageous to
the Holders in any material respect than the original agreement as in
effect on the Base Date;
- Restricted Payments permitted by the Indenture; and
- transactions between or among us or any of our Subsidiaries and a Land
Partnership, provided such transactions are permitted by and are effected
in accordance with the terms of the partnership agreement or other
similar agreement of the Land Partnership and our By-laws, in each case,
as in effect on the Issue Date except that:
(1) if at any time when transactions between or among us or any of our
Subsidiaries and NWHL Investment LLC (and its successors or assigns) are
subject to the covenants regarding Affiliate Transactions under the
indenture dated July 2, 2003 relating to our 7.625% Senior Subordinated
Notes due 2013, and are not excluded from those covenants as Permitted
Affiliate Transactions, those transactions will not be excluded as
Permitted Affiliate Transactions from the covenants in the Indenture, and
(2) if at any time we make payments to the holders of the 7.625% Senior
Subordinated Notes due 2013 to induce them to consent to an amendment,
waiver or modification of the indenture relating to the 7.625% Senior
Subordinated Notes due 2013 that causes transactions between or among us
or any of our Subsidiaries and NWHL Investment LLC (and its successors or
assigns) to be Permitted Affiliate Transactions under that indenture or
otherwise not to be subject to the covenants in that indenture regarding
Affiliate Transactions, we will make to holders of the Notes the same
payment per $1,000 principal amount of Notes that we make per $1,000
principal amount of 7.625% Senior Subordinated Notes due 2013 to holders
of the 7.625% Senior Subordinated Notes due 2013 who consent to the
amendment, waiver or modification.
Conduct of Business. We will, and will cause our Subsidiaries to, engage
primarily in the businesses of acquiring, developing, selling, owning, managing,
operating, leasing, credit enhancing and insuring commercial and multi-family
residential real estate, real estate related lending, acquiring, owning,
servicing and collecting real estate related loans and other underperforming
debt securities, investing in real estate related securities and securities of
companies engaged primarily in real estate related activities, and other
activities related to or arising out of any of those activities.
Reports to Holders. We will deliver to the Trustee within 15 days after
the filing of the same with the SEC, copies of the quarterly and annual reports
and of the information, documents and other reports, if any, which we are
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that we may not be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, we will file with the SEC, to the
extent permitted, and provide the Trustee and the holders with such annual
reports and such information, documents and other reports specified in Sections
13 and 15(d) of the Exchange Act. We will also comply with the other provisions
of 314(a) of the TIA.
EVENTS OF DEFAULT
Each of the following are "Events of Default" under the Indenture:
(1) if we fail to pay interest on any Notes when it becomes due and
payable and the default continues for a period of 30 days, 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;
(2) if we fail 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 of Control offer or make a payment
to purchase Notes tendered pursuant to a Change of Control offer), whether
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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 assume or otherwise become 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 the Credit Agreement, shall
become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or five business days after
receipt by us and the Representative under the 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 and 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;
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- if we have paid the Trustee its reasonable compensation and reimbursed
the Trustee for its expenses, 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 TIA. 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.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time, elect to have our obligations
discharged with respect to the outstanding Notes ("Legal Defeasance"). Legal
Defeasance means that we will be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for:
- the rights of Holders to receive payments in respect of the principal of,
premium, if any, and interest on the Notes when such payments are due;
- our obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, replacement of mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payments;
- the rights, powers, trust, duties and immunities of the Trustee and our
obligations in connection therewith; and
- the Legal Defeasance provisions of the Indenture.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in the
Indenture, including the covenants relating to a Change of Control ("Covenant
Defeasance"). Following a Covenant Defeasance, any omission to comply with such
obligations shall not constitute a Default or Event of Default. If a Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default.
In order to exercise Legal Defeasance or Covenant Defeasance:
- we must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in United States dollars, noncallable United States
government obligations, or a combination thereof, in such amounts as will
be sufficient without reinvestment, in the opinion of a nationally
recognized firm of
35
independent public accountants, to pay the principal of, premium, if any,
and interest on the Notes on the stated dates for payment thereof or on
the applicable redemption date, as the case may be;
- in the case of Legal Defeasance, we must deliver to the Trustee an
opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that:
(1) we have received from, or there has been published by, the Internal
Revenue Service a ruling; or
(2) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred;
- in the case of Covenant Defeasance, we must deliver to the Trustee an
opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that the Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
- no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (after giving effect to the deposit) or, in the
case of Legal Defeasance, insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Notes concurrently with
such incurrence);
- such Legal Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under, the Indenture or any
other material agreement or instrument to which we or any of our
Subsidiaries is a party or by which we or any of our Subsidiaries is
bound;
- we must deliver to the Trustee an officers' certificate stating that the
deposit was not made by us with the intent of preferring the Holders over
any of our other creditors or with the intent of defeating, hindering,
delaying or defrauding any of our other creditors or others;
- we must deliver to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance, as the case
may be, have been complied with;
- we must deliver to the Trustee an opinion of counsel to the effect that,
after the 91st day following the deposit, assuming that no bankruptcy
related default or Event of Default has occurred and is continuing on
such day:
(1) the trust funds will not be subject to any rights of holders of our
Indebtedness other than the Notes; and
(2) the deposit of trust funds will not be subject to avoidance under
any applicable preference or similar laws; and
- certain other customary conditions precedent are satisfied.
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SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when:
- either:
(1) all the Notes previously authenticated and delivered have been
delivered to the Trustee for cancellation, except lost, stolen or
destroyed Notes which have been replaced or paid and Notes for whose
payment money has been deposited in trust or segregated and held in trust
by us and repaid to us or discharged from such trust; or
(2) all Notes not previously delivered to the Trustee for cancellation
have become due and payable and we have irrevocably deposited or caused to
be deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Notes not previously delivered to
the Trustee for cancellation, for principal of, premium, if any, and
interest on the Notes to the date of deposit together with irrevocable
instructions from us directing the Trustee to apply such funds to the
payment thereof;
- we have paid all other sums payable by us under the Indenture; and
- we have delivered to the Trustee an officers' certificate and an opinion
of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been
complied with.
MODIFICATION OF THE INDENTURE
From time to time, we and the Trustee, without the consent of the Holders,
may amend the Indenture with respect to the Notes for certain specified
purposes, including curing ambiguities, defects or inconsistencies, so long as
such change does not, in the opinion of the Trustee, adversely affect the rights
of any of the Holders in any material respect. In formulating its opinion on
such matters, the Trustee will be entitled to rely on such evidence as it deems
appropriate, including, without limitation, solely on an opinion of counsel and
an officer's certificate. Other modifications, waivers and amendments of the
Indenture with respect to the Notes may be made with the consent of the Holders
of a majority in principal amount of the then outstanding Notes. However,
without the consent of each Holder affected thereby, no amendment or waiver may:
- reduce the amount of Notes whose Holders must consent to an amendment;
- reduce the rate of or change or have the effect of changing the time for
payment of interest, including defaulted interest, on any Notes;
- reduce the principal of or change or have the effect of changing the
fixed maturity of any Notes, or change the date on which any Notes may be
subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor;
- make any Notes payable in money other than that stated in the Notes;
- make any change in provisions of the Indenture protecting the right of
each Holder to receive payment of principal of and premium, if any, and
interest on such Note on or after the due date thereof or to bring suit
to enforce such payment, or permitting Holders of a majority in principal
amount of Notes to waive Defaults or Events of Default;
- amend, change or modify in any material respect our obligation to make
and consummate a Change of Control offer in the event of a Change of
Control or modify any of the provisions or definitions with respect
thereto; or
- modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the Notes in a
manner which adversely affects the Holders.
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GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of law that would apply the laws of another jurisdiction.
CONCERNING THE TRUSTEE
U.S. Bank Trust National Association, the Trustee under the Indenture,
currently is the paying agent, registrar and custodian with regard to the Notes.
The Trustee is also the trustee under the indentures relating to our 7.625%
Senior Subordinated Notes Due 2013 and our 5.5% Contingent Convertible Senior
Subordinated Notes Due 2023. An affiliate of the Trustee has extended
construction loans 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.
CERTAIN DEFINITIONS
The following are definitions of certain of the terms used in the
Indenture.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes our Subsidiary or at the
time it merges or consolidates with or into us or any of our Subsidiaries or
assumed by us or any of our Subsidiaries in connection with the acquisition of
assets from such Person.
"Additional Partnership Transactions" means transactions entered into in
accordance with our By-laws as in effect on the Issue Date with an entity other
than Lennar Land Partners, Lennar Land Partners II or NWHL Investment LLC that
is equally owned by us and Lennar Corporation (both economically and by voting
control) and has been organized and is then existing (i) for the primary purpose
of acquiring, holding and disposing of land that may be purchased by us or any
of our Subsidiaries and/or Lennar Corporation or any of its Subsidiaries; and
(ii) on terms substantially the same as those contained in the partnership
agreement of either Land Partnership (including provisions in such partnership
agreement regarding transactions with LNR), as in effect on the Issue Date.
"Adjusted Consolidated EBITDA" means, with respect to any Person for any
period, the sum of Consolidated EBITDA plus any non-refundable housing tax
credits used by such Person and its Consolidated Subsidiaries to reduce the
amount of income taxes that would have otherwise been payable by such Person and
its Consolidated Subsidiaries for such period.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means:
- an Investment by us or any of our Subsidiaries in any other Person
pursuant to which such Person shall become our Subsidiary, or shall be
merged with or into us or any of our Subsidiaries; or
- the acquisition by us or any of our Subsidiaries of the assets of any
Person (other than our Subsidiary) which constitutes all or substantially
all of the assets of such Person or comprise any division or line of
business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
38
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by us or any of our
Subsidiaries (including any sale and leaseback transaction) to any Person other
than us or our Wholly Owned Subsidiaries of:
- any Capital Stock of any of our Subsidiaries; or
- any of our or our Subsidiaries' other property or assets other than in
the ordinary course of business (treating sales of commercial and
multi-family residential real estate as being in the ordinary course of
business).
"Base Date" means March 24, 1998.
"Base Date Indenture" means the Indenture, dated as of March 24, 1998,
between us and U.S. Bank Trust National Association (formerly named First Trust
of New York, National Association).
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP. For purposes of this definition, the
amount of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.
"Capital Stock" means:
- with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated and
whether voting or nonvoting) of corporate stock, including each class of
Common Stock and Preferred Stock of such Person; and
- with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum (without duplication) of:
(1) Consolidated Net Income, plus
(2) to the extent Consolidated Net Income has been reduced thereby,
(i) all income taxes of such Person and its Subsidiaries paid or
accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses
or taxes attributable to sales or dispositions outside the ordinary
course of business),
(ii) Consolidated Interest Expense, and
(iii) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period, all as determined on
a consolidated basis for such Person and its Subsidiaries in accordance
with GAAP.
39
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Adjusted Consolidated EBITDA of such Person during the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:
- the incurrence or repayment or Refinancing of any Indebtedness of such
Person or any of its Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any
incurrence or repayment or Refinancing of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or
repayment of Indebtedness in the ordinary course of business for working
capital purposes pursuant to working capital facilities, occurring during
the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment or Refinancing, as the case may be (and the
application of the proceeds thereof), occurred on the first day of the
Four Quarter Period; and
- any Asset Sales or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a
result of such Person or one of its Subsidiaries (including any Person
who becomes a Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also
including any Consolidated EBITDA (including any pro forma expense and
cost reductions calculated on a basis consistent with Regulation S-X
under the Securities Act as in effect on the Base Date) (provided that
such Consolidated EBITDA shall be included only to the extent includible
pursuant to the definition of "Consolidated Net Income") attributable to
the assets which are the subject of the Asset Acquisition or Asset Sale
occurring during the Four Quarter Period or at any time subsequent to the
last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period).
If such Person or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary
of such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date;
(2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on the Transaction
Date will be deemed to have been in effect during the Four Quarter Period;
and
(3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Swap Obligations shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation
of such agreements.
Finally, in calculating the "Consolidated Fixed Charge Coverage Ratio,"
Indebtedness that has been the subject of a legal defeasance or covenant
defeasance shall be disregarded after such defeasance becomes effective.
40
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:
(1) Consolidated Interest Expense, plus
(2) the product of
(i) the amount of all dividend payments on any series of Preferred
Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such
period times
(ii) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal,
state and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the aggregate of the interest expense of such Person and its
Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation:
(i) any amortization of debt discount;
(ii) the net costs under Interest Swap Obligations, but not
including the net costs under Interest Swap Obligations incurred in
transactions entered into for the purpose of hedging against changes in
the value of assets of the Person or its Subsidiaries;
(iii) all capitalized interest; and
(iv) the interest portion of any deferred payment obligation; and
(2) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP, minus amortization or write off of deferred financing
costs.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP. However,
Consolidated Net Income shall not include:
(1) gains (and losses) on an after-tax effected basis from Asset Sales
or abandonments or reserves relating thereto;
(2) items classified as extraordinary or nonrecurring gains or losses
on an after tax-effected basis;
(3) the net income or loss of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Subsidiary of
the referent Person or is merged or consolidated with the referent Person
or any Subsidiary of the referent Person;
(4) the net income (but not loss) of any Subsidiary of the referent
Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted, directly or
indirectly, by operation of the terms of its charter or constituent
documents or any agreement, instrument, judgment, law, order, statute,
rule, or governmental regulation or for any other reason whatsoever;
(5) the net income or loss of any other Person, other than a
Consolidated Subsidiary of the referent Person, except:
(i) to the extent (in the case of net income) of cash dividends or
distributions paid to the referent Person, or to a Wholly Owned
Subsidiary of the referent Person (other than a Subsidiary described in
clause (4) above), by such other Person; or
41
(ii) that the referent Person's share of any net income or loss of
such other Person under the equity method of accounting for Affiliates
shall not be excluded;
(6) any restoration to income of any contingency reserve of an
extraordinary, nonrecurring or unusual nature, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued
at any time following the Base Date;
(7) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued), but not including
revenues, expenses, gains and losses relating to real estate properties
sold or held for sale, even if they were classified as attributable to
discontinued operations under the provisions of SFAS No. 144; and
(8) in the case of a successor to the referent Person by consolidation
or merger or as a transferee of the referent Person's assets, any earnings
of the successor prior to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" means, with respect to any Person, the
consolidated stockholders' equity of such Person as of the end of the last
completed fiscal quarter ending on or prior to the date of the transaction
giving rise to the need to calculate Consolidated Net Worth, determined on a
consolidated basis in accordance with GAAP, less (without duplication) amounts
attributable to Disqualified Capital Stock of such Person and interests in such
Person's Consolidated Subsidiaries not owned, directly or indirectly by such
Person.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization, and other non-cash charges of
such Person and its Subsidiaries reducing Consolidated Net Income of such Person
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charges which require an accrual of or
a reserve for cash charges for any future period).
"Consolidated Subsidiary" means, with respect to any Person, a Subsidiary
of such Person, the financial statements of which are consolidated with the
financial statements of such Person in accordance with GAAP.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect us or
any of our Subsidiaries against fluctuations in currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (other than as a result
of a Change of Control) on or prior to the final maturity date of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Existing Indebtedness" means (i) our Indebtedness under the 10 1/2% Senior
Subordinated Notes due 2009 and (ii) any other Indebtedness of us or our
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Base Date or incurred subsequent to the Base Date and on or prior to the
Issue Date in compliance with the terms of the Base Date Indenture (other than
compliance because it is "Permitted Indebtedness" thereunder), until such
amounts are repaid.
"Fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
42
shall be determined by our Board of Directors acting reasonably and in good
faith and shall be evidenced by a Board Resolution of our Board of Directors.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect on the Issue Date, except
that revenues, expenses, gains and losses that are included in results of
discontinued operations because of the application of Statement of Financial
Accounting Standards No. 144 will be treated as revenues, expenses, gains and
losses from continuing operations. For this purpose, Financial Accounting
Standards Board Interpretation 46 will apply to entities created after January
31, 2003, but not to entities created before that date.
"Holder" means any holder of Notes.
"Indebtedness" means, with respect to any Person, without duplication:
(1) all Obligations of such Person for borrowed money;
(2) all Obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business);
(5) all Obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction;
(6) guarantees and other contingent obligations in respect of
Indebtedness of any other Person that is referred to in clauses (1) through
(5) above and clause (8) below;
(7) all Obligations of any other Person of the kind referred to in
clauses (1) through (6) above and clause (8) below which are secured by any
lien on any property or asset of such Person, the amount of such Obligation
being deemed to be the lesser of the fair market value of such property or
asset or the amount of the Obligation so secured;
(8) all Obligations under currency agreements and interest swap
agreements of such Person; and
(9) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any.
For purposes hereof, the amount of any guarantee or other contingent
obligation in respect of Indebtedness of:
(i) any other Person (other than a Subsidiary of such Person) shall be
deemed to be equal to the maximum amount of such Indebtedness, unless the
liability is otherwise limited by the terms of such guarantee or other
contingent obligation regarding such Indebtedness, in which case, the
amount of such guarantee or other obligation shall be deemed to equal the
maximum amount of such liability; and
(ii) any Subsidiary of such Person, at the option of such Person,
shall be deemed to be either the amount determined pursuant to clause (1)
or the actual outstanding amount of such Indebtedness.
For purposes of this definition, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of
43
such Disqualified Capital Stock as if such Disqualified Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture. If such price is based upon, or measured by, the fair
market value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in us or any of our Subsidiaries and which, in the
judgment of our Board of Directors, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Notes" means collectively, our (i) 7.25% Senior Subordinated Notes
due 2013, Series A, issued on October 29, 2003 and (ii) any other 7.25% Senior
Subordinated Notes due 2013, Series A, that are issued under the Indenture
subsequent to October 29, 2003, in each case for so long as such securities
constitute restricted securities, as such term is defined in Rule 144(a)(3)
under the Securities Act.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on a stated notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by us and
our Subsidiaries on commercially reasonable terms in accordance with our or our
Subsidiaries' normal trade practices, as the case may be.
"Land Partnership" means (1) Lennar Land Partners, a Delaware general
partnership, (2) Lennar Land Partners II, a Delaware general partnership, (3)
NWHL Investment LLC, a Delaware limited liability company, and (4) any entity
jointly owned by Lennar Corporation and us that owns or succeeds to Lennar Land
Partners, Lennar Land Partners II, and NWHL Investment LLC.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Mortgage Subsidiary" means a Wholly Owned Subsidiary formed after the Base
Date solely for the purpose of engaging in the mortgage banking business and
incidental activities directly related thereto.
"Non-Recourse Indebtedness" means any of our or any of our Subsidiaries'
Indebtedness that is:
- specifically advanced to finance the acquisition of investment assets and
secured only by the assets to which such Indebtedness relates without
recourse to us or any of our Subsidiaries;
- advanced to any of our Subsidiaries or group of our Subsidiaries formed
for the sole purpose of acquiring or holding investment assets against
which a loan is obtained that is made without recourse to, and with no
cross-collateralization against our or any of our other Subsidiaries'
assets and upon complete or partial liquidation of which the loan must be
correspondingly completely or partially repaid, as the case may be; or
- specifically advanced to finance the acquisition of real property and
secured by only the real property to which such Indebtedness relates
without recourse to us or any of our Subsidiaries.
44
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness under the Notes in an aggregate principal amount not
in excess of $300 million;
(2) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate outstanding principal amount at any time not to exceed $220
million;
(3) Our Interest Swap Obligations covering our or any of our
Subsidiaries' Indebtedness; provided, however, that such Interest Swap
Obligations are entered into to protect us and our Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance with
the Indenture to the extent the notional principal amount of such Interest
Swap Obligation does not exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(4) Indebtedness under Currency Agreements; provided, however, that
in the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase our or our Subsidiaries' Indebtedness
outstanding other than as a result of fluctuations in foreign currency
exchange rates or by reason of fees, indemnities and compensation payable
thereunder;
(5) Indebtedness of a Subsidiary to us or to any of our Wholly Owned
Subsidiaries for so long as such Indebtedness is held by us or any of our
Wholly Owned Subsidiaries, in each case subject to no Liens held by any
Person other than us or any of our Wholly Owned Subsidiaries. However, if
on any date any Person other than us or any of our Wholly Owned
Subsidiaries acquires any such Indebtedness or obtains a Lien in respect of
such Indebtedness, such date shall be deemed the date of incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness unless such Indebtedness is otherwise permitted under the
Indenture;
(6) Our Indebtedness to any of our Wholly Owned Subsidiaries for so
long as such Indebtedness is held by any of our Wholly Owned Subsidiaries,
in each case subject to no Lien; provided, however, that:
(i) any of our Indebtedness to any of our Wholly Owned Subsidiaries
is unsecured and subordinated, pursuant to a written agreement, to our
obligations under the Indenture and the Notes at least to the same
extent that the Notes are subordinated to Senior Indebtedness; and
(ii) if on any date any Person other than any of our Wholly Owned
Subsidiaries acquires any such Indebtedness or obtains a Lien in respect
of such Indebtedness, such date shall be deemed the date of incurrence
of Indebtedness not constituting our Permitted Indebtedness unless such
Indebtedness is otherwise permitted under the Indenture;
(7) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within three business days of incurrence;
(8) Our or any of our Subsidiaries' Indebtedness represented by
letters of credit for our account or such Subsidiaries, as the case may be,
in order to provide security for workers' compensation claims, payment
obligations in connection with self-insurance or similar requirements in
the ordinary course of business;
(9) Existing Indebtedness;
(10) Non-Recourse Indebtedness of the Mortgage Subsidiary;
(11) Additional Indebtedness in an aggregate principal amount not to
exceed $50.0 million at any time outstanding; and
(12) Refinancing Indebtedness.
45
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Recourse Indebtedness" means all of our and our Subsidiaries' Indebtedness
other than Non-Recourse Indebtedness.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by us or any of our
Subsidiaries of Indebtedness incurred in accordance with the "Limitation on
Incurrence of Additional Indebtedness" covenant (other than pursuant to clauses
(2), (3), (4), (5), (6), (7), (8), (10), (11) or (12) of the definition of
Permitted Indebtedness), in each case that does not:
- result in an increase in the aggregate principal amount of Indebtedness
of such Person as of the date of such proposed Refinancing (plus the
amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
fees and expenses incurred by us or such Subsidiary, as the case may be,
in connection with such Refinancing), except to the extent that any such
increase in Indebtedness is otherwise permitted by the Indenture; or
- create Indebtedness with:
(1) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced; or
(2) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced.
However, if such Indebtedness being Refinanced is our Indebtedness, then
such Refinancing Indebtedness shall be solely our Indebtedness and (x) if such
Indebtedness being Refinanced is equal in right of payment with the Notes, then
such Refinancing Indebtedness shall be equal in right of payment with or
subordinate to the Notes or (y) if such Indebtedness being Refinanced is
subordinate or junior to the Notes, then such Refinancing Indebtedness shall be
subordinate to the Notes at least to the same extent and in the same manner as
the Indebtedness being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness. However, if and
for so long as any Designated Senior Indebtedness lacks such a representative,
then the Representative for such Designated Senior Indebtedness shall at all
times constitute the holders of a majority in outstanding principal amount of
such Designated Senior Indebtedness in respect of any Designated Senior
Indebtedness.
"Senior Recourse Indebtedness" means all Senior Indebtedness other than
Senior Indebtedness that is Non-Recourse Indebtedness plus Subsidiary
Unsubordinated Indebtedness of each of our Subsidiaries (but only to the extent
not in excess of the book value of the assets of the issuer thereof) other than
Subsidiary Unsubordinated Indebtedness of such Subsidiary that is Non-Recourse
Indebtedness.
"Subordinated Indebtedness" means all of our and our Subsidiaries'
Indebtedness which expressly provides that such Indebtedness shall be
subordinated in right of payment to any other Indebtedness.
46
"Subsidiary" means, with respect to any Person:
- any corporation of which the outstanding Capital Stock having at least a
majority of the votes entitled to be cast in the election of directors
under ordinary circumstances shall at the time be owned, directly or
indirectly, by such Person;
- any other Person (other than a partnership) of which at least a majority
of the voting interest under ordinary circumstances is at the time,
directly or indirectly, owned by such Person; or
- any partnership the sole general partner or the managing general partner
of which is such Person or a Subsidiary of such Person or the only
general partners of which are such Person or one or more Subsidiaries of
such Person (or any combination thereof).
"Subsidiary Unsubordinated Indebtedness" means all Indebtedness of any of
our Subsidiaries other than Subordinated Indebtedness thereof.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the then outstanding aggregate principal amount of such
Indebtedness into
(2) the sum of the total of the products obtained by multiplying
(i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by
(ii) the number of years (calculated to the nearest one-twelfth)
which will elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" means, with respect to any Person, any Subsidiary
of such Person:
- of which all the outstanding voting securities normally entitled to vote
in the election of directors are owned by such Person or any Wholly Owned
Subsidiary of such Person (other than directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons
pursuant to applicable law); or
- all the outstanding partnership interests are owned by such Person or any
Wholly Owned Subsidiary of such Person.
BOOK ENTRY, DELIVERY AND FORM
The certificates representing the Series B Notes will be issued in fully
registered form. The Series B Notes initially will be represented by a single,
permanent global Series B note, in definitive, fully registered form without
interest coupons (the "Global Note") and will be deposited with the trustee as
custodian for DTC and registered in the name of Cede & Co., as DTC's nominee.
Upon the issuance of a Global Note, DTC or its nominee will credit the
accounts of persons holding through it with the respective principal amounts of
the Series B Notes represented by such Global Note that are received by such
persons in the exchange offer. Ownership of beneficial interests in a Global
Note will be limited to persons that have accounts with DTC ("participants") or
persons that may hold interests through participants. Any person acquiring an
interest in a Global Note through an offshore transaction in reliance on
Regulation S under the Securities Act may hold such interest through Clearstream
(formerly known as Cedel) or Euroclear. Ownership of beneficial interests in a
Global Note will be shown on, and the transfer of that ownership interest will
be effected only through, records maintained by DTC (with respect to
participants' interests) and such participants (with respect to the owners of
beneficial interests in such Global Note other than participants). The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Note.
47
Payment of principal of and interest on Series B Notes represented by a
Global Note will be made in immediately available funds to DTC or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Series B Notes represented thereby for all purposes under the indenture. We have
been advised by DTC that upon receipt of any payment of principal of or interest
on any Global Note, DTC will immediately credit, on its book-entry registration
and transfer system, the accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal or face
amount of such Global Note as shown on the records of DTC. Payments by
participants to owners of beneficial interests in a Global Note held through
such participants will be governed by standing instructions and customary
practices as is now the case with securities held for customer accounts
registered in "street name" and will be the sole responsibility of such
participants.
A Global Note may not be transferred except as a whole by DTC or a nominee
of DTC to a nominee of DTC or to DTC. A Global Note is exchangeable for
certificated Series B Notes only if (a) DTC notifies us that it is unwilling or
unable to continue as a depositary for such Global Note or if at any time DTC
ceases to be a clearing agency registered under the Exchange Act, (b) we in our
discretion at any time determine not to have all the Series B Notes represented
by such Global Note, or (c) there shall have occurred and be continuing a
default or an event of default with respect to the Series B Notes represented by
such Global Note. Any Global Note that is exchangeable for certificated Series B
Notes pursuant to the preceding sentence will be exchanged for certificated
Series B Notes in authorized denominations and registered in such names as DTC
or any successor depositary holding such Global Note may direct. Subject to the
foregoing, a Global Note is not exchangeable, except for a Global Note of like
denomination to be registered in the name of DTC or any successor depositary or
its nominee. In the event that a Global Note becomes exchangeable for
certificated Series B Notes, (a) certificated Series B Notes will be issued only
in fully registered form in denominations of $1,000 or integral multiples
thereof, (b) payment of principal of, and premium, if any, and interest on, the
certificated Series B Notes will be payable, and the transfer of the
certificated Series B Notes will be registerable, at our office or agency
maintained for such purposes and (c) no service charge will be made for any
registration of transfer or exchange of the certificated Series B Notes,
although we may require payment of a sum sufficient to cover any tax or
governmental charge imposed in connection therewith.
So long as DTC or any successor depositary for a Global Note, or any
nominee, is the registered owner of such Global Note, DTC or such successor
depositary or nominee, as the case may be, will be considered the sole owner or
holder of the Series B Notes represented by such Global Note for all purposes
under the indenture and the Series B Notes. Except as set forth above, owners of
beneficial interests in a Global Note will not be entitled to have the Series B
Notes represented by such Global Note registered in their names, will not
receive or be entitled to receive physical delivery of certificated Series B
Notes in definitive form and will not be considered to be the owners or holders
of any Series B Notes under such Global Note. Accordingly, each person owning a
beneficial interest in a Global Note must rely on the procedures of DTC or any
successor depositary, and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the indenture. We understand that under
existing industry practices, in the event that we request any action of holders
or that an owner of a beneficial interest in a Global Note desires to give or
take any action which a holder is entitled to give or take under the indenture,
DTC or any successor depositary would authorize the participants holding the
relevant beneficial interest to give or take such action and such participants
would authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
DTC has advised us that it will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the Global Notes are credited and only in respect of such
portion of the aggregate principal amount of Notes as to which such participant
or participants has or have given such direction. However, if there is an Event
of Default under the Indenture, DTC will exchange the Global Notes for
Certificated Securities, which it will distribute to its participants.
48
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is 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 ("indirect
participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Issuer nor the Trustee nor the initial
purchasers will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
SALES OF SERIES B NOTES RECEIVED BY BROKER-DEALERS
Each broker-dealer that receives Series B Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. The prospectus,
as it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with sales of Series B Notes received in exchange for
Series A Notes which were acquired as a result of market-making activities or
other trading activities. We have agreed that, starting on the expiration date
and ending on the close of business on the first anniversary of the expiration
date, we will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
April 16, 2005, all dealers effecting transactions in the Series B Notes may be
required to deliver a prospectus.
We will not receive any proceeds from any sale of Series B Notes by
broker-dealers. Series B Notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the Series B Notes or a combination of those methods of resale, at
prices which may or may not be based upon market prices prevailing at the time
of the sale. Any such sale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from the selling broker-dealer and/or the purchasers of the Series B
Notes. Any broker-dealer that sells Series B Notes that were received by it for
its own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such Series B Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit from sale
of the Series B Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation. The letter of transmittal
states that a broker-dealer will not, by delivering a prospectus, be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the Series A Notes,
other than commissions or concessions of any brokers or dealers, and we will
indemnify the holders of the Series A Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
49
LEGAL MATTERS
Clifford Chance US LLP, New York, New York, is passing on the validity of
the Series B Notes for us.
EXPERTS
Our consolidated financial statements incorporated in this prospectus by
reference from our Annual Report on Form 10-K for the fiscal year ended November
30, 2003, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report (which report expresses an unqualified opinion and
includes an explanatory paragraph relating to the adoption of Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets), which is incorporated herein by reference, and
have been so incorporated in reliance on the report of such firm given upon
their authority as experts in accounting and auditing.
Our consolidated financial statement schedules incorporated in this
prospectus by reference from our Annual Report on Form 10-K for the year ended
November 30, 2003, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance on the report of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of LandSource Communities Development LLC
incorporated in this prospectus by reference from our Annual Report on Form 10-K
for the year ended November 30, 2003, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance on the report of
such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which constitutes a part of the
registration statement, does not contain all the information set forth in the
registration statement and the exhibits and schedules to it. We are subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance with it we file periodic reports and other
information with the SEC relating to our business, financial statements and
other matters. The registration statement, its schedules and exhibits and the
periodic reports and other information filed by us with the SEC are available
for inspection and copying at the public reference facilities maintained by the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. You can request copies of these documents by writing to the SEC and
paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for
more information about the operation of the public reference rooms. Our SEC
filings are also available at the SEC's Internet website at http://www.sec.gov.
In addition, you can read and copy our SEC filings at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
Our obligations under the Exchange Act to file periodic reports and other
information with the SEC may be suspended, under certain circumstances, if our
Common Stock is held of record by fewer than 300 holders at the beginning of any
fiscal year and is not listed on a national securities exchange. We have agreed
that, whether or not we are required to do so by the rules and regulations of
the SEC, for so long as any of the Series B Notes remain outstanding we will
furnish to the holders of the Series B Notes upon request, and if required by
the Exchange Act, file with the SEC, all annual, quarterly and current reports
that we are or would be required to file with the SEC pursuant to Section 13(a)
or 15(d) of the Exchange Act. In addition, we have agreed that, as long as any
of the Series A Notes remain outstanding, we will make the information required
by Rule 144A(d)(4) under the Securities Act available to any prospective
purchaser of Series A Notes or beneficial owner of Series A Notes in connection
with a sale of them.
50
INCORPORATION BY REFERENCE
We disclose important information to you by referring you to documents that
we have previously filed with the SEC or documents that we will file with the
SEC in the future. The information incorporated by reference is considered to be
part of this prospectus, and information in documents that we file later with
the SEC will automatically update and supersede information in this prospectus,
and any future filings made by us with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, until we close this offering. We incorporate by
reference our Annual Report on Form 10-K for the fiscal year ended November 30,
2003.
You may request a copy of this filing, at no cost, by writing us at the
following address:
LNR Property Corporation
1601 Washington Avenue
Suite 800
Miami Beach, Florida 33139
Attn: Investor Relations
51
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NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY LNR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES
IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROSPECTUS
OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
PAGE
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FORWARD LOOKING INFORMATION........... i
PROSPECTUS SUMMARY.................... 1
RISK FACTORS.......................... 8
USE OF PROCEEDS....................... 10
ABSENCE OF PUBLIC MARKET.............. 10
SELECTED CONSOLIDATED FINANCIAL
DATA................................ 11
CAPITALIZATION........................ 14
RATIO OF EARNINGS TO FIXED CHARGES.... 15
THE EXCHANGE OFFER.................... 16
DESCRIPTION OF THE SERIES B NOTES..... 22
BOOK ENTRY, DELIVERY AND FORM......... 47
SALES OF SERIES B NOTES RECEIVED BY
BROKER-DEALERS...................... 49
LEGAL MATTERS......................... 50
EXPERTS............................... 50
WHERE YOU CAN FIND MORE INFORMATION... 50
INCORPORATION BY REFERENCE............ 51
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$400,000,000
LNR Property Corporation
LNR LOGO
OFFER TO EXCHANGE 7.25% SERIES B SENIOR
SUBORDINATED NOTES DUE 2013 WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT FOR
ANY AND ALL OUTSTANDING 7.25% SERIES A
SENIOR SUBORDINATED NOTES DUE 2013
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PROSPECTUS
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Dated March 10, 2004
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