<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 13, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LNR PROPERTY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6513 65-0777234
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
760 N.W. 107TH AVENUE
MIAMI, FLORIDA 33172
(305) 485-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN J. SAIONTZ
CHIEF EXECUTIVE OFFICER
LNR PROPERTY CORPORATION
760 N.W. 107TH AVENUE
MIAMI, FLORIDA 33172
(305) 485-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
DAVID W. BERNSTEIN, ESQ.
ROGERS & WELLS LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective and all other
conditions to the exchange offer ("Exchange Offer") pursuant to the registration
agreement (the "Registration Agreement") described in the enclosed Prospectus
have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================================
PROPOSED
TITLE OF EACH CLASS OF PROPOSED MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) FEE(2)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/8% Series B Senior Subordinated
Notes due 2008.................... $200,000,000 100% $200,000,000 $59,000.00
============================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee under the
Securities Act of 1933.
(2) Calculated pursuant to Rule 457(f)(2).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE RELATED REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED APRIL 13, 1998
PROSPECTUS
[LOGO]
$200,000,000
LNR PROPERTY CORPORATION
9 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME ON , 1998 (UNLESS THE EXCHANGE OFFER IS EXTENDED).
LNR Property Corporation ("LNR") is offering (the "Exchange Offer") to
exchange its 9 3/8% Series B Senior Subordinated Notes due 2008 ("New Notes")
for the identical principal amount of 9 3/8% Series A Senior Subordinated Notes
due 2008 ("Old Notes"). The outstanding principal amount of the Old Notes, and
therefore the principal amount of New Notes which would be issued if all the Old
Notes were exchanged, is $200,000,000. The terms of the New Notes will be
identical with the terms of the Old Notes, except that the issuance of the New
Notes is being registered under the Securities Act of 1933, as amended (the
"Securities Act"), and therefore the New Notes will not be subject to
restrictions on transfer which apply to the Old Notes. See "Description of New
Notes."
The Old 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 a
Registration Rights Agreement dated March 24, 1998 among the Company, BT Alex.
Brown Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation.
Based on interpretations by the staff of the Securities and Exchange Commission,
the Company believes a holder (other than a broker-dealer who acquired Old Notes
directly from the Company for resale or an affiliate of the Company) may offer
and sell New Notes issued in exchange for Old Notes without registration under
the Securities Act and without the need to deliver a prospectus, if the holder
acquired the New 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 New Notes. See "Description of the New Notes" for information about the
terms of the New Notes.
Prior to the Exchange Offer, there has been no public market for the New
Notes. The Company does not currently intend to list the New Notes on a
securities exchange or seek approval for quotation of the New Notes on an
automated quotation system. Therefore, it is unlikely that an active trading
market for the New Notes will develop.
The Exchange Agent for the Exchange Offer is U.S. Bank Trust National
Association.
------------------------
SEE "RISK FACTORS," WHICH BEGIN ON PAGE 15, 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 , 1998.
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"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. When the Registration Statement becomes effective, the Company
will be subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and in accordance therewith the
Company will file periodic reports and other information with the Commission
relating to its business, financial statements and other matters. The
Registration Statement, its schedules and exhibits are, and the periodic reports
and other information filed by the Company with the Commission will be,
available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located at
Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661, and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials can be obtained at prescribed rates by addressing written requests for
such copies to the Public Reference Section of the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. The Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants. The
Commission's Web site can be accessed on the World Wide Web at
http://www.sec.gov.
The obligations of the Company under the Exchange Act to file periodic
reports and other information with the Commission may be suspended, under
certain circumstances, if the Company's Common Stock and New Notes are each held
of record by fewer than 300 holders at the beginning of any fiscal year and are
not listed on a national securities exchange. The Company has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the New Notes remain outstanding it will
furnish to the holders of the New Notes, and if required by the Exchange Act,
file with the Commission all annual, quarterly and current reports that the
Company is or would be required to file with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act. In addition, the Company has agreed that, as
long as any Old Notes remain outstanding, the Company will make the information
required by Rule 144A(d)(4) under the Securities Act available to any
prospective purchaser of Old Notes or beneficial owner of Old Notes in
connection with a sale of them.
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 THE COMPANY. 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.
2
<PAGE> 4
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 in or incorporated by reference in this Prospectus. Except
as otherwise indicated in this Prospectus, (i) references to a fiscal year refer
to a fiscal year of the Company which ends on a November 30, (ii) references to
the "Company" are to LNR Property Corporation and its subsidiaries and (iii)
references to "LNR" are to LNR Property Corporation.
LNR was formed by Lennar Corporation ("Lennar") in June 1997 to separate
Lennar's real estate investment and management business from its homebuilding
business. On October 31, 1997, Lennar distributed the stock of LNR to Lennar's
stockholders in a tax-free spin-off (the "Spin-off"). Activities conducted by
Lennar, as predecessor of the Company, of the type currently being conducted by
the Company are treated in this Prospectus as historical activities of the
Company.
THE COMPANY
The Company is a real estate investment and management company, which
structures and makes real estate related investments and, through its expertise
in developing and managing properties, seeks to enhance the value of those
investments. The Company has been engaged in the development, ownership and
management of commercial and multi-family residential properties since 1969.
LNR's Chairman, Chief Executive Officer and President have been with the Company
and have worked together for more than a decade. Over the five years ended
November 30, 1997, the Company's revenues and EBITDA increased at compound
annual growth rates of 27.7% and 30.4%, respectively. The Company's pro forma
revenues and EBITDA for the year ended November 30, 1997, giving effect to the
contributions of Lennar to the capital of LNR and the formation of Lennar Land
Partners (a land partnership with Lennar) as if they had occurred on December 1,
1996, and adjusting general and administrative costs to eliminate Spin-off
related costs and add incremental costs for a stand-alone public company, were
$180.8 million and $122.8 million, respectively.
The Company's real estate investment activities primarily consist of
- developing and managing commercial and multi-family residential
properties,
- acquiring, managing and repositioning commercial and multi-family
residential real estate loans and properties,
- acquiring (often in partnership with financial institutions and real
estate funds) and managing portfolios of real estate assets,
- investing in unrated and non-investment grade rated commercial
mortgage-backed securities ("CMBS") as to which the Company has the right
to be special servicer (i.e., to oversee workouts of underperforming and
nonperforming loans) and
- making high yielding real estate related loans and equity investments.
The Company adjusts its investment focus from time to time to adapt to
various phases of the real estate cycle.
3
<PAGE> 5
At November 30, 1997, the Company's assets included the following:
<TABLE>
<CAPTION>
TYPE OF ASSET BOOK VALUE DESCRIPTION/COMMENT
------------- ------------- -------------------
(IN MILLIONS)
<S> <C> <C>
Commercial properties............. $ 311.9 Multi-family apartment buildings, office and
industrial buildings, retail centers, hotels
and land.
Real estate loans................. 86.8 Primarily mortgage loans. Also includes
loans to developers and builders, sometimes
with profit participations.
Partnerships...................... 159.4 Twelve partnerships with investment banks or
real estate funds which acquired portfolios
of loans and properties, as to which the
Company is the managing general partner.
Also, a partnership with Lennar which
acquires, develops and sells land.
CMBS.............................. 304.7 Unrated or non-investment grade rated
tranches of CMBS pools acquired at
significant discounts from face value, as to
which the Company has the right to be
special servicer and therefore can attempt
to increase collections of underlying loans.
Cash and other assets............. 160.5 Cash at November 30, 1997 ($34.1 million
unrestricted and $56.6 million restricted,
of which $44.9 million was collateral for a
letter of credit) was unusually high because
of a Lennar capital contribution in
connection with the Spin-off. Other assets
primarily include deferred tax credits.
--------
Total........................ $1,023.3
========
</TABLE>
RECENT DEVELOPMENTS
The Company has agreed to acquire Affordable Housing Group ("AHG"), a group
of companies which owns 41 multi-family and senior housing properties, with
approximately 6,000 residential rental apartments, many of which qualify for
low-income tax credits under Section 42 of the Internal Revenue Code (the "AHG
Acquisition"). Of the apartments, 49% are located in the Northwestern United
States, 17% are located in the Southwest, 15% are located in the East, 13% are
located in the Far West, and the remainder are located in the Southeast and
Midwest. Approximately 82% of the apartments were constructed by AHG or under
its supervision. AHG acquired the other apartments after they were completed.
The purchase price for AHG will be approximately $86 million and the Company
will assume obligations to make future investments in properties totalling
approximately $44 million, subject to certain adjustments. The Company expects
that after the acquisition, AHG, as part of the Company, will continue
developing, acquiring and operating residential apartments which qualify for
low-income tax credits. At December 31, 1997, the book value of AHG's assets was
approximately $257 million and AHG had liabilities of approximately $184
million, including approximately $153 million of debt which, after the
acquisition, will be nonrecourse to LNR. As a result of the AHG Acquisition, the
Company's total indebtedness will increase by approximately $239 million,
including approximately $86 million of indebtedness which the Company will incur
to finance the AHG Acquisition. The consummation of the AHG Acquisition is
subject to the receipt of third party consents.
COMPETITIVE STRENGTHS
The Company believes the following competitive strengths contribute to its
ability to grow and operate profitably:
Real Estate Development, Management and Workout Experience
The Company has developed, redeveloped, repositioned, owned and managed
commercial and multi-family residential real estate since 1969, having
developed, redeveloped, repositioned and/or managed over
4
<PAGE> 6
500 properties over this time period. These properties have included
multi-family apartment buildings, office buildings, retail space, hotels,
industrial space and land. The Company also has, over the past seven years, been
responsible for workouts with regard to more than 6,300 real estate loans. Fitch
IBCA, Inc., which rates CMBS special servicers on the basis of management team,
organizational structure, operating history, workout and asset disposition
experience and strategies, information systems, investor reporting capabilities
and financial resources, has given the Company Fitch's highest rating. Based on
industry sources regarding issuances of CMBS, the CMBS as to which the Company
had the right to assume the special servicing represented 17.6% and 12.8% of the
CMBS issued in 1996 and 1997, respectively. In addition to applying the benefits
of its experience to properties it develops, owns or manages, the Company uses
this experience in evaluating potential real estate investments (including asset
by asset evaluations of properties underlying CMBS). It also uses this
experience in redeveloping or rehabilitating properties in order to maximize
proceeds from underperforming or nonperforming assets included in portfolios or
single assets acquired by the Company or partnerships it manages or underlying
CMBS in which the Company invests. The Company believes its combination of real
estate and financial experience gives it an advantage over competing investors
who have financial, but not operating, experience.
Disciplined Investment Approach
The Company performs extensive due diligence before making investments in
order to evaluate investment risks and opportunities to use the Company's skills
to enhance the value of the investments. For example, before bidding for a CMBS
investment, the Company performs a property-by-property evaluation of the assets
underlying the CMBS, including site visits and analyses of rent rolls, vacancy
rates and tenant strength, as well as analyses of the real estate markets in
which the properties are located. The Company's formalized pre-investment
procedures allow its senior management to exercise significant control and
discipline over all investment decisions.
Experienced Management Team
The 10 members of LNR's senior management have an average of 16 years of
real estate industry experience. Steven J. Saiontz, LNR's Chief Executive
Officer, and Jeffrey P. Krasnoff, LNR's President, have 14 and 21 years of real
estate industry experience, respectively, and have been with the Company for 14
years and 12 years, respectively. In addition, Stuart A. Miller, LNR's Chairman
of the Board, who devotes approximately 25% of his working time to the Company,
is the chief executive officer of Lennar, a major homebuilder, and has more than
15 years of real estate industry experience. The Company uses incentive based
compensation to retain key members of management, including payment of bonuses
over multi-year periods, and vesting of stock options over periods as long as
nine years.
Significant Equity Ownership by Leonard Miller
Leonard Miller, one of the founders of Lennar and a Director of LNR, owned,
through family partnerships, 9.898 million shares of LNR's Class B Common Stock
at November 30, 1997. Leonard Miller is the father of Stuart A. Miller, the
Chairman of LNR, and the father-in-law of Steven J. Saiontz, the Chief Executive
Officer of LNR.
Extensive Asset Monitoring
The Company has developed an extensive asset monitoring program that
includes weekly and monthly reports and meetings at which actual results are
compared against budgets on an asset-by-asset basis. This, combined with
comprehensive systems, procedures and controls, allows management to monitor
asset performance closely.
Significant Strategic Relationships
Through partnerships and otherwise, the Company has developed strategic
relationships with affiliates of many of the leading investment banking firms
and real estate funds, including Banc One/Orix, Blackrock
5
<PAGE> 7
Group, BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation,
Deutsche Morgan Grenfell, Donaldson, Lufkin & Jenrette Securities Corporation,
First Chicago Capital Corp., Lehman Brothers Inc., Morgan Stanley, Dean Witter,
Discover & Co. and Westbrook Partners. These organizations seek to avail
themselves of the Company's ability to evaluate real estate assets rapidly and
effectively and to apply its asset management skills to enhance the value of
assets once they have been acquired (including overseeing workouts of
underperforming assets). The relationships the Company has developed have, among
other things, brought the Company investment opportunities to which it might not
otherwise have had access.
Receiving Recurring Income from its Investments
The Company has significant net rental income, interest income and income
from fees earned as special servicer with regard to CMBS and for managing
partnerships in which it participates. During 1997, the Company's net revenues
from these sources totalled $75.4 million. In addition, through its 50%
ownership of Lennar Land Partners, the Company generates earnings from sales of
Lennar Land Partners' properties, including sales of properties to Lennar for
use in Lennar's homebuilding activities.
Not a REIT
In order not to be subject to federal income taxation, a real estate
investment trust is limited in what it can do and the types of income it can
receive, must hold assets for minimum periods and must distribute each year
almost all its earnings. In contrast, the Company can actively manage
properties, earn fee income and other types of non-passive income, dispose of
assets without meeting holding period requirements, and retain and reinvest its
after-tax earnings.
BUSINESS STRATEGY
The Company's business strategy consists of four key elements:
Using Real Estate Expertise to Enhance Real Estate Investments
The Company focuses on investments which it believes can benefit from its
expertise in real estate development and management, including its expertise
regarding workouts of troubled real estate assets. It uses this expertise to
evaluate the risks and potential rewards from particular real estate related
investments and to enhance the value of its investments by overseeing management
of underlying properties. For example, the Company has only invested in CMBS
when it has had the right to be special servicer, which enables it to attempt to
increase proceeds from underperforming or nonperforming assets. The Company
believes its experience in enhancing assets distinguishes it from many other
investors in real estate related financial products.
Identifying Opportunities Attuned to Various Phases of the Real Estate Cycle
During each phase of the real estate cycle, the Company tries to identify
investments which will benefit from being made at that point in the cycle. In
the weak real estate market of the early 1990's, the Company acquired portfolios
of underperforming or nonperforming real estate loans and subordinate classes of
CMBS, at substantial discounts from their face value. During the relatively
strong real estate market of 1997, the Company emphasized investments in
development or redevelopment projects and made loans to property developers and
residential builders, and continued to purchase subordinate classes of CMBS when
they were available at prices the Company believed to be attractive. In
purchasing AHG, the Company will acquire a group of companies which develop, own
and operate multi-family apartment complexes that generate low-income tax
credits. See "Business -- Real Estate Investments and Related
Activities -- Commercial and Multi-Family Residential Rental Real Estate." Also,
the Company recently made its first investment in a portfolio of real estate
assets outside the United States.
6
<PAGE> 8
Using Strategic Relationships
The Company builds and maintains strategic relationships with leading
investment banking firms and real estate funds which can introduce the Company
to real estate related investment opportunities. Also, by investing in
partnership with these firms and funds, the Company can limit the amount it is
required to invest to acquire interests in large real estate asset portfolios or
other large real estate related investments.
Diversifying its Real Estate Asset Investments
The Company's real estate investments are diversified both in the forms of
the investments and in the types of properties to which they relate. Further,
the Company's investments relate to properties throughout the United States, and
therefore are to an extent protected against factors which affect only
particular geographic areas.
LNR's principal executive office is located at 760 N.W. 107th Avenue,
Miami, Florida 33172 and its telephone number is (305) 485-2000. LNR was formed
as a Delaware corporation in 1997.
ISSUANCE OF THE OLD NOTES
The outstanding $200.0 million principal amount of 9 3/8% Series A Senior
Subordinated Notes due 2008 were sold by LNR (the "Offering") to BT Alex. Brown
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchasers") on March 19, 1998 (the "Closing Date") pursuant to a
Purchase Agreement, dated March 19, 1998 (the "Purchase Agreement"), between LNR
and the Initial Purchasers. The Initial Purchasers subsequently resold the Old
Notes in reliance on Rule 144A under the Securities Act and other available
exemptions under the Securities Act. The Company and the Initial Purchasers also
entered into a registration rights agreement (the "Registration Agreement")
pursuant to which the Company agreed to offer to exchange the New Notes which
are registered under the Securities Act for the Old Notes and also granted
holders of Old Notes rights under some circumstances to have resales of Old
Notes registered under the Securities Act. The Exchange Offer is intended to
satisfy certain of the Company's obligations under the Registration Agreement.
See "The Exchange Offer -- Purpose and Effects."
The Old Notes were issued under an indenture dated as of March 24, 1998
(the "Indenture"), between LNR and First Trust of New York National Association,
as trustee (the "Trustee"). The name of the Trustee has subsequently been
changed to "U.S. Bank Trust National Association." The New Notes also are being
issued under the Indenture and are entitled to the benefits of the Indenture.
The form and terms of the New Notes will be identical in all material respects
with the form and terms of the Old Notes, except that (i) the New Notes will
have been registered under the Securities Act and, therefore, will not bear
legends describing restrictions on transferring them, and (ii) holders of New
Notes will not be, and upon the consummation of the Exchange Offer, holders of
Old Notes will no longer be, entitled to certain rights under the Registration
Agreement intended for the holders of unregistered securities. The Exchange
Offer shall be deemed consummated upon the delivery by the Company to the
Exchange Agent under the Indenture of New Notes in the same aggregate principal
amount as the aggregate principal amount of Old Notes that are validly tendered
by holders thereof pursuant to the Exchange Offer. See "The Exchange
Offer -- Termination of Certain Rights" and "-- Procedures for Tendering" and
"Description of the New Notes."
The proceeds received by the Company from the issuance of the Old Notes
were used to repay short term indebtedness, which bore interest at a weighted
average rate of 6.89% at the Closing Date. This short term indebtedness was
primarily incurred by the Company to finance the purchase of CMBS. LNR or its
subsidiaries may incur new short term debt. In addition, the indebtedness which
LNR will incur to fund the acquisition of AHG may be short term. There will be
no proceeds to the Company from the exchange of New Notes for Old Notes pursuant
to the Exchange Offer.
7
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange its 9 3/8%
Series B Senior Subordinated Notes due 2008 for
identical principal amounts of its 9 3/8% Series A
Senior Subordinated Notes due 2008 (Old Notes,
together with the New Notes, "Notes"). At the date
of this Prospectus, $200 million principal amount
of Old Notes are outstanding. See "The Exchange
Offer -- Terms of the Exchange Offer."
Expiration of Exchange
Offer...................... 5:00 p.m., New York time, on ,
1998, 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."
Conditions of the Exchange
Offer...................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer
is subject to certain customary conditions, which
may be waived by the Company. See "The Exchange
Offer -- Conditions of the Exchange Offer."
Accrued Interest on the Old
Notes.................... The New Notes will bear interest at the rate of
9 3/8% per annum from and including their date of
issuance. When the first interest payment is made
with regard to the New Notes, LNR will also pay
interest on the Old Notes which are exchanged, from
the date they were issued or the most recent
Interest Date on which interest had been paid (if
applicable) to, but not including, the day the New
Notes are issued. Interest on the Old Notes which
are exchanged will cease to accrue on the day prior
to the day on which the New Notes are issued. The
interest rate on the Old Notes may increase under
certain circumstances if the Company is not in
compliance with its obligations under the
Registration Agreement. See "Description of the New
Notes."
Procedures for Tendering
Old Notes.................. A holder of Old Notes who wishes to accept the
Exchange Offer must complete, sign and date a
Letter of Transmittal, or a facsimile of one, in
accordance with the instructions contained under
"The Exchange Offer -- Procedures for Tendering"
and in the Letter of Transmittal, and deliver the
Letter of Transmittal, or facsimile, together with
the Old Notes and any other required documentation
to the Exchange Agent at the address set forth
below. Old Notes may be delivered physically or by
confirmation of book-entry delivery of the Old
Notes to the Exchange Agent's account at The
Depository Trust Company ("DTC"). By executing a
Letter of Transmittal, a holder will represent to
the Company that, among other things, the person
acquiring the New 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 is engaged in, or
intends to engage in, or has an arrangement or
understanding with any person to participate in,
the distribution of the New Notes and that neither
the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the
Securities Act, of the Company. Each broker or
dealer that receives New Notes for its own account
in exchange for Old Notes which were acquired by
the broker or
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<PAGE> 10
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 New Notes. See "The Exchange
Offer -- Procedures for Tendering" and "Sales of
New Notes Received By Broker-Dealers."
Guaranteed Delivery
Procedures................. Eligible Holders of Old Notes who wish to tender
their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver
their Old 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 Old Notes according to the
guaranteed delivery procedures described in the
Letter of Transmittal. See "The Exchange Offer --
Guaranteed Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes.... Upon satisfaction or waiver of all conditions to
the Exchange Offer, the Company will accept any and
all Old Notes that are properly tendered in
response to the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer will be
delivered promptly after acceptance of the Old
Notes. See "The Exchange Offer -- Procedures for
Tendering."
Withdrawal Rights.......... Tenders of Old 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 (formerly
named "First Trust of New York, National
Association") is the exchange agent (the "Exchange
Agent"). The address and telephone number of the
Exchange Agent are set forth in "The Exchange
Offer -- Exchange Agent."
Fees and Expenses.......... All expenses incident to the Company's consummation
of the Exchange Offer and compliance with the
Registration Agreement will be borne by the
Company. The Company will also pay any transfer
taxes which are applicable to the Exchange Offer
(but not transfer taxes due to transfers of Old
Notes or New Notes by the holder). See "The
Exchange Offer -- Fees and Expenses."
Resales of the New Notes... Based on interpretations by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes New Notes
issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and
otherwise transferred by the holder (other than (i)
a broker-dealer who purchased the Old Notes
directly from the Company for resale pursuant to
Rule 144A under the Securities Act or another
exemption under the Securities Act or (ii) a person
that is an affiliate of the Company, 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 New Notes in the
ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate, in a
distribution of the New Notes. Each broker-dealer
that receives New Notes for its own account in
exchange for Old Notes which Old Notes 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 New Notes. See "The Exchange
9
<PAGE> 11
Offer -- Purpose and Effects" and "Sales of New
Notes Received By Broker-Dealers."
DESCRIPTION OF NEW NOTES
The Exchange Offer applies to $200 million aggregate principal amount of
Old Notes. The terms of the New Notes are identical in all material respects
with those of the Old Notes, except for certain transfer restrictions and rights
relating to the exchange of the Old Notes for New Notes. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture under which both the Old Notes were, and the New Notes will be,
issued. See "Description of the New Notes."
Notes Offered.............. $200,000,000 aggregate principal amount of 9 3/8%
Series B Senior Subordinated Notes due 2008.
Maturity Date.............. March 15, 2008.
Interest Payment Dates..... Interest on the New Notes will accrue from their
issue date and will be payable semi-annually in
arrears on March 15 and September 15 of each year,
commencing on September 15, 1998.
Optional Redemption........ The New Notes will be redeemable in whole or in
part, at LNR's option, on or after March 15, 2003,
at the redemption prices set forth under
"Description of the New Notes -- Redemption" plus
accrued and unpaid interest to the date of
redemption. In addition, at any time on or prior to
March 15, 2001, LNR may, at its option, redeem up
to 35% of the aggregate principal amount of the New
Notes originally issued with the net cash proceeds
of one or more Public Equity Offerings at a
redemption price equal to 109.375% of the aggregate
principal amount of the New Notes to be redeemed
plus accrued interest to the date of redemption;
provided that at least 65% of the aggregate
principal amount of New Notes originally issued
remains outstanding immediately following such
redemption. See "Description of the New Notes --
Redemption."
Change of Control.......... Upon a Change of Control, each holder of New Notes
will have the right to require LNR to purchase that
holder's New Notes at a price equal to 101% of
their principal amount, plus accrued and unpaid
interest to the date of purchase. See "Description
of the New Notes -- Change of Control."
Ranking.................... The New Notes will be general unsecured obligations
of LNR and will be subordinated in right of payment
to all existing and future Senior Indebtedness. The
New Notes will rank pari passu in right of payment
with any other senior subordinated indebtedness of
LNR and will rank senior in right of payment to any
other subordinated indebtedness of LNR. In
addition, LNR is a holding company and,
accordingly, the New Notes will be effectively
subordinated to all present and future indebtedness
of LNR's subsidiaries. As of November 30, 1997, on
a pro forma basis after giving effect to the sale
of the Old Notes and the application of the net
proceeds of that sale, LNR would have had
approximately $329.8 million of Senior Indebtedness
outstanding (including $56.2 million of obligations
under letters of credit, and $119.0 million of
guarantees of outstanding borrowings under credit
facilities of unconsolidated partnerships). See
"Description of the New Notes -- Subordination" and
"Description of Certain Indebtedness." The
acquisition of AHG will substantially increase the
Company's debt.
10
<PAGE> 12
Certain Covenants.......... The Indenture under which the New Notes will be
issued contains covenants that, subject to certain
exceptions, restrict the ability of LNR and its
subsidiaries to incur Indebtedness or, in the case
of subsidiaries, issue preferred stock, and limit
the ability of LNR to pay dividends or make other
distributions, repurchase equity interests or
subordinated Indebtedness, or 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
New Notes, merge or consolidate with any other
person or sell, lease, or otherwise dispose of all
or substantially all of its assets. See
"Description of the New Notes -- Certain
Covenants."
For additional information regarding the Notes, see "Description of the New
Notes."
USE OF PROCEEDS
There will be no proceeds to LNR from the exchange of New Notes for Old
Notes pursuant to the Exchange Offer. The net proceeds to LNR from the sale of
the Old Notes were used to repay short term indebtedness. LNR or its
subsidiaries may incur new short term debt. In addition, the indebtedness which
LNR will incur to finance the acquisition of AHG may be short term. See
"Business -- Real Estate Investments and Related Activities -- Commercial and
Multi-Family Residential Rental Real Estate."
ABSENCE OF PUBLIC MARKET
The New Notes will be new securities for which there is no established
trading market. The Company currently does not intend to list the New Notes on
any securities exchange or to arrange for the New Notes to be quoted on any
quotation system. Although the Initial Purchasers have informed the Company 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, such market-making activities may be limited during the
Exchange Offer or the pendency of a Shelf Registration Statement required by the
Registration Agreement, if it is filed. Accordingly, it is not likely that an
active trading market for the New Notes will develop or, if such a market
develops, as to the liquidity of that market.
RISK FACTORS
See "Risk Factors" beginning on page 15 for a discussion of certain factors
that should be considered by holders of the Old Notes in evaluating the Exchange
Offer.
11
<PAGE> 13
SUMMARY FINANCIAL DATA
The following tables present summary consolidated financial data regarding
the Company. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto included
elsewhere in this Prospectus. See "Selected Consolidated Financial Data."
The pro forma financial information has been prepared to reflect the
effect, as though they had occurred on December 1, 1996, of (i) the Company's
50% interest in the earnings of Lennar Land Partners, (ii) the elimination of
costs related to the Spin-off and addition of incremental administrative costs
associated with operating as a stand-alone public company, (iii) reductions in
interest expense due to the use of proceeds from funds advanced by Lennar to
repay debt and (iv) the estimated income tax effect of the pro forma adjustments
to the Company's effective tax rate of 39.0%.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED NOVEMBER 30,
----------------------------------------------------------
PRO FORMA ACTUAL
--------- ----------------------------------------------
1997 1997 1996 1995 1994 1993
--------- ------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Revenues
Rental income.......................... $ 56,334 56,334 59,215 51,664 45,978 39,381
Equity in earnings of partnerships..... 43,441 30,149 51,862 31,203 20,710 7,046
Interest income........................ 41,446 41,446 28,726 20,475 11,640 8,694
Gains on sales of:
Real estate......................... 18,076 18,076 3,669 15,776 9,085 --
Investment securities............... 5,359 5,359 1,735 513 -- --
Management fees..................... 13,385 13,385 18,229 10,274 12,390 6,565
Other, net............................. 2,734 2,734 -- 2,910 2,016 1,387
-------- ------- ------- ------- ------- ------
Total revenues...................... 180,775 167,483 163,436 132,815 101,819 63,073
-------- ------- ------- ------- ------- ------
Costs and expenses
Cost of rental operations.............. 35,767 35,767 38,126 30,890 23,884 18,866
General and administrative............. 22,176 26,584 20,756 15,155 14,436 7,806
Depreciation........................... 6,060 6,060 5,916 5,671 4,618 4,002
Other, net............................. -- -- 658 -- -- --
-------- ------- ------- ------- ------- ------
Total costs and expenses................. 64,003 68,411 65,456 51,716 42,938 30,674
-------- ------- ------- ------- ------- ------
Operating earnings....................... 116,772 99,072 97,980 81,099 58,881 32,399
Interest expense......................... 24,484 26,584 20,513 14,692 5,688 3,378
-------- ------- ------- ------- ------- ------
Earnings before income taxes............. 92,288 72,488 77,467 66,407 53,193 29,021
Income taxes............................. 35,991 28,270 30,212 25,899 20,695 10,447
-------- ------- ------- ------- ------- ------
Net earnings............................. $ 56,297 44,218 47,255 40,508 32,498 18,574
======== ======= ======= ======= ======= ======
Net earnings per share(1)................ $ 1.55 1.21
======== =======
</TABLE>
- ---------------
(1) LNR was formed in June 1997 and had no outstanding stock prior to formation;
therefore, net earnings per share have not been calculated for the fiscal
years ended November 30, 1996, 1995, 1994 and 1993.
12
<PAGE> 14
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED NOVEMBER 30,
-------------------------------------------------------------
PRO FORMA ACTUAL
--------- -------------------------------------------------
1997 1997 1996 1995 1994 1993
--------- --------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA
EBITDA(1)............................. $122,832 105,132 103,896 86,770 63,499 36,401
Depreciation and amortization......... 6,060 6,060 5,916 5,671 4,618 4,002
Ratio of earnings to fixed
charges(2).......................... 4.6x 3.6x 4.8x 5.5x 10.4x 9.6x
Ratio of EBITDA to average
assets(3)........................... 13.8% 11.8% 14.8% 14.5% 14.8% 14.1%
FINANCIAL POSITION(4)
Total assets.......................... -- 1,023,337 752,968 652,400 547,722 310,355
Total mortgage notes and other debts
payable............................. -- 391,171 354,406 252,256 119,935 34,163
Total stockholders' equity(5)......... -- 569,088 -- -- -- --
Total Parent Company investment....... -- -- 367,048 370,903 396,403 266,965
OTHER DATA AND RATIOS ADJUSTED FOR THE
OFFERING(6)
Interest expense(7)................... 30,294 -- -- -- -- --
Total mortgage notes and other debts
payable............................. 396,267 -- -- -- -- --
Ratio of EBITDA to interest expense... 4.1x -- -- -- -- --
Ratio of total mortgage notes and
other debts payable to total
stockholders' equity(8)............. 0.7x -- -- -- -- --
</TABLE>
- ---------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is
used by the Company in analyzing its operating performance, leverage and
liquidity. However, it is not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net earnings as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity.
(2) Outstanding debt of Lennar Land Partners is guaranteed by the Company. See
"Description of Certain Indebtedness -- LNR Guarantees of Partnership Debt."
The amount of fixed charges associated with such debt is excluded from the
computation of these ratios
(3) Ratio of EBITDA to average assets is calculated by dividing EBITDA by the
average of total assets at the beginning and end of the fiscal year.
(4) Actual and pro forma financial position are identical for 1997.
(5) In connection with the Spin-off, the assets and liabilities of Lennar and
its subsidiaries were divided between the Company and Lennar and its
homebuilding subsidiaries so that Lennar and its homebuilding subsidiaries
would have a net worth of $200 million (with specified adjustments) and the
remaining net worth was transferred to the Company. See the Company's
consolidated statements of Parent Company investment and stockholders'
equity and notes thereto included elsewhere in this Prospectus.
(6) Excludes debt which will be incurred in connection with the AHG Acquisition.
(7) Reflects the repayment of $194.0 million of short term debt, which had an
approximate weighted average interest rate of 6.70% for the year ended
November 30, 1997, using the net proceeds of the Offering, and the issuance
of the Notes at an effective interest rate of 9.445%.
(8) Total mortgage notes and other debts payable excludes $119 million of
outstanding unconsolidated partnership debt guaranteed by LNR. The ratio of
total mortgage notes and other debts payable plus outstanding unconsolidated
partnership debt guaranteed by LNR to stockholders' equity, as adjusted for
the Offering, would have been 0.9x.
13
<PAGE> 15
The following is a summary of the Company's actual results of operations
for the years ended November 30, 1997, 1996, 1995, 1994 and 1993 and pro forma
results for 1997, after allocating among the core business lines certain
non-corporate general and administrative expenses. This information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
FOR THE YEARS ENDED NOVEMBER 30,
----------------------------------------------------------
PRO FORMA ACTUAL
--------- ----------------------------------------------
1997 1997 1996 1995 1994 1993
--------- ------- ------- ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Real estate operations.............. $ 74,410 74,410 62,884 67,440 55,063 39,381
CMBS and loans...................... 51,067 51,067 33,207 23,202 12,766 8,694
Partnerships and joint ventures..... 52,564 39,272 67,345 39,263 31,974 13,611
Corporate and other................. 2,734 2,734 -- 2,910 2,016 1,387
-------- ------- ------- ------- ------- ------
Total revenues...................... 180,775 167,483 163,436 132,815 101,819 63,073
-------- ------- ------- ------- ------- ------
Operating expenses
Real estate operations............ 44,663 44,663 46,683 38,296 33,243 25,197
CMBS and loans.................... 2,547 2,547 1,813 604 555 139
Partnerships and joint
ventures..................... 3,104 3,104 6,113 5,339 4,453 1,670
Corporate and other............... 13,689 18,097 10,847 7,477 4,687 3,668
-------- ------- ------- ------- ------- ------
Total operating expenses............ 64,003 68,411 65,456 51,716 42,938 30,674
-------- ------- ------- ------- ------- ------
Operating earnings
Real estate operations............ 29,747 29,747 16,201 29,144 21,820 14,184
CMBS and loans.................... 48,520 48,520 31,394 22,598 12,211 8,555
Partnerships and joint ventures... 49,460 36,168 61,232 33,924 27,521 11,941
Corporate and other............... (10,955) (15,363) (10,847) (4,567) (2,671) (2,281)
-------- ------- ------- ------- ------- ------
Total operating earnings............ 116,772 99,072 97,980 81,099 58,881 32,399
Interest expense.................... 24,484 26,584 20,513 14,692 5,688 3,378
Income tax expense.................. 35,991 28,270 30,212 25,899 20,695 10,447
-------- ------- ------- ------- ------- ------
Net earnings........................ $ 56,297 44,218 47,255 40,508 32,498 18,574
======== ======= ======= ======= ======= ======
</TABLE>
14
<PAGE> 16
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus, including, without limitation,
statements under "Prospectus Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business,"
regarding budgeted capital expenditures, the Company's financial position,
projected results of the Company's real estate investments, possible
environmental liabilities, business strategy and other plans, objectives or
expectations for future operations, are forward-looking statements. Although the
Company believes the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that those expectations will prove to
have been correct, particularly given the cyclical nature of aspects of the
Company's business and the inherent uncertainty in estimating future
fluctuations in the commercial real estate market. There are numerous
uncertainties inherent in predicting future performance of real estate
investments, including many factors beyond the control of the Company, such as
changes in interest rates, changes in demand for commercial real estate
nationally, in areas in which the Company owns properties, or in areas in which
properties securing mortgages directly or indirectly owned by the Company are
located, national or regional business conditions which affect the ability of
mortgage obligors to pay principal or interest when it is due, and the cyclical
nature of the commercial real estate business. Additional important factors that
could cause actual results to differ materially from the Company's expectations
are disclosed under "Risk Factors" and elsewhere in this Prospectus. Should one
or more of these risks or uncertainties occur, the Company's actual results and
plans for 1998 and beyond could differ materially from those expressed in
forward-looking statements.
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered in evaluating the Exchange Offer.
LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION
The historical financial information about the Company included in this
Prospectus relates almost entirely to periods when the entities which currently
constitute the Company were subsidiaries of Lennar. The Company's results of
operations during those periods were not necessarily the same as they would have
been if LNR and its subsidiaries had operated as a separate, stand-alone group
during those periods.
ABSENCE OF HISTORY AS A STAND-ALONE GROUP
Until November 1, 1997, LNR and its subsidiaries had never operated as a
stand-alone publicly owned group of companies. Therefore, their administrative
costs after that date are likely to be higher than those reflected in the
Company's historical financial statements. Also, until November 1, 1997, none of
the Company's senior executive officers had been engaged in managing a public
parent company (except that its Chairman of the Board, who is not a full time
employee, has for a number of years been a senior executive officer of Lennar
and has since April 1997 been the chief executive officer of Lennar).
RISK OF LEVERAGED INVESTMENT ACTIVITIES
One of the reasons for separating the Company from Lennar was to enable the
Company to increase its borrowings and therefore increase the investments it
could make. While increased leverage can substantially increase the Company's
earnings potential, it also will expose the Company to increased risks if,
because of changes in market conditions, changes in interest rates or for any
other reason, the value of its investments declines.
15
<PAGE> 17
CYCLICAL NATURE OF THE REAL ESTATE BUSINESS
Most aspects of the United States real estate markets are cyclical. To some
extent, the cycles for different types of real estate assets (such as single
family homes and office buildings) are different. However, all aspects of the
real estate markets are affected by interest rates, with the value of various
types of real estate tending to decline relative to non-real estate assets when
interest rates rise. All aspects of the United States real estate markets also
may be affected by changes in the economy in general. Because a significant
portion of the Company's business involves acquiring mortgages, properties and
real estate related securities at discounted prices, periods of low real estate
values have in the past provided investment opportunities for the Company.
However, although future periods of poor real estate markets may provide
additional acquisition opportunities for the Company, they also may seriously
impair the value of the assets the Company already holds and the Company's
ability to dispose of assets at prices which are acceptable to it.
In accordance with the Company's strategy of trying to enhance the value of
assets it acquires and to sell those assets at a profit, when real estate
markets are strong the Company tends to accelerate the rate at which it sells
assets. Conversely, when real estate markets are strong, there may be fewer
opportunities for the Company to acquire assets at prices which are likely to
generate the combination of yield and appreciation in value which the Company
seeks. While the Company believes there are attractive investment opportunities
even when real estate markets are strong (for example, during 1997, the Company
made several investments in development or redevelopment projects, which should
benefit from a strong real estate market, and the Company is beginning to seek
investment opportunities outside the United States), the Company's rate of asset
acquisitions during periods of strong real estate markets may be slower than
during periods of weaker real estate markets.
RISKS RELATED TO AHG ACQUISITION
Although the Company has substantial experience in developing multi-family
residential apartments, senior management of the Company has little experience
with acquiring and owning properties which qualify for low-income tax credits
under Section 42 of the Internal Revenue Code and, therefore, there can be no
assurance that the Company will be able to successfully integrate the operations
of AHG with the operations of the Company.
Consummation of the acquisition of AHG is subject to the receipt of third
party consents and customary closing conditions. Therefore, it is not certain
that the acquisition of AHG will be consummated.
INVESTMENT IN JAPAN; POSSIBLE FUTURE INVESTMENTS IN FOREIGN MARKETS
The Company has formed several partnerships with large financial
institutions to acquire portfolios of distressed real estate loans in Japan,
where the commercial real estate market has declined substantially in recent
years. The Company expects its investments in these projects to be reduced from
an initial investment of approximately $20 million to an investment of
approximately 11 million dollars, assuming anticipated nonrecourse partnership
financing is arranged. The Company is considering making additional investments
in Japanese real estate and real estate related assets if attractive
opportunities arise. The Company also may seek investment opportunities
elsewhere outside the United States.
When the Company considers real estate related investments outside the
United States, it usually will do so in conjunction with experts in real estate
or real estate finance where the real estate is located. Nonetheless, the senior
management of the Company has no experience in Japan or other markets outside
the United States and this lack of experience could adversely affect the senior
managers' ability to evaluate types of real estate investments which are
available, trends in real estate markets or overall economic trends in
particular countries. Also, real estate related transactions in a country
normally are conducted in the currency of that country. Investments by the
Company denominated in currencies other than the U.S. dollar may be adversely
affected by a decline in the value of the currencies in which the investments
are denominated compared with the value of the U.S. dollar, whether because of
factors affecting the non-U.S. currencies or because of a strengthening of the
U.S. dollar against currencies generally. The Company may try to hedge against
currency
16
<PAGE> 18
risks by buying or selling currency contracts or options. However, the Company
has no experience in hedging against currency fluctuations.
NO ACCESS TO CREDIT SUPPORT
Until October 31, 1997, the Company had access to Lennar's corporate credit
lines, Lennar guaranteed many of the obligations the Company incurred in
purchasing specific assets (including obligations under repurchase obligations
incurred to finance purchases of CMBS), and creditors had been able to look to
Lennar's cash flows, as well as those of the Company, to satisfy Company
indebtedness guaranteed by Lennar. Since November 1, 1997, the Company has not
had access to Lennar's corporate credit lines or cash flows, and Lennar has not
guaranteed any new indebtedness of the Company. The Company believes its
consolidated net worth (which was $569 million at November 30, 1997), its cash
flow, and the fact that there are active markets for many of the types of assets
it acquires, should enable the Company to obtain the credit lines it will need
to finance its contemplated activities. The Company has arranged approximately
$618 million of credit lines (in addition to having borrowed $200 million by
selling the Notes). Absence of Lennar credit support probably has affected, and
may continue to affect, both the availability and the cost of credit to the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
SIGNIFICANT INDEBTEDNESS
At November 30, 1997, as adjusted to give effect to the sale of the Old
Notes and the application of the net proceeds from that sale, the Company's
total indebtedness would have been $397.2 million, representing approximately
41% of its combined total debt and stockholders' equity. See "Capitalization."
In addition, as a result of the acquisition of AHG, the Company's total
indebtedness will increase by approximately $239 million, including
approximately $86 million of indebtedness which the Company will incur to
finance the AHG Acquisition. LNR also is a guarantor of up to $244.4 million of
credit facilities of unconsolidated partnerships, under which $119.0 million was
outstanding as of November 30, 1997. See "Certain Relationships and
Transactions -- Relationships with Lennar -- Lennar Land Partners" and
"Description of Other Indebtedness." The Company's ability to make scheduled
payments of principal or interest on, or to refinance, its indebtedness
(including the Notes) depends on its future performance, which, to a certain
extent, is subject to general economic, financial, competitive and other factors
beyond its control. Based upon the current level of operations and anticipated
growth, the Company believes that available cash flow, together with other
sources of liquidity, will be adequate to meet the Company's anticipated future
requirements for working capital, capital expenditures, scheduled payments of
principal and interest on its indebtedness, including the Notes, and the
implementation of its growth initiatives. However, all or a portion of the
principal payments at maturity on the Notes may require refinancing. There can
be no assurance that the Company's business will generate sufficient cash flow
from operations or that future borrowing will be available in an amount
sufficient to enable the Company to service its indebtedness, including the New
Notes, or to make necessary capital expenditures, or that any required
refinancing will be available on commercially reasonable terms or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition, Liquidity and Capital Resources."
The Company's leverage may have important consequences for the Company and
the holders of the New Notes, including, but not limited to, the following: (i)
the ability of the Company to obtain additional financing for acquisitions,
working capital, capital expenditures or other purposes, if necessary, may be
impaired or financing may not be available on terms favorable to the Company;
(ii) a portion of the Company's cash flow will be used to pay the Company's
interest expense and debt amortization, which will reduce the funds that would
otherwise be available to the Company for its operations and future business
opportunities; (iii) a substantial decrease in net operating cash flows or an
increase in expenses of the Company could make it difficult for the Company to
meet its debt service requirements and force it to dispose of assets prematurely
or otherwise modify its operations; and (iv) the Company's leverage will
increase its vulnerability to a downturn in its business or the economy
generally.
17
<PAGE> 19
A significant portion of the Company's existing indebtedness bears interest
at variable rates. However, most of the Company's investments generate interest
or rental income at essentially fixed rates. Therefore, a material increase in
the interest rates on the Company's indebtedness could substantially reduce the
Company's cash flow.
SUBORDINATION
LNR's obligations under the New Notes (like those under the Old Notes) will
be subordinated in right of payment to all its existing and future Senior
Indebtedness. As of November 30, 1997, as adjusted to give effect to the sale of
the Old Notes and the application of the net proceeds of that sale, LNR would
have had approximately $329.8 million of Senior Indebtedness outstanding.
Additional Senior Indebtedness may be incurred by LNR from time to time, subject
to certain restrictions imposed by the Indenture. By reason of the subordination
of the New Notes, in the event of an insolvency, liquidation or other
reorganization of LNR, creditors who are holders of Senior Indebtedness must be
paid in full before any payments may be made to holders of New Notes. There may
not be sufficient assets remaining after payment of prior claims to pay amounts
due on the New Notes. In addition, under certain circumstances, no payments may
be made with respect to the New Notes if a default exists with respect to Senior
Indebtedness. See "Description of the New Notes -- Subordination."
STRUCTURAL SUBORDINATION TO SUBSIDIARY DEBT
The New Notes will be debt obligations of LNR, a holding company whose
primary assets consist of shares of common stock issued to LNR by its
subsidiaries. Accordingly, LNR will be dependent upon the cash flow of, and
receipt of dividends or advances from, its subsidiaries in order to meet its
debt obligations, including LNR's obligations under the New Notes. The New Notes
will not be guaranteed by LNR's subsidiaries, and, consequently, LNR's
subsidiaries are not obligated or required to pay any amounts pursuant to the
New Notes or to make funds available for the New Notes in the form of dividends
or advances to LNR. A significant amount of the Company's indebtedness at
November 30, 1997, was indebtedness of subsidiaries of LNR. Creditors of a
subsidiary are entitled to be paid what is due them before assets of the
subsidiary become available for creditors of its parent. Therefore, even
liabilities which are not Senior Indebtedness, and preferred stock, of
subsidiaries will, in effect, be prior in right of payment to the New Notes with
regard to the assets of those subsidiaries. This can substantially reduce the
portion of the Company's consolidated assets which are available for payment of
the New Notes. Also, any agreements of subsidiaries which prohibit or limit the
subsidiaries' payment of dividends will eliminate or reduce LNR's access to cash
flows of those subsidiaries to pay interest or principal with regard to the New
Notes.
LIMITED RESTRICTIVE COVENANTS
The Indenture contains financial and operating covenants that place limited
restrictions on, among other things, the ability of the Company to incur
additional indebtedness, to create liens or other encumbrances, to make certain
payments and investments and to sell or otherwise dispose of assets and merge or
consolidate with other entities. A failure to comply with the obligations
contained in the Indenture could result in an event of default under the
Indenture, which would result in the acceleration of the related debt and the
acceleration of debt under other instruments evidencing indebtedness that may
contain cross-acceleration or cross-default provisions. To the extent events of
default under the Indenture result in defaults with respect to Senior
Indebtedness, the subordination provisions in the Indenture would likely
restrict payments to the holders of New Notes. See "Description of the New
Notes -- Certain Covenants." The Indenture does not contain covenants
specifically designed to protect holders of the New Notes in case there is a
material adverse change in the Company's financial position or in the event of a
highly leveraged transaction involving the Company.
LIMITATIONS ON REPURCHASE OF NEW NOTES UPON CHANGE OF CONTROL
Upon a Change of Control, each holder of New Notes (and each holder of Old
Notes) will have the right to require LNR to repurchase the holder's Notes. If a
Change of Control were to occur, and LNR did not have sufficient funds to pay
the repurchase price for all the Notes which are tendered, that failure would be
an
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event of default under the Indenture. In addition, a Change of Control would
constitute a default under LNR's existing 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 which the
Company may enter into from time to time. The borrowings under the credit
facility are, and other borrowings are likely to be, Senior Indebtedness.
Therefore, a Change of Control at a time when LNR cannot pay for Notes which are
tendered as a result of the Change of Control could result in holders of New
Notes receiving substantially less than the principal amount of the New Notes.
See "Description of the New Notes -- Change of Control" and "-- Subordination."
INDEMNIFICATION OF LENNAR IN CASE THE SPIN-OFF WAS NOT TAX-FREE
A Separation and Distribution Agreement entered into by LNR and Lennar at
the time of the Spin-off (the "Separation and Distribution Agreement") provides
that if it is ultimately determined that the Spin-off did not qualify as a tax
free transaction, other than because of actions taken by Lennar after completion
of Lennar's merger with Pacific Greystone Corporation (October 31, 1997), and as
a result Lennar incurs any liabilities for taxes, interest or penalties which it
would not have incurred if the Spin-off had been tax free, LNR will pay Lennar
an amount equal to the liabilities incurred for taxes, interest and penalties as
a result of the Spin-off and all related accounting, legal and professional
fees, as well as any costs, expenses or damages Lennar incurs as a result of
stockholder litigation or controversies because the Spin-off was not tax free.
The Internal Revenue Service issued a ruling that the Spin-off was tax free. The
Company believes that, because the Internal Revenue Service issued that ruling,
it is very unlikely that the Internal Revenue Service would assert that the
Spin-off was not tax free and would be successful in that assertion. However, if
it were determined that the ruling was issued on the basis of an inaccurate
statement of facts, or if events occur which Lennar or its principal stockholder
had stated to the Internal Revenue Service would not occur, the Internal Revenue
Service could ignore the ruling and seek to demonstrate that the Spin-off was
not tax free. If it were determined that the Spin-off was not tax free, Lennar
could be taxed on the entire amount by which the fair value of LNR at the time
of the Spin-off exceeded Lennar's basis in the stock of LNR. LNR might be
required to reimburse Lennar for the Federal tax on this amount (probably at a
tax rate of 35%), plus interest and any penalties Lennar is required to pay to
the Internal Revenue Service, as well as any state or other taxes resulting from
the Spin-off. This could require the Company to dispose of substantial portions
of its assets, and could substantially impair the ability of the subsidiaries to
conduct their activities as LNR currently expects the subsidiaries to conduct
those activities.
COMPANY WOULD BE ADVERSELY AFFECTED IF IT WERE SUBJECT TO THE INVESTMENT COMPANY
ACT
The Company intends to conduct its business at all times so as not to
become regulated as an investment company under the Investment Company Act of
1940 (the "Investment Company Act"). Accordingly, the Company does not expect to
be subject to the restrictive provisions of the Investment Company Act. The
Investment Company Act applies to entities which hold themselves out as being
involved primarily in investing, reinvesting or trading in securities or which
own investment securities having a value exceeding 40% of the value of the
entities' total assets (other than government securities or cash) on an
unconsolidated basis. The Investment Company Act exempts, among others, entities
that are "primarily engaged in the business of purchasing or otherwise acquiring
mortgages and other liens on and interests in real estate" ("Qualifying
Interests"). Under the current interpretation of the staff of the Securities and
Exchange Commission, to qualify for this exemption, the entity must maintain at
least 55% of its assets in ownership of real estate or mortgage loans. Unless
CMBS held by an entity constitute 100% of the interests in the mortgage pools to
which they relate, the CMBS may be treated as not constituting ownership of the
mortgage loans to which the CMBS relate, and therefore not being Qualifying
Interests. An analysis of the Company's assets at November 30, 1997 indicated
that (a) less than 40% of LNR's assets, other than Government securities or
cash, on an unconsolidated basis, were investment securities and (b) more than
55% of the Company's assets were Qualifying Interests. If, however, due to a
change in the Company's assets, or a change in the value of particular assets,
the Company became an investment company which is not exempt from the Investment
Company Act, the Company either would have to restructure its assets so it would
not be subject to the Investment Company Act, or would have to change materially
the way it conducts its activities. Either of
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these changes could require the Company to sell substantial portions of its
assets at a time it might not otherwise want to do so, and the Company could
incur significant losses as a result. Further, in order to avoid becoming
subject to the requirements of the Investment Company Act, the Company may be
required at times to forego investments it would like to make or otherwise to
act in a manner other than that which its management believes would maximize its
earnings.
REAL ESTATE INVESTMENT RISKS
General. Investments in real property or real property related assets are
subject to varying degrees of risk. A property owner's ability to service debt
will depend in large part on the amount of income generated, expenses incurred
and capital expenditures required by the properties. The Company's income, both
as an owner of properties and as a holder of investments secured by real
properties (including mortgage loans and CMBS), may be adversely affected by a
number of factors, including the general economic climate and local real estate
conditions, an oversupply of, or a reduction in demand for, space in properties
in the areas where particular properties are located and the attractiveness of
particular properties to prospective tenants. Income from properties also is
affected by such factors as the cost of compliance with government regulations,
including zoning and tax laws and the potential for liability under applicable
laws. Many expenditures associated with properties (such as operating expenses
and capital expenditures) cannot be reduced when there is a reduction in income
from the properties.
Lease expirations could adversely affect the Company's earnings and cash
flow. When leases for space in the Company's properties terminate, the Company
may not be able to re-lease the space on terms as favorable as those of the
terminated leases, or at all, and the Company may incur substantial costs to
obtain new tenants (including the cost of renovations, commissions and rent
concessions). If the Company were unable to re-lease a substantial portion of
the space to which those leases relate at rents at least comparable to those
under the current leases, the Company's earnings and cash flow could be
significantly adversely affected.
Illiquidity of real estate investments could adversely affect the Company's
financial condition. Because real estate investments are relatively illiquid,
the Company's ability to vary its portfolio promptly in response to changes in
economic or other conditions may be limited. That illiquidity, or any other
factor that impedes the ability of the Company to respond to adverse changes in
the performance of its investments, could have an adverse effect on the
Company's financial condition and results of operations.
Possible environmental liabilities. Under various federal, state and local
laws, ordinances and regulations, a current or previous owner or operator of a
property may be required to clean up hazardous substances released at the
property, and may be held liable to a governmental entity or to third parties
for property damage and for investigation and cleanup costs incurred by those
parties in connection with the contamination. In addition, some environmental
laws create a lien on a contaminated site in favor of the government for damages
and costs it incurs in connection with the contamination. The presence of
contamination or the failure to remediate contamination may adversely affect the
owner's ability to sell or lease real estate or to borrow using the real estate
as collateral. The owner or operator of a site may be liable under common law to
third parities for damages and injuries resulting from environmental
contamination emanating from the site. Under some circumstances, the holder of a
loan secured by a mortgage on a property may be directly liable for effects of
failure of the property to comply with environmental laws. Therefore, in
addition to the possibility the Company will incur significant costs or
liabilities under environmental laws with regard to properties it owns, the
Company could be adversely affected as a holder of mortgage loans or CMBS, if
costs of complying with environmental laws, or liability for failure to do so,
made property owners unable to meet their debt service obligations, if existence
of contamination or other violations of environmental laws made it difficult to
dispose of properties or reduced the prices for which properties could be sold
upon foreclosure of mortgages, or if property owners incurred direct liability
for failure to comply with environmental laws.
The Company could be required to incur significant costs to comply with the
Americans with Disabilities Act. The Company's properties are subject to the
requirements of the Americans with Disabilities Act (the "ADA"), which generally
requires that public accommodations, including office buildings and in some
instances, facilities in multifamily residential buildings, be made accessible
to disabled persons. The Company
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believes its properties are in substantial compliance with the ADA and that it
will not be required to make substantial capital expenditures to meet the
requirements of the ADA. However, compliance with the ADA could require removal
of access barriers and noncompliance could result in imposition of fines by the
Federal government or the award of damages to private litigants. If the Company
were required to make substantial alterations to a number of its properties to
comply with the ADA, the Company's earnings and cash flow could be adversely
affected.
Investment risks. The Company intends to continue to invest directly or
through partnerships, to originate and acquire mortgage loans, to acquire CMBS,
and otherwise to invest in commercial and residential multi-family rental real
estate in the United States and, at least to a limited extent, elsewhere in the
world. This entails risks that investments will fail to perform in accordance
with expectations and that judgments with respect to the costs of improvements
to bring properties up to market standards will prove inaccurate, as well as
general investment risks associated with any real estate investment.
RISKS OF INVESTING IN SUBORDINATED CMBS
Risks of subordination. To date the Company has purchased only
substantially subordinated classes of CMBS. It has done this because those
classes can be purchased at substantial discounts from their face amounts, and
present the potential for significant profits to the extent collections of
underlying loans exceed those anticipated when the Company purchases them.
However, if collections are lower than anticipated, the payments to the holders
of the most subordinate classes of CMBS, which are the classes in which the
Company invests, will be substantially reduced, and possibly eliminated
entirely.
Risks of repurchase obligation financing. The Company finances most of its
CMBS purchases with repurchase obligations, which are in effect borrowings
secured by the CMBS. The repurchase obligation arrangements require that, if the
market value of the CMBS falls below specified percentages of the repurchase
obligations, the Company provide additional collateral, reduce the loan balance
or liquidate CMBS positions. Therefore, in a period when, due to a substantial
increase in interest rates, a depressed real estate market or otherwise, the
market value of the Company's CMBS were to fall significantly, the Company could
be required to make a significant additional investment in its CMBS (in the form
of increased collateral for the repurchase obligations) or to sell the CMBS at a
time when it may be very inopportune for the Company to do that.
CONTROLLING STOCKHOLDER
LNR has two classes of stock: common stock, which is entitled to one vote
per share, and Class B Common Stock, which is entitled to ten votes per share.
At November 30, 1997, there were 25.144 million outstanding shares of common
stock and 10.984 million outstanding shares of Class B Common Stock. Leonard
Miller owned, through family partnerships, 9.898 million shares of the Class B
Common Stock, and therefore was entitled to cast approximately 74% of the
combined votes which could be cast by the holders of the common stock and the
Class B Common Stock. That gives Mr. Miller the power to elect all LNR's
directors and to approve most matters which are presented to the stockholders,
even if no other stockholders vote in favor of them. In addition, as long as Mr.
Miller owns a substantial portion of the Class B Common Stock, his ownership of
Class B Common Stock would make it impossible for anyone to acquire enough
shares to obtain voting control of LNR. Therefore, Mr. Miller's ownership of
Class B Common Stock probably would discourage any non-negotiated tender offers
or other non-negotiated efforts to take over LNR.
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
If the New 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, the performance of the Company and
certain other factors. Historically, the market for non-investment grade debt
has been subject to disruptions that have caused substantial volatility in the
prices of securities similar to the New Notes. There can be no assurance that if
a market for the New Notes develops, that market will not be subject to similar
disruptions. Any such disruptions may have an adverse effect on holders of the
New Notes.
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CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes in
response to the Exchange Offer will continue to be subject to the restrictions
on transfer of the Old Notes resulting from the fact that the issuance of the
Old Notes was not registered under the Securities Act or registered or qualified
under any state securities laws. In general, the Old Notes may not be offered or
sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that, except in limited circumstances specified in the Registration Agreement,
it will register the Old Notes under the Securities Act. New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred (other than by a holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided the holder acquired the New Notes in the
ordinary course of the holder's business and the holder has no arrangement with
any person to participate in the distribution of the New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of those New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes which the
broker-dealer acquired as a result of market-making activities or other trading
activities. The Company will make this Prospectus available to any such
broker-dealer for use in connection with resales of New Notes. See "Sales of New
Notes Received By Broker-Dealers." However, under the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in those jurisdictions or an
exemption from registration or qualification is available. To the extent that
Old Notes are exchanged as a result of the Exchange Offer, the ability to trade
untendered and tendered but unaccepted Old Notes may be adversely affected.
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THE EXCHANGE OFFER
PURPOSE AND EFFECTS
The Old Notes were issued by the Company on March 24, 1998 to the Initial
Purchasers, who resold the Old Notes to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) and other institutional
"accredited investors" (as defined in Rule 501(a) under the Securities Act). In
connection with the sale of the Old Notes, the Company and the Initial
Purchasers entered into the Registration Agreement pursuant to which the Company
agreed to file with the Commission within 45 days after the Old Notes were
issued a registration statement (the "Exchange Offer Registration Statement")
with respect to an offer to exchange New Notes for the Old Notes. In addition,
the Company agreed to use its best efforts to cause the Exchange Offer
Registration Statement to become effective under the Securities Act within 150
days after the Old Notes were issued and to issue the New Notes pursuant to the
Exchange Offer. A copy of the Registration Agreement 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 Agreement.
Holders of Old Notes who do not tender their Old Notes or whose Old Notes are
tendered but 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 Old Notes.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to persons unrelated to the Company, the Company
believes the New Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for sale, sold and otherwise transferred by any holder
(other than a person that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act and except as set forth in the next paragraph)
without registration or the delivery of a prospectus under the Securities Act,
provided the holder acquires the New 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 New Notes.
If a person were to participate in the Exchange Offer for the purpose of
distributing securities in a manner not permitted by the Commission's
interpretation, (i) the position of the staff of the Commission enunciated in
the no-action letters would not be applicable to the person and (ii) the person
would be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a sale of the New Notes.
Each broker-dealer that receives New Notes for its own account in exchange for
Old 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 New Notes. See "Sales of New
Notes Received By Broker-Dealers."
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes with addresses in any
jurisdiction in which the Exchange Offer or the issuance of New Notes pursuant
to it would violate applicable securities or blue sky laws. Prior to the
Exchange Offer, however, the Company will register or qualify, or cooperate with
the holders of the Old Notes and their respective counsel in connection with the
registration or qualification of, the New 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 New 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, the Company will issue New Notes
in exchange for all Old 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 New Notes issued in the exchange will be the same as the
principal amount of the Old Notes for which they are exchanged. Holders may
tender some or all of their Old Notes in response to the Exchange Offer.
However, Old Notes may be tendered only in multiples of $1,000. See "Description
of the New Notes."
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The form and terms of the New Notes will be the same in all material
respects as the form and terms of the Old Notes, except that (i) the New Notes
will be registered under the Securities Act and hence will not bear legends
regarding restrictions on transfer and (ii) because the New Notes will be
registered, holders of New Notes will not be, and upon the consummation of the
Exchange Offer, except under limited circumstances, holders of Old Notes will no
longer be, entitled to rights under the Registration Agreement intended for
holders of unregistered securities.
Old 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 Agreement.
The Company will be deemed to accept all the Old Notes which are validly
tendered and not withdrawn when the Company gives 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 New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or otherwise, certificates for those Old Notes will be returned,
without expense, to the tendering holder as promptly as practicable after the
Expiration Date.
Holders who tender Old 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. The Company 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
, 1998, unless it is extended by the Company by notice to the
Exchange Agent. The Company reserves the right to extend the Exchange Offer at
its discretion. If the Company extends the Exchange Offer, the term "Expiration
Date" will mean the time and date on which the Exchange Offer as extended will
expire. The Company 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.
TERMINATION OF CERTAIN RIGHTS
The Registration Agreement provides that, with certain exceptions, if
(i)(A) the Exchange Offer Registration Statement has not been filed with the
Commission on or prior to the 45th calendar day following the date of original
issue of the Old Notes, or (B) the Shelf Registration Statement has not been
filed with the Commission on or prior to the 30th day after a Shelf Notice is
required to be delivered under the Registration Agreement (the "Shelf
Registration Statement Filing Date"); (ii)(A) the Exchange Offer Registration
Statement has not been declared effective on or prior to the 150th calendar day
following the date of original issue of the Old Notes, or (B) the Shelf
Registration Statement has not been declared effective on or prior to the 75th
day following the Shelf Registration Filing Date; (iii)(A) the Exchange Offer is
not consummated
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on or prior to the 195th day following the date of original issue of the Old
Notes, or (B) after the 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 the Company is obligated
by the Registration Agreement to maintain its effectiveness (each event referred
to in clauses (i) through (iv) above being a "Registration Default"), the
interest rate on the Old Notes will be increased by one half of one percent per
annum when the Registration Default occurs and will increase by an additional
one half of one percent at the end of 90 days that additional interest continues
to accrue, with an aggregate maximum increase in the interest rate equal to two
percent (2%) per annum. Following the cure of all Registration Defaults, the
accrual of additional interest will cease.
Holders of New Notes will not be and, upon consummation of the Exchange
Offer, holders of Old Notes will no longer be, entitled to rights under the
Registration Agreement intended for holders of Old Notes which are restricted as
to transferability. The Exchange Offer will be deemed consummated when the
Company delivers to the Exchange Agent New Notes in the same aggregate principal
amount as that of the Old Notes which are validly tendered and not withdrawn.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender Old Notes in response to the Exchange
Offer. To tender Old 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 Old 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 Old Notes by causing
DTC to transfer the Old Notes into the Exchange Agent's account in accordance
with DTC's transfer procedure. Although delivery of Old Notes may be 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 Old Notes by a holder will constitute an agreement by the
holder to transfer the Old Notes to the Company in exchange for New Notes on the
terms and subject to the conditions set forth in this Prospectus and in the
Letter of Transmittal.
The method of delivering Old 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 Old
Notes should be sent to the Company. 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 Old 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 Old 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 the Company may require that evidence
satisfactory to the Company of their authority to sign be submitted with the
Letter of Transmittal.
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All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, and that determination will be final and
binding. The Company reserves the right to reject any Old Notes which are not
properly tendered or the acceptance of which the Company believes might be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes, without being
required to waive the same defects, irregularities or conditions as to other Old
Notes. The Company's 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 Old Notes must be cured by the Expiration Date, or by
such later time as the Company may determine. Although the Company intends to
request the Exchange Agent to notify holders of defects or irregularities with
respect to tenders of Old Notes, none of the Company, the Exchange Agent nor any
other person will incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until all defects and
irregularities have been cured or waived. Any Old 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.
The Company has the right (subject to limitations contained in the
Indenture) (i) to purchase or make offers for any Old Notes that remain
outstanding after the Expiration Date and (ii) to the extent permitted by
applicable law, to purchase Old 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, a holder will be representing to the Company that the person
who will acquire the New 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 New Notes or is an "affiliate" of the Company (as defined in
Rule 405 under the Securities Act). If the holder is a broker-dealer that will
receive New Notes for its own account in exchange for Old 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 New Notes.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old 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, the certificate number(s) of
the Old Notes (if available) and the principal amount of Old 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, the certificate(s) representing the Old Notes (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) The certificate(s) representing all the tendered Old Notes (or
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.
26
<PAGE> 28
WITHDRAWAL OF TENDERS
Except as otherwise described below, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,
unless the Old Notes have already been accepted for exchange.
To withdraw a tender of Old 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 Old Notes have been
accepted for exchange by the Company. Any notice of withdrawal must (i) specify
the name of the person who deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate numbers and principal amounts of the Old Notes), (iii) be signed by
the Depositor in the same manner as the signature on the Letter of Transmittal
by which the Old 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 Old Notes into the name of the person who
withdraws the tender, and (iv) specify the name in which the withdrawn Old 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 the Company in its sole discretion, and that
determination will be final and binding on all parties. Any Old Notes which are
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer, and no New Notes will be issued with respect to those Old Notes
unless they are validly re-tendered. Any Old 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 Old
Notes may be re-tendered at any time prior to the Expiration Date.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. 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 the Company and its affiliates.
The Company has 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. The Company 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.
The Company 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 Old Notes and in handling or
forwarding tenders for exchange. The Company 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.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes for New Notes pursuant to the Exchange Offer. If, however,
certificates representing New Notes or Old Notes for principal amounts which are
not tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, a person other than the registered holder of the Old
Notes tendered, or if tendered Old 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 Old Notes for New
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. The Company may refuse to
issue New Notes in exchange for Old Notes, or to return certificates evidencing
Old Notes which are not exchanged, until the Company receives evidence
satisfactory to it that any transfer taxes payable by the holder have been paid.
27
<PAGE> 29
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The exchange of the Old Notes for the New Notes in the Exchange Offer
should not constitute an exchange for federal income tax purposes. Consequently,
(i) no gain or loss should be realized by a U.S. Holder upon receipt of a New
Note; (ii) the holding period of the New Note should include the holding period
of the Old Note for which it is exchanged; and (iii) the adjusted tax basis of
the New Note should be the same as the adjusted tax basis of the Old Note for
which it is exchanged, immediately before the exchange. Even if the exchange of
an Old Note for a New Note were treated as an exchange, the exchange should
constitute a tax-free recapitalization for federal income tax purposes.
Accordingly, a New Note should have the same issue price as an Old Note and a
U.S. Holder should have the same adjusted basis and holding period in the New
Note as it had in the Old Note immediately before the exchange. A "U.S. Holder"
means a person who is, for United States federal income tax purposes, (i) a
citizen or resident of the United States; (ii) 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 (iii) 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 OLD NOTES
If a holder does not exchange Old Notes for New Notes in response to the
Exchange Offer, the Old Notes will continue to be subject to the restrictions on
transfer described in the legend on the certificate evidencing the Old Notes,
and will not have the benefit of any agreement by the Company to register Old
Notes under the Securities Act. In general, the Old 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 Old
Notes. Holders of Old Notes are urged to consult their financial and tax
advisors in making their own decisions on what action to take.
ACCOUNTING TREATMENT
The New Notes will be recorded in the Company's accounting records at the
same carrying value as the Old Notes on the date of the exchange. Accordingly,
the Company will not recognize any gain or loss for accounting purposes as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized by the Company over the term of the New Notes.
EXCHANGE AGENT
U.S. Bank Trust National Association (formerly "First Trust of New York,
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:
<TABLE>
<S> <C> <C>
By Facsimile: By Overnight Courier: By Registered or Certified
Mail:
(212) 809-5459 U.S. Bank Trust U.S. Bank Trust
Corporate Trust Department National Association National Association
Attn: Carlos Luciano Corporate Trust Department Corporate Trust Department
U.S. Bank Trust National Attn: Carlos Luciano 100 Wall Street
Association 100 Wall Street 16th Floor
100 Wall Street 16th Floor New York, New York 10005
16th Floor New York, New York 10005 Attn: Carlos Luciano
New York, New York 10005
(212) 361-2532
</TABLE>
Requests for additional copies of this Prospectus or the Letter of
Transmittal should be directed to the Exchange Agent.
28
<PAGE> 30
CAPITALIZATION
Set forth below is the short term debt and capitalization of the Company at
November 30, 1997 and as adjusted to take account of the sale of the Old Notes
and the application of the net proceeds from that sale. This table should be
read in conjunction with the Company's consolidated financial statements and the
notes thereto included elsewhere in the Prospectus. See also "Description of
Certain Indebtedness."
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Short term debt, including current portion of long term
debt(1)................................................ $302,668 108,668
Existing long term debt(2)................................ 88,503 88,503
The Notes (net of $904 discount).......................... -- 199,096
-------- -------
Total debt........................................ 391,171 396,267
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, 150,000 shares authorized,
25,144 shares issued and outstanding................... 2,515 2,515
Class B common stock, $.10 par value, 40,000 shares
authorized, 10,984 shares issued and outstanding....... 1,098 1,098
Additional paid-in capital................................ 544,548 544,548
Retained earnings......................................... 370 370
Unrealized gains on available-for-sale securities, net.... 20,557 20,557
-------- -------
Total stockholders' equity........................ 569,088 569,088
-------- -------
Total debt and stockholders' equity............... $960,259 965,355
======== =======
</TABLE>
- ---------------
(1) Short term debt consists of $177,386 of borrowings under repurchase
agreements secured by CMBS, $110,909 of borrowings under revolving credit
lines secured by CMBS and mortgage loans and a $12,607 unsecured note
payable to Lennar, which was repaid by the Company in December 1997. Current
portion of long term debt at November 30, 1997 was $1,766.
(2) Existing long term debt consists of secured mortgage notes on operating
properties and land.
PRO FORMA CONSOLIDATED FINANCIAL DATA
The pro forma financial information has been prepared to reflect the
effect, as though they had occurred on December 1, 1996, of (i) the Company's
50% interest in the earnings of Lennar Land Partners, (ii) the elimination of
costs related to the Spin-off and addition of incremental administrative costs
associated with operating as a stand-alone public company, (iii) reductions in
interest expense due to the use of proceeds from funds advanced by Lennar to
repay debt and (iv) the estimated income tax effect of the pro forma adjustments
to the Company's effective tax rate of 39.0%.
The unaudited pro forma consolidated financial statements have been
prepared utilizing the accounting policies outlined in the historical financial
statements.
The following data should be read in conjunction with the Company's
consolidated financial statements and the notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial information included elsewhere in this document. The unaudited
pro forma consolidated financial statements do not necessarily reflect what the
results of operations would have been had the Spin-off occurred as assumed in
preparing the unaudited pro forma consolidated financial statements, nor do they
necessarily reflect the future results of the Company.
29
<PAGE> 31
LNR PROPERTY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Rental income......................................... $ 56,334 $ 56,334
Equity in earnings of partnerships.................... 30,149 $13,292(a) 43,441
Interest income....................................... 41,446 41,446
Gains on sales of:
Real estate........................................ 18,076 18,076
Investment securities.............................. 5,359 5,359
Management fees....................................... 13,385 13,385
Other, net............................................ 2,734 2,734
-------- ------- --------
Total revenues................................ 167,483 13,292 180,775
Costs and expenses
Cost of rental operations............................. 35,767 35,767
General and administrative............................ 26,584 (6,200)(b) 22,176
6,800(b)
(1,742)(b)
(3,266)(b)
Depreciation.......................................... 6,060 6,060
-------- ------- --------
Total costs and expenses...................... 68,411 (4,408) 64,003
-------- ------- --------
Operating earnings...................................... 99,072 116,772
Interest expense........................................ 26,584 (2,100)(c) 24,484
-------- ------- --------
Earnings before income taxes............................ 72,488 19,800 92,288
Income taxes............................................ 28,270 7,721(d) 35,991
-------- ------- --------
Net earnings............................................ $ 44,218 $12,079 $ 56,297
======== ======= ========
Net earnings per share.................................. $ 1.21 $ 1.55
======== ========
Weighted average pro forma shares outstanding........... 36,434 36,434
======== ========
</TABLE>
Adjustments to the historical results to arrive at the pro forma results
are as follows:
(a) Represents entries to reflect the Company's 50% interest in the earnings of
Lennar Land Partners.
(b) Represents entries to reflect the elimination of costs related to the
Spin-off and addition of incremental administrative costs associated with
operating as a stand-alone public company.
(c) Represents entries to reflect reductions in interest expense due to the use
of proceeds from funds advanced by Lennar to repay debt.
(d) The adjustment to taxes represents the estimated income tax effect of the
pro forma adjustments at the Company's effective tax rate of 39.0%.
30
<PAGE> 32
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data regarding
the Company. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
The pro forma financial information has been prepared to reflect the
effect, as though they had occurred on December 1, 1996, of (i) the Company's
50% interest in the earnings of Lennar Land Partners, (ii) the elimination of
costs related to the Spin-off and addition of incremental administrative costs
associated with operating as a stand-alone public company, (iii) reductions in
interest expense due to the use of proceeds from funds advanced by Lennar to
repay debt and (iv) the estimated income tax effect of the pro forma adjustments
to the Company's effective tax rate of 39.0%.
During most of the periods to which the following financial information
relates, LNR and its subsidiaries were subsidiaries of Lennar. The consolidated
financial statements of the Company have been prepared and are presented to
reflect the Company as a separate combined group for all periods presented and
have been extracted from the financial statements of Lennar using Lennar's
historical results of operations and historical cost basis of its assets and
liabilities which are used in the businesses being operated by the Company
(including some assets and liabilities which were not recorded as belonging to
current LNR subsidiaries, but which were used primarily in connection with their
businesses). Expenses which related both to the businesses operated by the
Company and the businesses retained by Lennar have been allocated on a basis
which both Lennar and the Company believe is reasonable. However, the expenses
allocated to the Company are not necessarily the same as those the Company would
have incurred if it had operated independently, and in general, the results of
operations reflected in the consolidated financial statements of LNR and its
subsidiaries are not necessarily the same as those which would have been
realized if the Company had been operated independently of Lennar during the
periods to which those financial statements relate.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED NOVEMBER 30,
----------------------------------------------------------
PRO FORMA ACTUAL
--------- ----------------------------------------------
1997 1997 1996 1995 1994 1993
--------- ------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Revenues
Rental income.............................. $ 56,334 56,334 59,215 51,664 45,978 39,381
Equity in earnings of partnerships......... 43,441 30,149 51,862 31,203 20,710 7,046
Interest income............................ 41,446 41,446 28,726 20,475 11,640 8,694
Gains on sales of:
Real estate............................. 18,076 18,076 3,669 15,776 9,085 --
Investment securities................... 5,359 5,359 1,735 513 -- --
Management fees......................... 13,385 13,385 18,229 10,274 12,390 6,565
Other, net................................. 2,734 2,734 -- 2,910 2,016 1,387
-------- ------- ------- ------- ------- ------
Total revenues..................... 180,775 167,483 163,436 132,815 101,819 63,073
-------- ------- ------- ------- ------- ------
Costs and expenses
Cost of rental operations.................. 35,767 35,767 38,126 30,890 23,884 18,866
General and administrative................. 22,176 26,584 20,756 15,155 14,436 7,806
Depreciation............................... 6,060 6,060 5,916 5,671 4,618 4,002
Other, net................................. -- -- 658 -- -- --
-------- ------- ------- ------- ------- ------
Total costs and expenses........... 64,003 68,411 65,456 51,716 42,938 30,674
-------- ------- ------- ------- ------- ------
Operating earnings........................... 116,772 99,072 97,980 81,099 58,881 32,399
Interest expense............................. 24,484 26,584 20,513 14,692 5,688 3,378
-------- ------- ------- ------- ------- ------
Earnings before income taxes................. 92,288 72,488 77,467 66,407 53,193 29,021
Income taxes................................. 35,991 28,270 30,212 25,899 20,695 10,447
-------- ------- ------- ------- ------- ------
Net earnings................................. $ 56,297 44,218 47,255 40,508 32,498 18,574
======== ======= ======= ======= ======= ======
Net earnings per share(1).................... $ 1.55 1.21 -- -- -- --
======== =======
Dividends per common share................... $ 0.0125 0.0125 -- -- -- --
</TABLE>
- ---------------
(1) LNR was formed in June 1997 and had no outstanding stock prior to formation;
therefore, net earnings per share have not been calculated for the fiscal
years ended November 30, 1996, 1995, 1994 and 1993.
31
<PAGE> 33
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED NOVEMBER 30,
-------------------------------------------------------------
PRO FORMA ACTUAL
--------- -------------------------------------------------
1997 1997 1996 1995 1994 1993
--------- --------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA
EBITDA(1).................................. $122,832 $105,132 $103,896 $86,770 $63,499 $36,401
Depreciation and amortization.............. 6,060 6,060 5,916 5,671 4,618 4,002
Ratio of earnings to fixed charges(2)...... 4.6x 3.6x 4.8x 5.5x 10.4x 9.6x
Ratio of EBITDA to average assets(3)....... 13.8% 11.8% 14.8% 14.5% 14.8% 14.1%
FINANCIAL POSITION(4)
Total assets............................... -- $1,023,337 $752,968 $652,400 $547,722 $310,355
Total mortgage notes and other debts
payable.................................. -- $391,171 $354,406 $252,256 $119,935 $34,163
Total stockholders' equity(5).............. -- $569,088 -- -- -- --
Total Parent Company investment............ -- -- 367,048 370,903 396,403 266,965
OTHER DATA AND RATIOS ADJUSTED FOR THE
OFFERING(6)
Interest expense(7)........................ $ 30,294 -- -- -- -- --
Total mortgage notes and other debts
payable.................................. $396,267 -- -- -- -- --
Ratio of EBITDA to interest expense........ 4.1x -- -- -- -- --
Ratio of total mortgage notes and other
debts payable to total stockholders'
equity(8)................................ 0.7x -- -- -- -- --
</TABLE>
- ---------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is
used by the Company in analyzing its operating performance, leverage and
liquidity. However, it is not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net earnings as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity.
(2) Outstanding debt of Lennar Land Partners is guaranteed by the Company. See
"Description of Certain indebtedness -- LNR Guarantees of Partnership Debt."
The amount of fixed charges associated with such debt is excluded from the
computation of these ratios.
(3) Ratio of EBITDA to average assets is calculated by dividing EBITDA by the
average of total assets at the beginning and end of the fiscal year.
(4) Actual and pro forma financial position are identical for 1997.
(5) In connection with the Spin-off, the assets and liabilities of Lennar and
its subsidiaries were divided between the Company and Lennar and its
homebuilding subsidiaries so that Lennar and its homebuilding subsidiaries
would have a net worth of $200 million (with specified adjustments) and the
remaining net worth was transferred to the Company. See the Company's
consolidated statements of Parent Company investment and stockholders'
equity and notes thereto included elsewhere in this Prospectus.
(6) Excludes debt which will be incurred in connection with the AHG Acquisition.
(7) Reflects the repayment of $194.0 million of short term debt, which had an
approximate weighted average interest rate of 6.70% for the year ended
November 30, 1997, using the net proceeds of the Offering, and the issuance
of the Notes at an effective interest rate of 9.445%.
(8) Total mortgage notes and other debts payable excludes $119 million of
outstanding unconsolidated partnership debt guaranteed by LNR. The ratio of
total mortgage notes and other debts payable plus outstanding unconsolidated
partnership debt guaranteed by LNR to stockholders' equity, as adjusted for
the Offering, would have been 0.9x.
32
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS CONTAINS INFORMATION WHICH CONSTITUTES FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS INHERENTLY INVOLVE RISKS AND
UNCERTAINTIES. THE FACTORS, AMONG OTHERS, THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS IN THIS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCLUDE
THE ITEMS DESCRIBED UNDER "RISK FACTORS" AND "FORWARD-LOOKING STATEMENTS."
OVERVIEW
LNR was formed by Lennar in June 1997 to separate Lennar's real estate
investment and management business from its homebuilding business. Lennar
contributed to LNR all of the Lennar subsidiaries which were engaged in
businesses described in the following paragraph and assets of other Lennar
subsidiaries which were used primarily in connection with those businesses. On
October 31, 1997, Lennar distributed the stock of LNR to Lennar's stockholders
in the Spin-off. LNR and Lennar have entered into the Separation and
Distribution Agreement, and may enter into other agreements, providing for the
separation of the companies into independent groups and governing various
relationships between them.
The Company is engaged primarily in (i) developing and managing commercial
and multifamily residential properties, (ii) acquiring, managing and
repositioning commercial and multifamily residential real estate loans and
properties, (iii) acquiring (often in partnership with financial institutions or
real estate funds) and managing portfolios of real estate assets, (iv) investing
in unrated and non-investment grade rated CMBS as to which the Company has the
right to be special servicer, and (v) making high yielding real estate related
loans and equity investments. For the following discussion, these businesses are
grouped as follows: (i) real estate operations, (ii) CMBS and loans and (iii)
partnerships and joint ventures.
The combined results of operations of the Company for the periods prior to
November 1, 1997, were extracted from the financial statements of Lennar using
the historical results of operations and historical cost basis of the assets and
liabilities of Lennar's real estate investment and management businesses.
Additionally, the results of operations include revenues and expenses that were
not historically recorded as part of those businesses, but were primarily
associated with them. Management believes the assumptions underlying the
Company's results of operations are reasonable. However, those results may not
reflect the results of operations the Company would have realized if it had
operated as a separate stand-alone group during the periods presented, rather
than as part of the larger Lennar enterprise.
33
<PAGE> 35
The following is a summary of the Company's results of operations for the
years ended November 30, 1997, 1996 and 1995 after allocating among the core
business lines certain non-corporate general and administrative expenses. The
pro forma financial information has been prepared to reflect the effect, as
though they had occurred on December 1, 1996, of (i) the Company's 50% interest
in the earnings of Lennar Land Partners, (ii) the elimination of costs related
to the Spin-off and addition of incremental administrative costs associated with
operating as a stand-alone public company, (iii) reductions in interest expense
due to the use of proceeds from funds advanced by Lennar to repay debt and (iv)
the estimated income tax effect of the pro forma adjustments to the Company's
effective tax rate of 39.0%.
<TABLE>
<CAPTION>
PRO FORMA ACTUAL
--------- --------------------------------
1997 1997 1996 1995
--------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues
Real estate operations........................ $ 74,410 $ 74,410 $ 62,884 $ 67,440
CMBS and loans................................ 51,067 51,067 33,207 23,202
Partnerships and joint ventures............... 52,564 39,272 67,345 39,263
Corporate and other........................... 2,734 2,734 -- 2,910
-------- -------- -------- --------
Total revenues.................................. 180,775 167,483 163,436 132,815
-------- -------- -------- --------
Operating expenses
Real estate operations........................ 44,663 44,663 46,683 38,296
CMBS and loans................................ 2,547 2,547 1,813 604
Partnerships and joint ventures............... 3,104 3,104 6,113 5,339
Corporate and other........................... 13,689 18,097 10,847 7,477
-------- -------- -------- --------
Total operating expenses........................ 64,003 68,411 65,456 51,716
-------- -------- -------- --------
Operating earnings
Real estate operations........................ 29,747 29,747 16,201 29,144
CMBS and loans................................ 48,520 48,520 31,394 22,598
Partnerships and joint ventures............... 49,460 36,168 61,232 33,924
Corporate and other........................... (10,955) (15,363) (10,847) (4,567)
-------- -------- -------- --------
Total operating earnings........................ 116,772 99,072 97,980 81,099
-------- -------- -------- --------
Interest expense................................ 24,484 26,584 20,513 14,692
Income tax expense.............................. 35,991 28,270 30,212 25,899
-------- -------- -------- --------
Net earnings.................................... $ 56,297 $ 44,218 $ 47,255 $ 40,508
======== ======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
Pro forma year ended November 30, 1997 compared to actual year ended November
30, 1997
Pro forma net earnings for the year ended November 30, 1997 were $56.3
million, or $1.55 per share compared with actual net earnings of $44.2 million,
or $1.21 per share. The increase over actual resulted from pro forma adjustments
made to reflect the Spin-off and formation of Lennar Land Partners as of the
beginning of the year.
Actual year ended November 30, 1997 compared to year ended November 30, 1996
Net earnings for the year ended November 30, 1997 were $44.2 million. This
represented a decrease of 6.4% from the prior year net earnings of $47.3
million. The decrease resulted primarily from (i) lower earnings from
partnerships and joint ventures as some of the more mature partnerships wind
down, (ii) the costs associated with the Spin-off offset by increases in (a)
interest income and servicing fees derived from the Company's growing CMBS
portfolio and (b) higher gains on sales of real estate properties and CMBS.
34
<PAGE> 36
Operating earnings were generated from the Company's three core business
lines in the following proportions: 26% from real estate operations, 42% from
CMBS and loans and 32% from partnerships and joint ventures. This compares with
15%, 29% and 56%, respectively, for the prior year. The shift in these
percentages from 1996 to 1997 was the result of higher gains from the sale of
real estate assets, higher net income from a growing CMBS portfolio and lower
earnings from the more mature partnerships and joint ventures during 1997.
Year ended November 30, 1996 compared to year ended November 30, 1995
Net earnings for the year ended November 30, 1996 were $47.3 million. This
represented an increase of 16.7% over the prior year net earnings of $40.5
million. The increase resulted primarily from increased earnings from
partnerships and joint ventures due to higher sales of and gains on operating
properties and loans within the partnerships and higher interest income and
servicing fees resulting from purchases of CMBS, partially offset by lower gains
on sales of real estate properties.
Operating earnings were generated from the Company's three core business
lines in the following proportions: 15% from real estate operations, 29% from
CMBS and loans and 56% from partnerships and joint ventures. This compares with
34%, 26% and 40%, respectively, for the prior year. The shift in these
percentages from 1995 to 1996 was the result of lower gains on sales of real
estate, offset by (i) substantially higher earnings from partnerships and joint
ventures due to substantially higher sales of and gains on assets within the
partnerships, and (ii) higher interest income resulting from purchases of CMBS.
REAL ESTATE OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Rental income............................................... $56,334 $59,215 $51,664
Gains on sales of real estate............................... 18,076 3,669 15,776
------- ------- -------
Total revenues.................................... 74,410 62,884 67,440
------- ------- -------
Cost of rental operations................................... 35,767 38,784 30,890
Other operating expenses.................................... 2,836 1,983 1,735
Depreciation................................................ 6,060 5,916 5,671
------- ------- -------
Total operating expenses.......................... 44,663 46,683 38,296
------- ------- -------
Operating earnings................................ $29,747 $16,201 $29,144
======= ======= =======
</TABLE>
- ---------------
Note: Actual and pro forma results are identical for 1997.
Total revenues from real estate operations include the rental income from
operating properties plus gains on sales of those properties. Operating expenses
include the direct costs of operating those properties and the overhead
associated with managing them.
Year ended November 30, 1997 compared to year ended November 30, 1996
Overall, operating earnings from real estate properties increased to $29.7
million for the year ended November 30, 1997 from $16.2 million for 1996. The
increase was due primarily to greater gains on sales of real estate properties
in 1997 as the Company sold those properties it believed had reached their
optimal values. In addition, the stronger real estate economy in 1997
contributed to the higher sales prices for those assets sold. The increases were
also due to the shift in investments over the past few years from large
portfolios of assets in off-balance sheet partnerships and joint ventures to
individual asset acquisitions that are recorded directly on the Company's
balance sheet and statement of earnings.
Although sales of real estate property were approximately $82.4 million
during 1997, the balance of operating properties and equipment, net and land
held for investment increased by $17.5 million during the
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<PAGE> 37
year primarily as a result of approximately $101.3 million in acquisitions. A
majority of those acquisitions were for operating properties which are being
developed or where the Company believes it can improve net operating earnings
and/or ultimate sales value, although there can be no assurance that the Company
will be successful. As of November 30, 1997, approximately 48% of the Company's
operating property portfolio based on book value had not reached stabilized
occupancy and the anticipated improvements in operating earnings will not be
recognized until future periods.
Total rental income decreased to $56.3 million in 1997 from $59.2 million
in 1996. Rental income consisted of $27.0 million and $28.9 million from
commercial properties (office, retail and industrial), $19.5 million and $19.9
million from multi-family residential properties and $9.8 million and $10.4
million from hotels and other properties, in 1997 and 1996, respectively. The
decreases in rental income were attributable to the sales of real estate
properties described above. This was offset, to a lesser degree, by the
inclusion of rental income from newer properties added during 1996 and 1997.
Overall occupancy and rental rates were similar in the two years for stabilized
operating properties. Similarly, the cost of rental operations decreased to
$35.8 million in 1997 from $38.8 million in 1996, primarily due to the
aforementioned sale of real estate properties.
Other operating expenses increased to $2.8 million for 1997 from $2.0
million for 1996, primarily due to increased acquisition, development and
repositioning activities.
Year ended November 30, 1996 compared to year ended November 30, 1995
Overall, operating earnings from real estate properties decreased to $16.2
million for the year ended November 30, 1996 from $29.1 million for 1995. The
decrease was due primarily to lower gains on sales of real estate properties,
which decreased $12.1 million during 1996.
Total rental income increased to $59.2 million in 1996 from $51.7 million
in 1995. Rental income consisted of $28.9 million and $21.7 million from
commercial properties (office, retail and industrial), $19.9 million and $20.1
million from multi-family residential properties and $10.4 million and $9.9
million from hotels and other properties, in 1996 and 1995, respectively. The
increase in rental income from commercial properties (and total rental income)
was due primarily to the acquisition of a 36-story office building in downtown
Atlanta during the first quarter of 1996. Overall occupancy and rental rates
were similar in the two years for stabilized operating properties. The cost of
rental operations increased to $38.8 million in 1996 from $30.9 million in 1995,
due primarily to the acquisition of the office building and an overall increase
in repairs and maintenance expense during 1996.
Gains on sales of real estate properties were $3.7 million in 1996 compared
with $15.8 million in 1995. Gross sales of real estate properties were $15.9
million in 1996 compared with $38.2 million in 1995. The 1995 sales of real
estate properties and gains on those sales were substantially affected by a sale
of a recreational facility in 1995 for $16.5 million. There were no sales of
comparable size in 1996.
Other operating expenses did not change significantly in 1996 from 1995.
36
<PAGE> 38
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) AND LOANS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income -- CMBS..................................... $29,919 $20,713 $12,631
Interest income -- Loans.................................... 11,527 8,013 7,844
Gains on sales of investment securities..................... 5,359 1,735 513
Servicing fees.............................................. 4,262 2,746 2,214
------- ------- -------
Total revenues.................................... 51,067 33,207 23,202
Operating expenses.......................................... 2,547 1,813 604
------- ------- -------
Operating earnings................................ $48,520 $31,394 $22,598
======= ======= =======
</TABLE>
- ---------------
Note: Actual and pro forma results are identical for 1997.
Revenues from CMBS and loans include interest income, gains on sales of
these assets and fees from acting as special servicer for CMBS transactions.
Related operating expenses include the direct costs of investing in and
originating CMBS and loans, and servicing the CMBS portfolio.
Year ended November 30, 1997 compared to year ended November 30, 1996
Overall, operating earnings from CMBS and loans increased to $48.5 million
in 1997 from $31.4 million in 1996. Revenue was higher primarily due to the
growth of the Company's CMBS portfolio to $304.7 million at November 30, 1997
from $263.8 million at November 30, 1996, and to a lesser extent, the
origination and/or purchase of new loans. During 1997, the Company purchased
$146.7 million of CMBS in comparison with $121.9 million in 1996.
Special servicing fees earned from the CMBS portfolio increased during 1997
to $4.3 million from $2.7 million earned in 1996. These fees increased because
of an increased number of CMBS transactions (36 at November 30, 1997 versus 25
at November 30, 1996) for which the Company acts as special servicer.
In addition, results for 1997 include $5.4 million in gains from sales of
CMBS, primarily as a result of a Re-REMIC securitization transaction. The
Re-REMIC transaction was the securitization of the cash flows from pre-existing
CMBS bonds. In that transaction, the Company sold approximately $140 million of
non-investment grade rated CMBS bonds to a trust to which two other parties sold
approximately $320 million of similar bonds. Over 42% of the new securities
created by pooling this $460 million portfolio of non-investment grade bonds
were rated as investment grade. Most of the bonds in the new securitization were
sold to third parties and the Company also retained and/or purchased
approximately $63 million of face value of the non-investment grade securities.
In recording CMBS interest income, the Company follows generally accepted
accounting principles and records interest received plus amortization of the
difference between the carrying value and the face amount of the securities to
achieve a level yield. To date, this has resulted in less recognition of
interest income than interest received. The excess interest received is applied
to reduce the Company's investment. In 1997 and 1996, this excess of cash
received over income recorded was $21.2 million and $10.1 million, respectively.
The Company's initial and ongoing estimates of its returns on CMBS investments
are based on a number of assumptions that are subject to certain business and
economic conditions, the most significant of which is the timing and magnitude
of credit losses on the underlying mortgages.
Actual loss experience to date, particularly for older transactions (3 to 4
years in age) is significantly lower than originally underwritten by the
Company. Therefore, changes to original estimated yields will result in improved
earnings from these transactions in future periods. The Company believes these
improvements resulted from (i) its ability to conservatively underwrite these
transactions, (ii) its workout and real estate expertise in these transactions
and (iii) an improving real estate economy. The Company, however, makes no
37
<PAGE> 39
representation at this time that such positive experience on these older
transactions will translate into yield improvements on newer investments.
The increase in interest income from mortgage loans to $11.5 million in
1997 from $8.0 million in 1996 was due primarily to the higher investment in
mortgage loans, which increased to $86.8 million at November 30, 1997 from $64.4
million at November 30, 1996, and gains realized on the early payoff of certain
loans which had been purchased at discounts.
Operating expenses increased to $2.5 million for 1997 from $1.8 million for
1996 as a result of the additional investments made by the Company.
Year ended November 30, 1996 compared to year ended November 30, 1995
Overall, operating earnings from CMBS and loans increased to $31.4 million
in 1996 from $22.6 million in 1995. Revenue was higher primarily due to the
growth of the Company's CMBS portfolio to $263.8 million at November 30, 1996
from $163.3 million at November 30, 1995, and to a lesser extent the origination
and/or purchase of new loans. During 1996, the Company purchased $121.9 million
of CMBS in comparison with $81.6 million in 1995.
Special servicing fees earned from the CMBS portfolio increased during 1996
to $2.7 million from $2.2 million earned in 1995. These fees increased because
of an increased number of CMBS transactions (25 at November 30, 1996 versus 14
at November 30, 1995) for which the Company acts as special servicer.
In 1996 and 1995, respectively, the excess of cash received on CMBS over
income recorded was $10.1 million and $5.8 million, respectively.
Operating expenses increased to $1.8 million for 1996 from $0.6 million for
1995 as a result of the additional investments made by the Company.
PARTNERSHIPS AND JOINT VENTURES
<TABLE>
<CAPTION>
PRO FORMA ACTUAL
--------- -----------------------------
1997 1997 1996 1995
--------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Equity in earnings of partnerships
"Distressed portfolios".......................... $28,591 $28,591 $51,804 $31,488
Lennar Land Partners............................. 13,570 278 -- --
Other............................................ 1,280 1,280 58 (285)
Management fees.................................... 9,123 9,123 15,483 8,060
------- ------- ------- -------
Total revenues........................... 52,564 39,272 67,345 39,263
Operating expenses................................. 3,104 3,104 6,113 5,339
------- ------- ------- -------
Operating earnings....................... $49,460 $36,168 $61,232 $33,924
======= ======= ======= =======
</TABLE>
The Company's interests in partnerships and joint ventures range from 15%
to 50%. The 50% or less partnerships are not consolidated in the Company's
consolidated financial statements and the results are reflected on the line item
"Equity in earnings of partnerships." Many of the Company's larger partnership
investments in distressed portfolios were made between 1992 and 1996. Because
the purchase price of assets acquired by the partnerships is allocated among the
assets on the basis of their relative values at the time of the purchase, there
is generally little profit from dispositions of partnership assets shortly after
they are acquired. Therefore, the partnerships in which the Company invests tend
to generate greater profits as they mature, at least while real estate markets
are strong and until the partnerships become significantly liquidated.
As the U.S. real estate markets strengthened in 1996 and 1997,
substantially fewer large distressed real estate portfolios became available at
what the Company viewed as attractive prices; and therefore the Company has not
purchased any such portfolio subsequent to August, 1996. Approximately 20% to
25% of
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<PAGE> 40
each portfolio is turned over each year, therefore it is expected that operating
earnings from the Company's U.S. distressed portfolio investments will continue
to decrease over the next three to four years.
The Company, however, has continued to acquire individual underperforming
real estate assets, both in partnership, for the larger assets, and directly. In
addition, subsequent to November 30, 1997, the Company entered into a
partnership to acquire a portfolio of nonperforming commercial mortgage loans in
Japan, where the Company has opened an office to oversee its loan workout and
real estate asset management operations. At this point, there can be no
assurance that these new investments will achieve the same level of results for
the Company as the U.S. distressed portfolio business did.
Prior to the Spin-off, Lennar and the Company transferred to a new
partnership, Lennar Land Partners, parcels of land or interests in land and
other assets which had a total book value on the partnership's books at November
30, 1997 of $376.4 million. This new partnership, which is owned 50% by the
Company and 50% by Lennar, is expected to have a significant impact in
offsetting some, but probably not all, of the decreases in future operating
earnings from the Company's U.S. distressed portfolio business.
Pro forma operating earnings from partnerships and joint ventures for the
year ended November 30, 1997 were $49.5 million compared to $36.2 million on an
actual basis. This difference was due to the inclusion of the Company's equity
in the earnings of Lennar Land Partners from December 1, 1996 through October
31, 1997.
Year ended November 30, 1997 compared to year ended November 30, 1996
Operating earnings from partnerships and joint ventures decreased to $36.2
million in 1997 from $61.2 million in 1996. The decrease was primarily due to
reduced earnings and management fees related to the Company's larger distressed
portfolios. Equity in earnings from LW Real Estate Investments, L.P. and
subsidiaries ("LW Real Estate") decreased to $10.5 million in 1997 from $23.6
million in 1996 and equity in earnings from Lennar Florida Partners I, L.P. and
qualified affiliates ("Lennar Florida Partners") decreased to $8.7 million in
1997 from $20.0 million in 1996. Both of these partnerships were the largest
contributors of actual equity in earnings for both 1997 and 1996. As these
partnerships continue to liquidate their remaining portfolios of assets, their
future contributions to earnings should decrease in comparison with total equity
in earnings. The decreases in the earnings from these two partnerships were
partially offset by additional earnings from some of the Company's other smaller
partnerships and joint ventures.
Partnership distributions received by the Company in 1997 were $79.7
million in comparison with $95.4 million for 1996, a decrease of $15.7 million.
This decrease was primarily due to lower distributions from LW Real Estate of
$35.5 million, resulting from lower dispositions of partnership assets during
the current year. This decrease was partially offset by higher distributions
from several of the other partnerships, a portion of which was due to proceeds
from refinancing of unencumbered partnership assets. Future distributions from
these partnerships may not achieve their 1997 level due to the refinancings. The
1997 distributions were $49.6 million higher than the Company's actual equity in
earnings of the partnerships of $30.1 million. This was because as assets were
liquidated, the partnerships received and could distribute a significant portion
of the liquidating proceeds whereas partnership earnings are only based on net
liquidation proceeds in excess of the book basis. The Company's overall
investments in and advances to partnerships increased approximately 45% during
1997 to $159.4 million at the end of that year. This was primarily due to (i)
the addition of Lennar Land Partners, as part of the Spin-off, which increased
investments in and advances to partnerships by $92.3 million, and (ii) equity in
earnings of the partnerships of $30.1 million, offset by partnership
distributions of $79.7 million. The largest distributions were made by LW Real
Estate, Lennar Florida Partners and Lennar U.S. Partners and were in excess of
the Company's equity in their earnings ($58.4 million of distributions compared
with $23.1 million of equity in earnings).
The Company did not receive any distributions from Lennar Land Partners
during 1997 and future distributions are limited until the repayment of the
partnership's debt, which is projected to occur in approximately 2 years.
39
<PAGE> 41
Management fees decreased to $9.1 million in 1997 from $15.5 million in
1996. These fees typically are based on the amount of assets managed, the
performance of assets or partnerships, or both. Management fees decreased during
1997 due to a reduction in partnership assets. Also contributing to the decrease
during 1997 was the receipt during 1996 of incentive fees from partnerships
managed by the Company (including an incentive fee of $9.6 million received from
one partnership which liquidated a significant portion of its assets in 1996).
Year ended November 30, 1996 compared to year ended November 30, 1995
Operating earnings from partnerships and joint ventures increased to $61.2
million in 1996 from $33.9 million in 1995. This was because of increased
earnings of the partnerships resulting from increases in the collections from
distressed loans, foreclosed properties and other assets which had been acquired
by the partnerships, resulting to some extent from an improvement in the real
estate market, and to some extent from management of the assets.
In particular, the Company's equity in earnings of LW Real Estate increased
to $23.6 million in 1996 from $12.1 million in 1995 because of an increase in
the Company's percentage interest due to an additional investment in the fourth
quarter of 1995. Its equity in the earnings of Lennar Florida Partners was
essentially the same in 1996 as in 1995 ($20.0 million compared with $19.5
million).
Partnership distributions received by the Company in 1996 were $95.4
million, of which distributions of $50.4 million were from LW Real Estate and
$26.6 million were from Lennar Florida Partners. Distributions from these two
partnerships were primarily from the net proceeds of asset sales. These
distributions were substantially greater than the Company's equity in earnings
of the partnerships of $51.9 million. This was because as assets were
liquidated, the partnerships received and could distribute a significant portion
of the liquidating proceeds whereas partnership earnings are only based on net
liquidation proceeds in excess of the book basis.
Management fees increased to $15.5 million in 1996 from $8.1 million in
1995. The 1996 increase was due primarily to incentive fees received from
partnerships managed by the Company (including an incentive fee of $9.6 million
received from one partnership which liquidated a significant portion of its
assets in 1996).
CORPORATE, OTHER AND INTEREST EXPENSES
Year ended November 30, 1997 compared to year ended November 30, 1996
Actual corporate general and administrative expenses increased to $18.1
million in 1997 from $10.8 million in 1996 primarily due to Spin-off expenses of
approximately $6.2 million incurred during 1997. Lower corporate reserves and
bonus expenses in 1997 were largely offset by higher costs during the latter
half of the year associated with operating as a stand-alone company.
Pro forma corporate general and administrative expenses for the year ended
November 30, 1997 were $13.7 million compared to $18.1 million on an actual
basis. This difference was due to the removal of Spin-off related costs incurred
in 1997, offset by incremental costs for operating as a stand-alone public
company.
Interest expense of $26.6 million and $20.5 million was incurred during
1997 and 1996, respectively. Interest amounts incurred and charged to expense in
1997 were greater than those in 1996 due to higher debt levels. The higher debt
levels, in turn, reflected increased borrowings to finance the expansion of the
Company's core business lines.
Pro forma interest expense for the year ended November 30, 1997 was $24.5
million compared to $26.6 million on an actual basis. This difference was due to
the use of proceeds from funds advanced by Lennar to repay debt on October 31,
1997, as if such debt had been repaid on December 1, 1996.
40
<PAGE> 42
Year ended November 30, 1996 compared to year ended November 30, 1995
Corporate general and administrative expenses increased to $10.8 million in
1996 from $7.5 million in 1995. This increase was attributable to a general
increase in the Company's operating costs, primarily relating to personnel
costs, including bonuses, and an increase in corporate level reserves.
During 1996 and 1995, interest expense of $20.5 million and $14.7 million,
respectively, were incurred by the Company. Interest amounts incurred and
charged to expense in 1996 were greater than those in 1995 due to higher debt
levels. The higher debt levels, in turn, reflected increased borrowings to
finance the expansion of the Company's core business lines.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Prior to the Spin-off on October 31, 1997, the Company obtained the funds
it used in its activities primarily from its cash flows, from borrowings and
from funds advanced by Lennar. While the Company was part of Lennar, borrowings
consisted of repurchase agreements and loans secured by particular assets of the
Company and borrowings under Lennar's and other revolving credit lines. As part
of the Spin-off, the Company has entered into its own debt agreements, including
its own revolving lines of credit.
The Company used $56.3 million of cash in operating activities in 1997
compared with $11.8 million in 1996. The increase during 1997 was primarily due
to the funding of restricted cash accounts of $10.0 million and increases in
other assets and deferred income taxes of $26.0 million and $9.4 million,
respectively. The increased restricted cash deposits relate primarily to an
increase in funds held in trust for asset purchases.
The fact that operating activities were a net user of cash also resulted
from the fact that the net earnings of the Company in those years included
non-cash equity in earnings of partnerships of $30.1 million in 1997 and $51.9
million in 1996. However, in those years, cash distributions by those
partnerships totaled $79.7 million and $95.4 million, respectively.
Distributions from partnerships are classified as cash provided by investing
activities, not as cash from operating activities. This is because as assets are
liquidated, the partnerships receive and can distribute a significant portion of
the liquidating proceeds whereas partnership earnings are only based on net
liquidation proceeds in excess of the book basis.
Cash flows provided by investing activities totaled $70.0 million in 1997
compared with $3.5 million in 1996. The increase is primarily attributable to
substantially higher proceeds from sales of real estate, which increased $66.5
million during 1997, higher proceeds from the sale of investment securities of
$102.1 million, including proceeds from the Re-REMIC transaction previously
discussed, and lower purchases of loans which decreased $15.6 million.
Offsetting these increases were lower partnership distributions, which decreased
$15.7 million, increased expenditures for operating property and equipment and
land held for investment of $78.3 million (primarily for investments in
development and redevelopment projects), and increased expenditures for other
investments of $21.9 million.
The Company also received cash from financing activities of $18.1 million
in 1997 compared with $6.4 million in 1996. The increase in 1997 was primarily
due to increased borrowings under mortgage notes and other debts payable, lower
cash borrowings under repurchase agreements for the purchase of CMBS (most CMBS
acquisitions during 1997 were financed at the same time as the purchase and did
not affect cash flows) and lower payments to Lennar.
Because many of the Company's interest bearing assets have fixed interest
rates while the Company's borrowings have been primarily at variable rates, the
Company's profits could be reduced by rising interest rates. Also, the value of
the Company's fixed rate assets will fall when interest rates rise. This could
require the Company to provide additional collateral for its borrowings or to
sell assets to repay borrowings. The Company closely monitors interest rate
risks and uses interest rate swaps and similar instruments to reduce the risks
of rising variable rates. The Company intends to increase long term fixed rate
borrowings which would reduce its need to make variable rate borrowings and
therefore would reduce its exposure to rising variable rates.
The Company has various lines of credit and a revolving credit facility
available to fund its future expansion. Subsequent to November 30, 1997, the
Company entered into an unsecured revolving credit
41
<PAGE> 43
agreement which expires on December 31, 2000, with the option of a one year
extension. The total amount of the facility is $200 million. This facility
contains covenants which could restrict the ability of the Company to borrow in
future periods, however, these restrictions are not expected to have any adverse
impact on the Company's activities. The Company has other secured lines of
credit totaling $418 million, with availability of $147 million at November 30,
1997. These lines are available to purchase CMBS and mortgage notes.
On March 19, 1998, LNR sold $200,000,000 principal amount of 9 3/8% Old
Notes due 2008, the proceeds of which were used to repay short term
indebtedness.
The Company believes the combination of its liquid assets and cash flows
and its ability to obtain borrowings will provide all the funds the Company
requires to meet its short- and long-term needs based upon its currently
anticipated levels of growth.
SUBSEQUENT EVENTS
On February 26, 1998, the Company announced that it had agreed to acquire
AHG, a group of companies which owns 41 multi-family and senior housing
properties, with approximately 6,000 residential rental apartments, many of
which qualify for low-income tax credits under Section 42 of the Internal
Revenue Code. Of the apartments, 49% are located in the Northwestern United
States, 17% are located in the Southwest, 15% are located in the East, 13% are
located in the Far West, and the remainder are located in the Southeast and
Midwest. Approximately 82% of the apartments were constructed by AHG or under
its supervision. AHG acquired the other apartments after they were completed.
The purchase price for AHG will be approximately $86 million and the Company
will assume obligations to make future investments in properties totalling
approximately $44 million, subject to certain adjustments. The Company expects
that after the acquisition AHG, as part of the Company, will continue
developing, acquiring and operating residential apartments which qualify for
low-income tax credits. At December 31, 1997, the book value of AHG's assets was
approximately $257 million and AHG had liabilities of approximately $184
million, including approximately $153 million of debt which, after the
acquisition, will be nonrecourse to LNR. As a result of the AHG Acquisition, the
Company's total indebtedness will increase by approximately $239 million,
including approximately $86 million of indebtedness which the Company will incur
to finance the AHG Acquisition. The consummation of the AHG Acquisition is
subject to the receipt of third party consents.
YEAR 2000
The Company utilizes a number of software systems in conjunction with its
operations. The Company has and will continue to make certain investments in its
software systems and applications to ensure the Company is Year 2000 compliant.
The financial impact of becoming Year 2000 compliant has not been and is not
expected to be material to the Company's financial position or results of
operations in a given year.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share." This statement is effective for the Company
beginning with the first quarter of 1998 and earlier adoption is not permitted.
This statement requires that the current calculations of earnings per share be
replaced by basic and diluted earnings per share calculations. Under the new
guidance, basic and diluted earnings per share would be $1.22 for 1997.
Also in February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information About Capital Structure." SFAS No. 129, which applies to all
entities that have issued securities, requires in summary form, the pertinent
rights and privileges of the various securities outstanding. Examples of
information that must be disclosed are dividend and liquidation preferences,
participation rights, call prices and dates, conversion or exercise prices or
rates and pertinent dates, sinking-fund requirements, unusual voting rights and
significant terms of contracts to issue additional shares. SFAS No. 129 is
effective for financial statements issued for periods ending after December 15,
1997.
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<PAGE> 44
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement is effective for fiscal
years beginning after December 15, 1997, and requires reclassification of
comparative purpose financial statements for all earlier periods presented.
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<PAGE> 45
BUSINESS
OVERVIEW
The Company is a real estate investment and management company, which
structures and makes real estate related investments and, through its expertise
in developing and managing properties, seeks to enhance the value of those
investments. The Company has been engaged in the development, ownership and
management of commercial and multi-family residential properties since 1969.
LNR's Chairman, Chief Executive Officer and President have been with the Company
and have worked together for more than a decade. Over the five years ended
November 30, 1997, the Company's revenues and EBITDA increased at compound
annual growth rates of 27.7% and 30.4%, respectively. The Company's pro forma
revenues and EBITDA for the year ended November 30, 1997, giving effect to the
contributions of Lennar to the capital of LNR and the formation of Lennar Land
Partners as if they had occurred on December 1, 1996, and adjusting general and
administrative costs to eliminate Spin-off related costs and add incremental
costs for a stand-alone public company, were $180.8 million and $122.8 million,
respectively.
LNR was formed by Lennar in June 1997 to separate Lennar's real estate
investment and management business from its homebuilding business. On October
31, 1997, Lennar distributed the stock of LNR to Lennar's stockholders in a
tax-free Spin-off. Activities conducted by Lennar, as predecessor of the
Company, of the type currently being conducted by the Company are treated below
as historical activities of the Company.
The Company's real estate investment activities primarily consist of
- developing and managing commercial and multi-family residential
properties,
- acquiring, managing and repositioning commercial and multi-family
residential real estate loans and properties,
- acquiring, (often in partnership with financial institutions and real
estate funds) and managing portfolios of real estate assets,
- investing in unrated and non-investment grade rated CMBS as to which the
Company has the right to be special servicer (i.e., to oversee workouts
of underperforming and nonperforming loans) and
- making high yielding real estate related loans and equity investments.
The Company adjusts its investment focus from time to time to adapt to
various phases of the real estate cycle. The Company does not have specific
policies as to the type of real estate related assets it will acquire, the
percentage of its assets it will invest in particular types of real estate
related assets or the percentage of the interests in particular entities it will
acquire. Instead, it reviews, at least monthly, the types of real estate related
investment opportunities which may at that time be available, the market factors
which may affect various types of real estate related investments (including the
likelihood of changes in interest rates or availability of investment capital)
and other factors which may affect the attractiveness of particular investment
opportunities.
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<PAGE> 46
At November 30, 1997, the Company's assets included the following:
<TABLE>
<CAPTION>
TYPE OF ASSET BOOK VALUE DESCRIPTION/COMMENT
------------- ------------- -------------------
(IN MILLIONS)
<S> <C> <C>
Commercial properties...... $ 311.9 Multi-family apartment buildings, office and
industrial buildings, retail centers, hotels and
land.
Real estate loans.......... 86.8 Primarily mortgage loans. Also includes loans to
developers and builders, sometimes with profit
participations.
Partnerships............... 159.4 Twelve partnerships with investment banks or real
estate funds which acquired portfolios of loans and
properties, as to which the Company is the managing
general partner. Also, a partnership with Lennar
which acquires, develops and sells land.
CMBS....................... 304.7 Unrated or non-investment grade rated tranches of
CMBS pools acquired at significant discounts from
face value, as to which the Company has the right to
be special servicer and therefore can attempt to
increase collections of underlying loans.
Cash and other assets...... 160.5 Cash at November 30, 1997 ($34.1 million
-------- unrestricted and $56.6 million restricted, of which
$44.9 million was collateral for a letter of credit)
was unusually high because of a Lennar capital
contribution in connection with the Spin-off. Other
assets primarily include deferred tax credits.
Total............ $1,023.3
========
</TABLE>
At the time of the Spin-off, LNR entered into the Separation and
Distribution Agreement with Lennar under which, among other things, they agreed
that at least until 2002, they would not engage in the respective businesses in
which, when the Separation and Distribution Agreement was signed, the other of
them was engaged, or anticipated becoming engaged, except in limited areas in
which their then activities, or anticipated activities, overlapped. The
Separation and Distribution Agreement is described in detail under "Certain
Relationships and Transactions -- Relationships With Lennar."
COMPETITIVE STRENGTHS
The Company believes the following competitive strengths contribute to its
ability to grow and operate profitably:
Real Estate Development, Management and Workout Experience
The Company has developed, redeveloped, repositioned, owned and managed
commercial and multi-family residential real estate since 1969, having
developed, redeveloped, repositioned and managed over 500 properties over this
time period. These properties have included multi-family apartment buildings,
office buildings, retail space, hotels, industrial space and land. The Company
also has, over the past seven years, been responsible for workouts with regard
to more than 6,300 real estate loans. Fitch IBCA, Inc., which rates CMBS special
servicers on the basis of management team, organizational structure, operating
history, workout and asset disposition experience and strategies, information
systems, investor reporting capabilities and financial resources, has given the
Company its highest rating. Based on industry sources regarding issuances of
CMBS, the CMBS as to which the Company had the right to assume the special
servicing represented 17.6% and 12.8% of the CMBS issued in 1996 and 1997,
respectively. In addition to applying the benefits of its experience to
properties it develops, owns or manages, the Company uses this experience in
evaluating potential real estate investments (including asset by asset
evaluations of properties underlying CMBS). It also uses this experience in
redeveloping or rehabilitating properties in order to maximize proceeds from
underperforming or nonperforming assets included in portfolios or single assets
acquired by the Company or partnerships it manages or underlying CMBS in which
the Company invests. The Company believes its combination of real estate and
financial experience gives the Company an advantage over competing investors who
have financial, but not operating, experience.
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<PAGE> 47
Disciplined Investment Approach
The Company performs extensive due diligence before making investments in
order to evaluate investment risks and opportunities to use the Company's skills
to enhance the value of the investments. For example, before bidding for a CMBS
investment, the Company performs a property-by-property evaluation of the assets
underlying the CMBS, including site visits and analyses of rent rolls, vacancy
rates and tenant strength, as well as analyses of the real estate markets in
which the properties are located. The Company's formalized pre-investment
procedures allow its senior management to exercise significant control and
discipline over all investment decisions.
Experienced Management Team
The 10 members of LNR's senior management have an average of 16 years of
real estate industry experience. Steven J. Saiontz, LNR's Chief Executive
Officer, and Jeffrey P. Krasnoff, LNR's President, have 14 and 21 years of real
estate industry experience, respectively, and have been with the Company for 14
years and 12 years, respectively. In addition, Stuart A. Miller, LNR's Chairman
of the Board, who devotes approximately 25% of his working time to the Company,
is the chief executive officer of Lennar, a major homebuilder, and more than 15
years of real estate industry experience. The Company uses incentive based
compensation to retain key members of management, including payment of bonuses
over several year periods, and vesting of stock options over periods as long as
nine years.
Significant Equity Ownership by Leonard Miller
Leonard Miller, one of the founders of Lennar and a Director of LNR, owned,
through family partnerships, 9.898 million shares of LNR's Class B Common Stock
at November 30, 1997. Leonard Miller is the father of Stuart A. Miller, the
Chairman of LNR, and the father-in-law of Steven J. Saiontz, the Chief Executive
Officer of LNR.
Extensive Asset Monitoring
The Company has developed an extensive asset monitoring program that
includes weekly and monthly reports and meetings at which actual results are
compared against budgets on an asset-by-asset basis. This, combined with
comprehensive systems, procedures and controls, allows management to monitor
asset performance closely.
Significant Strategic Relationships
Through partnerships and otherwise, the Company has developed strategic
relationships with affiliates of many of the leading investment banking firms
and real estate funds, including Banc One/Orix, Blackrock Group, BT Alex. Brown
Incorporated, Credit Suisse First Boston Corporation, Deutsche Morgan Grenfell,
Donaldson, Lufkin & Jenrette Securities Corporation, First Chicago Capital
Corp., Lehman Brothers Inc., Morgan Stanley, Dean Witter, Discover & Co. and
Westbrook Partners. These organizations seek to avail themselves of the
Company's ability to evaluate real estate assets rapidly and effectively and to
apply its asset management skills to enhance the value of assets once they have
been acquired (including overseeing workouts of underperforming assets). The
relationships the Company has developed have, among other things, brought the
Company investment opportunities to which it might not otherwise have had
access.
Receiving Recurring Income from its Investments
The Company has significant net rental income, interest income and income
from fees earned as special servicer with regard to CMBS and for managing
partnerships in which it participates. During 1997, the Company's net revenues
from these sources totalled $75.4 million. In addition, through its 50%
ownership of Lennar Land Partners, the Company generates earnings from sales of
Lennar Land Partners' properties, including sales of properties to Lennar for
use in Lennar's homebuilding activities.
46
<PAGE> 48
Not a REIT
In order not to be subject to federal income taxation, a real estate
investment trust is limited in what it can do and the types of income it can
receive, must hold assets for minimum periods and must distribute each year
almost all its earnings. In contrast, the Company can actively manage
properties, earn fee income and other types of non-passive income, dispose of
assets without meetings holding period requirements, and retain and reinvest its
after-tax earnings.
BUSINESS STRATEGY
The Company's business strategy consists of four key elements:
Using Real Estate Expertise to Enhance Real Estate Investments
The Company focuses on investments which it believes can benefit from its
expertise in real estate development and management, including its expertise
regarding workouts of troubled real estate assets. It uses this expertise to
evaluate the risks and potential rewards from particular real estate related
investments and to enhance the value of its investments by overseeing management
of properties underlying financial investments. For example, the Company has
only invested in CMBS when it has had the right to be special servicer, which
enables it to attempt to increase proceeds from underperforming or
non-performing assets. The Company believes its ability to enhance assets
distinguishes it from many other investors in real estate related financial
products.
Identifying Opportunities Attuned to Various Phases of Real Estate Cycle
During each phase of the real estate cycle, the Company tries to identify
investments which will benefit from being made at that point in the cycle. In
the weak real estate market of the early 1990's, the Company acquired portfolios
of underperforming or nonperforming real estate loans and subordinated classes
of CMBS, at substantial discounts from their face value. During the relatively
strong real estate market of 1997, the Company made investments in development
or redevelopment projects and made loans to property developers and residential
builders, and continued to purchase subordinated classes of CMBS when they were
available at prices the Company believed to be attractive. The Company has
entered into an agreement with regard to the AHG Acquisition to purchase a group
of companies engaged in developing and operating multi-family apartment
complexes which generate low-income tax credits. See "-- Real Estate Investments
and Related Activities -- Commercial and Multi-Family Residential Rental Real
Estate." Also, the Company recently made its first investment in a portfolio of
real estate assets located outside the United States.
Using Strategic Relationships
The Company builds and maintains strategic relationships with leading
investment banking firms and real estate funds which can introduce the Company
to real estate related investment opportunities. Also, by investing in
partnership with these firms and funds, the Company can limit the amount it has
to invest to acquire interests in large real estate asset portfolios or other
large real estate related investments.
Diversifying its Real Estate Asset Investments
The Company's real estate investments are diversified both in the forms of
the investments and in the types of properties to which they relate. Further,
the Company's investments relate to properties throughout the United States, and
therefore are to an extent protected against factors which affect only
particular geographical areas.
REAL ESTATE INVESTMENTS AND RELATED ACTIVITIES
Commercial and Multi-Family Residential Rental Real Estate
In 1969 Lennar began engaging in the development, ownership and management
of commercial and residential multi-family rental real estate. Its initial
activities of this type included acquiring an apartment
47
<PAGE> 49
complex, and building and operating small office buildings, local regional
shopping centers and other commercial and industrial facilities on properties
being developed as part of Lennar's homebuilding operations. Gradually, this was
expanded to general development, acquisition and active management of commercial
and residential multi-family rental real estate, as well as acquiring land for
development and sale or leasing for commercial uses. Among other things, these
activities helped offset the cyclical nature of Lennar's homebuilding business.
The Company has developed a staff of in-house real estate professionals to
engage in those activities, including on-site management, leasing and
maintenance personnel, and accounting and management personnel located at
several offices. It also, in some instances, has used outside management
companies to perform day-to-day activities. In those instances, employees of the
Company have closely supervised the operation of the commercial properties and
the activities of the outside management companies. At November 30, 1997, the
Company's portfolio included 14 shopping centers with 1.5 million square feet of
rentable space, five office buildings with 1.1 million square feet of rentable
space, two industrial properties, 3,348 apartment units, a mobile home park and
two hotels.
The shopping centers the Company owns and operates include six small
regional shopping centers (sometimes referred to as "strip centers") with
between 12,000 square feet and 36,400 square feet of store space, as well as
parking areas and public areas, and eight larger shopping centers, with 71,000
square feet to 599,000 square feet of store space. All the small regional
centers are located in Florida. Of the larger shopping centers, six are in
Florida and two are in Arizona.
The Company's five office buildings range from one to 36 stories and have
an aggregate of 1.1 million square feet of rentable office space. Two of the
office buildings are in Florida, two are in Georgia and one is in Louisiana. The
Company's industrial properties are located in Florida and California and
consist of 80,000 square feet and 382,000 square feet, respectively, of usable
floor space. The Company's ten apartment properties range in size from 96 to 712
units, eight of which are located in Florida, one is located in Virginia and one
is located in Colorado.
The two hotels owned by the Company have a total of 462 rooms. One is
managed by the Company and the other is managed by a national chain under a
management contract which can be terminated by either party on 10 days' notice.
In addition to the Company's operating properties, the Company owns
commercially zoned land, 1.6 million square feet of which is leased under ground
leases, and 865.6 acres of which is to be used for specific projects or sold.
The Company maintains a program of liability, property loss and damage and
other insurance which covers all the Company's properties and which the Company
believes is adequate to protect it against all reasonably foreseeable material
insurable risks.
48
<PAGE> 50
The net book value and operating results at November 30, 1997 and for the
year ended on that date with regard to various types of properties owned by the
Company, and related furniture, furnishings and equipment, were as follows:
<TABLE>
<CAPTION>
NET NOI AS A
OPERATING % OF
NET BOOK OCCUPANCY INCOME NET BOOK
VALUE RATE (NOI) VALUE
-------- --------- --------- --------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C>
Stabilized operating properties
Commercial..................................... $ 62,949 85% $11,031 18%
Multi-family................................... 38,527 91% 7,712 20%
Hotel and other................................ 16,195 75% 3,689 23%
Under development or repositioning
Commercial..................................... 65,629 3,976
Multi-family................................... 42,172 46
-------- -------
Total operating properties............. 225,472 26,454
Furniture, fixtures and equipment................ 3,126 --
Land held for investment......................... 83,297 --
-------- -------
Total operating properties and
equipment............................ $311,895 $26,454
======== =======
</TABLE>
The Company's financing strategy with regard to its real estate portfolio
is normally to obtain financing secured by specific assets when the Company
acquires them. This type of financing usually is short- or intermediate-term.
However, the Company sometimes seeks more permanent financing in cases where the
market for an asset makes long-term debt an attractive option and the loan can
be assumed or prepaid.
In the AHG Acquisition, the Company has agreed to acquire AHG, a group of
companies which owns 41 multi-family and senior housing properties, with
approximately 6,000 residential rental apartments, many of which qualify for
low-income tax credits under Section 42 of the Internal Revenue Code. Of the
apartments, 49% are located in the Northwestern United States, 17% are located
in the Southwest, 15% are located in the East, 13% are located in the Far West,
and the remainder are located in the Southeast and Midwest. Approximately 82% of
the apartments were constructed by AHG or under its supervision. AHG acquired
the other apartments after they were completed. The purchase price for AHG will
be approximately $86 million and the Company will assume obligations to make
future investments in properties totalling approximately $44 million, subject to
certain adjustments. The Company expects that after the acquisition, AHG, as
part of the Company, will continue developing, acquiring and operating
residential apartments which qualify for low-income tax credits. At December 31,
1997, the book value of AHG's assets was approximately $257 million and AHG had
liabilities of approximately $184 million, including approximately $153 million
of debt which, after the acquisition, will be nonrecourse to LNR. As a result of
the AHG Acquisition, the Company's total indebtedness will increase by
approximately $239 million, including approximately $86 million of indebtedness
which the Company will incur to finance the AHG Acquisition. The consummation of
the AHG Acquisition is subject to the receipt of third party consents.
Portfolios of Commercial Mortgage Loans and Owned Real Estate
In 1992, the Company began acquiring, directly and through partnerships,
portfolios of commercial mortgage loans and related pools of owned real estate
assets. Its first transaction of this type was a partnership with The Morgan
Stanley Real Estate Fund, which acquired from Resolution Trust Corporation a
portfolio of almost $1 billion face value of assets consisting of more than
1,000 mortgage loans and 65 properties. Since 1992, the Company has formed 11
additional partnerships with several different investment banking firms and real
estate funds to purchase and handle workout activities regarding portfolios of
distressed commercial loans and related real estate. The Company's partners in
these additional partnerships included affiliates of Banc One/Orix, Blackrock
Group, BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation,
Deutsche Morgen Grenfell, Donaldson, Lufkin & Jenrette Securities Corporation,
First Chicago Capital Corp., Lehman
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<PAGE> 51
Brothers Inc., Morgan Stanley, Dean Witter, Discover & Co. and Westbrook
Partners. Involvement of these partners both gave the Company access to
investment opportunities it might not otherwise have had and reduced the amount
the Company had to invest to acquire interests in large portfolios.
In each of these partnerships, a subsidiary formed by the Company acts as
the managing general partner and conducts the business of the partnership. The
partnership portfolio acquisitions in 1993 included a portfolio of real estate
assets with a face amount of more than $2 billion, in what the Company believes
is one of the largest real estate portfolio acquisitions ever to take place in
the United States. The Company earns management fees and asset disposition fees
from the partnerships and has carried interests in cash flow and sale proceeds
once the partners have recovered their capital and achieved specified returns.
The Company's investments ranged from 15% to 50% of the partnerships' capital
and totalled $165 million, out of a total of $684 million invested in the
partnerships. By November 30, 1997, the partnerships had distributed a total of
$1.1 billion to the partners, of which $331 million had been distributed to the
Company. Distributions to the Company included management and asset disposition
fees totalling approximately $50 million. As the U.S. real estate markets
strengthened in 1996 and 1997, substantially fewer large real estate portfolios
become available at what the Company viewed as attractive prices. The Company
has not participated in a partnership which acquired a portfolio of
underperforming real estate assets in the United States since August 1996
(although the Company recently became part of several partnerships to acquire
portfolios of underperforming and nonperforming commercial mortgage loans in
Japan). However, it has continued to acquire individual underperforming real
estate assets. Currently, the partnerships the Company formed are engaged
primarily in enhancing and disposing of assets in the portfolios they acquired,
as well as collecting sums paid with regard to portfolio assets. Since June
1992, the Company has also acquired directly three portfolios of real estate
assets with face amounts of between $21 million and $75 million.
The portfolio loans consist primarily, but not entirely, of fixed rate
first mortgage loans secured by office and industrial buildings, shopping
centers and multi-family residential properties. They are not covered by credit
insurance.
The principal activity of the Company with respect to distressed portfolios
(whether owned by partnerships or directly owned by the Company) is to manage
the workout of nonperforming loans, including negotiating new or modified
financing terms and foreclosing on defaulted loans. The assets generally are
held only as long as is required to enhance their value and prepare them for
sale. Approximately 20% to 25% of each portfolio is turned over each year. The
Company believes its workout and property rehabilitation skills are the
principal reasons financial institutions have sought the Company as a partner in
acquiring portfolios of distressed assets and have given the Company management
control of the partnerships.
Debt financing for partnerships' acquisitions of real estate related asset
portfolios has usually been on a non recourse basis and with no guaranties by
the Company or any other of the partners. In some cases, the lender must be
repaid in full before a partnership can make cash distributions to the Company
and its partners. The Company's financing strategy with regard to real estate
related asset portfolios in which it invests directly is to seek short term
floating rate financing which matches the underlying loans. This type of
financing usually gives lenders recourse to the LNR subsidiaries which acquire
particular asset portfolios.
Investments in CMBS
As a further use of its loan and real estate workout capabilities, the
Company acquires unrated and non-investment grade rated subordinated CMBS and
provides "special servicing" for the mortgage pools to which they relate. Fitch
IBCA, Inc., which rates special servicers of CMBS on the basis of management
team, organizational structure, operating history, workout and asset disposition
experience and strategies, information systems, investor reporting capabilities
and financial resources, has given the Company Fitch's highest rating. At
November 30, 1997, the Company was entitled to be the special servicer with
regard to 36 securitized commercial mortgage pools and owned unrated junior CMBS
related to 33 of those pools. Special servicing is the business of managing and
working out the problem assets in a pool of commercial mortgages or other
assets. For example, when a mortgage in a securitized pool goes into default,
the special servicer negotiates with the borrower on behalf of the pool to
resolve the situation. The Company uses as special
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<PAGE> 52
servicer essentially the same workout skills it applies with regard to its
distressed assets portfolios. Because the holders of the unrated CMBS receive
everything that is collected after the more senior levels of CMBS have been paid
in full, the Company and other holders of unrated CMBS are the principal
beneficiaries of increased collections. Therefore, ownership of the unrated CMBS
gives the Company an opportunity to profit from its special servicing in
addition to receiving fees for being special servicer. The Company has not
purchased unrated CMBS unless it has had the right to be the special servicer of
the mortgage pools to which they relate.
The Company also, in some instances, purchases non-investment grade rated
subordinated CMBS relating to commercial mortgage pools as to which the Company
will act as special servicer. The Company expects to receive a yield on these
securities based on the stated interest and amortization of the Company's
purchase discount. However, if, as senior CMBS issued with regard to a pool
begin to be paid down, the performance of the pool exceeds initial expectations,
then the ratings of the subordinated CMBS are sometimes upgraded by the rating
agencies. This increases their market values and gives the Company an
opportunity to achieve gains on sale of the securities, as well as receiving the
stated interest while it holds them. Therefore, purchases of non-investment
grade rated subordinated securities, like purchases of unrated junior
securities, are a means for the Company to profit from its workout skills.
Particularly in periods of falling interest rates, there often are
prepayments of mortgages underlying CMBS. Because the Company usually purchases
CMBS at significant discounts from their face amounts, prepayments tend to
increase the Company's yield as a percentage of its investment.
The Company is currently financing its purchases of CMBS through short term
repurchase obligations and under its short term revolving credit lines. The
Company intends to repay a portion of these repurchase obligations with proceeds
from the Offering.
The following are the CMBS held by the Company at November 30, 1997:
<TABLE>
<CAPTION>
% OF
FACE INTEREST BOOK FACE CASH BOOK
AMOUNT RATE VALUE AMOUNT YIELD(1) YIELD(2)
-------- -------- -------- ------ -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
BB rated or above......................... $ 88,828 7.93% $ 69,490 78.2% 10.15% 10.15%
B rated................................... 149,684 8.49% 102,786 68.7% 12.43% 12.43%
Unrated................................... 457,213 7.63% 95,165 21.5% 34.49% 11.85%
Unrealized gains on securities and
other................................... -- -- 37,219 -- -- --
-------- ---- -------- ---- ----- -----
Total CMBS portfolio............ $695,725 8.31% $304,660 43.8% 19.54% 11.22%
======== ==== ======== ==== ===== =====
</TABLE>
- ---------------
(1) Cash yield is determined by annualizing the actual cash received during the
month of November 1997, and dividing the result by the book value at
November 1, 1997.
(2) Book yield is determined by annualizing the interest income for the month of
November 1997, and dividing the result by the book value at November 1,
1997.
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<PAGE> 53
Commercial Real Estate Lending
The Company holds mortgage loans made with regard to commercial properties
or properties being developed as residential communities, and loans made to the
developers and builders themselves. At November 30, 1997, the Company held eight
mortgage loans with a total outstanding principal balance of $74.4 million and
four loans to developers and builders with a total outstanding principal balance
of $21.2 million. The states in which the properties securing the Company's
mortgage loans were located were as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
STATE OF LOANS
- ----- ----------------
(IN THOUSANDS)
<S> <C>
Nevada....................................... $52,760
California................................... 26,288
Florida...................................... 8,341
New Jersey................................... 4,500
Texas........................................ 3,704
-------
$95,593
=======
</TABLE>
The mortgage loans are primarily first mortgage loans secured by office
buildings, shopping centers, hotels or land acquired for development. The
mortgage loans on residential communities are usually subordinate to
construction loans, and provide the Company, in addition to interest income,
participation in profits after the developer or builder has achieved specified
financial targets. The types of loans held by the Company at November 30, 1997,
were as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
TYPE OF LOAN OF LOANS
- ------------ ----------------
(IN THOUSANDS)
<S> <C>
Mortgage loans
Convention center.......................... $45,000
Office buildings........................... 17,401
Residential land........................... 7,064
Hotel...................................... 4,500
Shopping center............................ 3,704
Industrial park............................ 1,671
Recreation facility........................ 368
Warehouse.................................. 297
Developer and builder loans.................. 15,588
-------
$95,593
=======
</TABLE>
The Company identifies opportunities to make commercial and residential
development loans through brokers and relationships with other real estate
companies and developers.
The Company evaluates possible loans with in-house personnel, who perform
site visits and do market, demographic and financial analyses with regard to the
collateral for the loans. The Company applies guidelines, which change from time
to time depending on the type of property and market conditions, relating to
loan-to-value ratio, debt coverage and other financial ratios. In most instances
the guidelines the Company has applied have been similar to those applied in
evaluating commercial mortgages for inclusion in mortgage securitizations
(although the Company has not to date securitized any of the commercial loans it
originated for its own account). Sometimes the Company has made subordinated
loans to which it applies other guidelines, but which bear interest at rates
which are higher than those on senior commercial mortgage loans, and some of
which provide the Company participation in profits from the underlying
properties.
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<PAGE> 54
The Company finances its commercial real estate lending activities with a
$50 million credit line, supplemented by the Company's general funds, which
include funds available under its revolving credit lines or repurchase
obligation lines.
Lennar Land Partners
Before the Spin-off, Lennar and the Company transferred to Lennar Land
Partners (the "Land Partnership"), which is 50% owned by the Company and 50%
owned by Lennar, parcels of land or interests in land and other assets which had
a total book value on Lennar's books at October 31, 1997 of approximately $372.4
million. This land was acquired by Lennar primarily to be used for residential
home development. It consists of approximately 31,000 potential home sites in 35
communities, of which 19 communities with 19,300 potential home sites are in
Florida, two communities with 760 potential home sites are in Arizona, five
communities with 4,800 potential home sites are in Texas and nine communities
with 6,500 potential home sites are in California. Approximately 8% of the land
was developed and ready to be built upon, 49% of the land was in various stages
of development and 43% of the land was totally undeveloped. The parcels of land
or interests in land contributed by the Company had been contributed to the
Company by Lennar so the Company could contribute them to the Land Partnership
and receive a 50% interest in the Land Partnership.
When Lennar contributed that land to the Company and to the Land
Partnership, Lennar retained options to purchase up to approximately 22% of the
contributed land at prices it established. The remaining land is available for
sale to independent homebuilders or to Lennar at prices determined from time to
time, which, as is discussed below, must be approved by LNR.
The Land Partnership has an agreement with Lennar under which Lennar, for a
fee, administers all day-to-day activities of the Land Partnership, including
overseeing planning and development of properties and overseeing sales of land
to Lennar and other builders.
The Land Partnership is governed by an Executive Committee consisting of
representatives of Lennar and of the Company, with Lennar's representatives and
the Company's representatives each having in total one vote. This, in effect,
gives each of Lennar and the Company a veto with regard to matters presented to
the Executive Committee. LNR's by-laws require that all significant decisions
relating to the Land Partnership be approved by a Board of Directors committee
consisting entirely of directors who have no relationship with Lennar.
Lennar may, but will be under no obligation to, offer additional properties
to the Land Partnership. Lennar will be free to acquire properties for itself
without any consideration of whether those properties might have been
appropriate for the Land Partnership. The Company will, in effect, be able to
veto any proposals that the Land Partnership acquire properties proposed by
Lennar. See "Certain Relationships and Transactions -- Lennar Land Partners."
Arrangements with regard to particular properties might include, (i) options to
Lennar to purchase all or portions of properties, (ii) rights of first refusal
for Lennar to acquire lots if other builders propose to acquire them, or
buy/sell arrangements under which, if Lennar wanted to purchase lots on which it
did not have an option, it would propose a purchase price and the Company would
have the option to approve the sale to Lennar at that price or itself to
purchase the lots for that price (probably in order to resell them to someone
who would be willing to pay a higher price).
The Company might seek to acquire commercial portions of properties owned
or acquired by the Land Partnership or options relating to them. If it did,
Lennar could, if it wanted to do so, veto acquisitions by the Company.
The Land Partnership has a $125 million revolving line of credit, and a
$100 million term loan, each of which matures in 2001. LNR and Lennar jointly
and severally guaranty the Land Partnership's obligations under these credit
facilities. Many of the Land Partnership assets are subject to non-recourse
mortgage loans. The revolving line of credit is available to supplement
financing which is available with regard to specific properties. As of December
31, 1997, there was $4 million outstanding under the revolving line of credit,
and $100 million outstanding under the term loan.
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<PAGE> 55
COMPETITION
In virtually all aspects of its activities, the Company competes with a
variety of real estate development companies, real estate investment trusts,
investment firms, investment funds and others. The principal area of competition
is for the purchase of real estate assets and securities at prices which the
Company can achieve its desired returns. As the real estate markets have
improved over the past two years, the Company has encountered increased
competition in several of the markets in which it competes, including the
purchase of certain types of real estate and CMBS as well as real estate
lending. The Company believes that its access to investment opportunities
through its relationships and presence in markets across the country, its
ability to quickly underwrite and evaluate those opportunities and its expertise
in real estate workout and management helps the Company to compete effectively
in the purchase of such assets. In addition, the Company's experience in adding
value to real estate and its top rating as a special servicer to CMBS
transactions often attracts other investors with attractive investment
opportunities but who do not have those skills.
Competitive conditions relating to shopping centers, office buildings,
industrial properties, residential apartment buildings and hotels owned or
operated by the Company vary depending on the locations of particular
properties. Most often these facilities compete for tenants or other users based
on their locations, the facilities provided and the pricing of the leases or
room rates. As general economic conditions have improved over the past year,
occupancies have generally increased in many of the Company's markets, which has
helped to reduce the amount of competition in existing properties and has
allowed for, in certain instances, new development.
Although properties owned by the Company may be significant competitors in
some of the areas in which they are located, the Company is not a significant
national competitor with regard to any of the properties it owns or any type of
real estate securities, except that, based on industry sources regarding
issuances of CMBS, the CMBS as to which the Company had the right to assume the
special servicing represented 17.6% and 12.8% of all the CMBS issued in 1996 and
1997, respectively.
REGULATION
Commercial properties owned by the Company or partnerships in which it
participates must comply with a variety of state and local regulations relating
to, among other things, zoning, treatment of waste, construction materials which
must be used and some aspects of building design.
In its loan workout activities, the Company is required to comply with a
number of Federal and state laws designed to protect debtors against overbearing
loan collection techniques. However, in most instances, laws of this type apply
to consumer level loans (including home mortgages), but do not apply to
commercial loans.
The Company's hotels have to be licensed to conduct various aspects of
their businesses, including sales of alcoholic beverages.
EMPLOYEES
At November 30, 1997, the Company had 327 full time and 67 part time
employees, of whom 10 were senior management, 20 were corporate staff, 163 were
hotel personnel and 201 were engaged in asset acquisitions, loan workouts and
rehabilitation and disposition of properties.
None of the Company's employees are members of unions. The Company believes
its relationships with its employees are good.
LEGAL PROCEEDINGS
The Company is not subject to any legal proceedings other than suits
relating to properties it owns which the Company views as an ordinary part of
its business, and most of which are covered by insurance. LNR believes these
suits will not, in aggregate, have a material adverse effect upon the Company.
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<PAGE> 56
PROPERTIES
The Company maintains its principal executive offices at 760 N.W. 107th
Avenue, Miami, Florida, in a building which was built and is owned by the
Company. Those offices occupy approximately 11,240 square feet. Additional
Company offices are located in various office buildings owned by the Company and
in one leased facility.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF LNR
The following table lists the directors and executive officers of LNR, all
of whom will serve until the next annual meeting of stockholders.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION
---- --- ------------------
<S> <C> <C>
Stuart A. Miller.......................... 40 Chairman of the Board; Director
Steven J. Saiontz......................... 39 Chief Executive Officer; Director
Jeffrey P. Krasnoff....................... 42 President; Director
Shelly Rubin.............................. 35 Financial Vice President
Michelle R. Simon......................... 34 Secretary and Corporate Counsel
Robert Cherry............................. 35 Vice President
Steven I. Engel........................... 51 Vice President
Mark A. Griffith.......................... 41 Vice President
David G. Levin............................ 42 Vice President
Ronald E. Schrager........................ 36 Vice President
David O. Team............................. 37 Vice President
Margaret A. Jordan........................ 46 Treasurer
John T. McMickle.......................... 40 Controller
Leonard Miller............................ 65 Director
Sue M. Cobb............................... 60 Director
Carlos M. de la Cruz...................... 56 Director
Brian Bilzin.............................. 52 Director
</TABLE>
Stuart A. Miller is the Chairman of the Board of LNR. Mr. Miller became the
Chairman of the Board of LNR when it was formed in June 1997. Mr. Miller has
been the President and Chief Executive Officer of Lennar since April 1997. For
more than five years prior to April 1997, Mr. Miller was a vice president of
Lennar and held various executive positions with Lennar subsidiaries, including
being the president of its principal homebuilding subsidiary from December 1991
to April 1997 and the president of its principal real estate investment and
management division (the predecessor to a substantial portion of the Company's
business) from April 1995 to April 1997.
Steven J. Saiontz is the Chief Executive Officer of LNR. Mr. Saiontz became
the Chief Executive Officer and a Director of LNR when it was formed in June
1997. For more than five years prior to that, he was the president of Lennar
Financial Services, Inc., a wholly owned subsidiary of Lennar. Mr. Saiontz is
currently a Director of Lennar. He is the brother-in-law of Stuart A. Miller and
the son-in-law of Leonard Miller.
Jeffrey P. Krasnoff is the President of LNR. Mr. Krasnoff became the
President of LNR when it was formed in June 1997 and became a Director in
December 1997. From 1987 until June 1997, he was a vice president of Lennar.
From 1990 until he became the President of LNR, Mr. Krasnoff was involved almost
entirely in Lennar's real estate investment and management division (the
predecessor to a substantial portion of the Company's business).
Shelly Rubin is the Financial Vice President of LNR. She became the
Financial Vice President of LNR when it was formed in June 1997. From May 1994
until June 1997, she was the principal financial officer of Lennar's real estate
investment and management division (the predecessor to a substantial portion of
the Company's business). From 1991 until May 1994, Ms. Rubin was employed by
Burger King Corporation as the controller for its real estate division.
Michelle R. Simon is the Secretary and Corporate Counsel of LNR. She became
the Secretary and Corporate Counsel of LNR when it was formed in June 1997. From
1994 until June 1997, she was the counsel to Lennar's real estate investment
division (the predecessor to a substantial portion of the Company's
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<PAGE> 58
business). From 1992 to 1994, Ms. Simon was an associate and then a vice
president in the investment banking division, special execution group, of
Goldman, Sachs & Co.
Robert Cherry is a Vice President of LNR, responsible for sourcing and
evaluating new investment opportunities. From March 1995 until October 1997, Mr.
Cherry had similar responsibilities for LNR and Lennar's real estate investment
and management division (the predecessor to a substantial portion of the
Company's business). From March 1994 until February 1995, he was a vice
president of G. Soros Realty Advisors/Quantum North America Realty Fund. Prior
to that he was a senior analyst at Moody's Investor Service. Before joining
Moody's, Mr. Cherry was an associate at the law firm of Sullivan & Cromwell.
Steven I. Engel is a Vice President of LNR, directing the special servicing
of the CMBS portfolio. From 1992 until 1997, Mr. Engel had similar
responsibilities for LNR and Lennar's real estate investment and management
division (the predecessor to a substantial portion of the Company's business).
From 1987 to 1992, Mr. Engel owned and managed his own single family
construction company with projects in Broward, Collier and Lee counties in
Florida.
Mark A. Griffith is a Vice President of LNR, responsible for managing the
Eastern Regional Division. From February 1990 until October 1997, Mr. Griffith
had similar responsibilities for LNR and Lennar's real estate investment and
management division (the predecessor to a substantial portion of the Company's
business).
David G. Levin is a Vice President of LNR, responsible for managing Lennar
Capital Services, an LNR subsidiary. From February 1992 until early 1997, Mr.
Levin was responsible for managing the Miami Division of Lennar's real estate
investment and management division (the predecessor to a substantial portion of
the Company's business), which was at that time primarily focused on
partnerships with the Morgan Stanley Real Estate Fund. Prior to that he had
various positions with commercial real estate firms including managing director
of Bear Stearns Real Estate Group.
Ronald E. Schrager is a Vice President of LNR, responsible for managing the
Miami Division of LNR, which is primarily focused on CMBS/special servicing.
From September 1992 until early 1997, he held several positions in Lennar's real
estate investment and management division (the predecessor to a substantial
portion of the Company's business), managing various areas. Prior to that he
served as a vice president of Chemical Bank's Real Estate Finance Group.
David O. Team is a Vice President of LNR, responsible for the Western
Regional Division. From 1994 to 1996, Mr. Team was the owner and president of
Windward Realty Group, a real estate development firm. From 1992 to 1993, he was
a senior vice president with American Real Estate Group.
Margaret A. Jordan is the Treasurer of LNR. Ms. Jordan joined LNR in
September 1997. From February 1993 to August 1997, Ms. Jordan worked as an
independent contractor and financial consultant to real estate businesses. From
June 1987 to January 1993, Ms. Jordan was employed by Atlantic Gulf Communities
Corporation, serving as assistant treasurer and then senior vice president and
treasurer.
John T. McMickle is the Controller of LNR. Mr. McMickle joined LNR in July
1997. From 1994 to June 1997, Mr. McMickle was responsible for financial
reporting at Ryder System. Prior to that he was employed as a senior manager by
Price Waterhouse LLP.
Leonard Miller is the Chairman of the Board of Lennar. He has been the
President or Chairman of the Board, or both, of Lennar since it was founded in
1969. From the time Lennar was founded until April 1997, Mr. Miller was the
chief executive officer of Lennar. Leonard Miller is the father of Stuart A.
Miller and the father-in-law of Steven J. Saiontz.
Sue M. Cobb is and for more than five years has been, Managing Director and
General Counsel of Cobb Partners, Inc. and affiliated companies, a privately
owned group of companies involved in investments, real estate and resort
development. She was the founding partner of the Public Finance Department in
the law firm of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., with
whom she was associated from 1978 until early 1998. From 1993 to 1996, she was
also Vice President and General Counsel of Pan American World Airways, Inc. She
is currently a Director of Enterprise Florida Capital Development Corp., a
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<PAGE> 59
public/private development organization in the State of Florida; and a Director
of Kirkwood Associates, Inc., a closely held ski and summer resort company
headquartered in Kirkwood, California. From 1982 to 1988, she was a member of
the Board of Directors of the Federal Reserve Bank of Atlanta, Miami Branch, and
served three terms as Chairman of that Board.
Carlos M. de la Cruz is, and for more than five years has been, the
Chairman of the Board of Eagle Brands, Inc. (a beverage wholesaler), Coca-Cola
Puerto Rico Bottlers and the Miami Honda, Central Hyundai, Sunshine Ford and
Central Kia automobile dealerships.
Brian L. Bilzin is, and since February 1, 1998 has been, a partner in the
law firm of Bilzin Sumberg Dunn & Axelrod LLP. For more than five years prior to
February 1, 1998, Mr. Bilzin was a partner in Rubin Baum Levin Constant Friedman
& Bilzin, a law firm.
LNR has an Audit Committee, consisting entirely of directors who are not
employees, officers or former officers of LNR or any of its subsidiaries or
divisions, are not relatives of any of its principal executive officers, and are
not individual members of organizations which act as advisors, consultants or
legal counsel to LNR which receive compensation on a continuing basis from LNR.
The functions of the Audit Committee will be to recommend to the full Board of
Directors the engagement of independent auditors, review the scope of non-audit
services performed for LNR or its subsidiaries by the independent auditors,
review the independent auditors' recommendations for improvements of internal
controls and review the scope of work, findings and conclusions of LNR's
Internal Audit Department. The members of this Committee are Ms. Sue M. Cobb and
Mr. Carlos M. de la Cruz.
LNR's By-Laws require that LNR have, until 2002, an Independent Directors
Committee consisting of three or more directors, none of whom is an officer or
employee of LNR or a subsidiary, and none of whom is a director, officer or
employee of Lennar Corporation or a subsidiary of Lennar Corporation. LNR's
By-Laws state that, unless the action has been approved by the Independent
Directors Committee, LNR may not, and its Board of Directors may not approve or
authorize it to, (i) instruct or permit the representatives of its subsidiary on
the Executive Committee of the Land Partnership to vote or consent with regard
to any action which requires the unanimous vote of that Executive Committee,
(ii) enter into, or permit any of its subsidiaries to enter into, any
transaction with Lennar Corporation or any of its subsidiaries, or (iii) agree
to any amendment of, or give any waiver or consent under, the Separation and
Distribution Agreement. The members of this Committee are Mr. Brian L. Bilzin,
Ms. Sue M. Cobb and Mr. Carlos M. de la Cruz.
LNR has (a) a Compensation Committee, which determines the compensation of
its chief executive officer and other executive officers and reviews the
compensation of its other key employees, (b) a Stock Option Committee, which
grants, and determines the terms of, options under the Company's Employee Stock
Option Plans, except grants to directors or officers of LNR and (c) a Directors
and Officers Stock Option Committee, which approves grants, and the terms of,
options granted to directors or officers of LNR (in addition to approval by
LNR's Board of Directors of grants of options to LNR's directors and officers).
The members of this Committee are Messrs. Leonard Miller and Brian L. Bilzin.
LNR uses incentive compensation to encourage key employees to remain with
the Company, as well as to reward performance. Thus, 50% of bonuses to key
employees are paid when they are earned, with the remaining 50% payable over the
following five years, and most stock options are ten year options which become
exercisable in 10% increments on the first through ninth anniversaries of their
dates of grant.
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PRINCIPAL STOCKHOLDERS
The Company is authorized to issue 150,000,000 shares of common stock, par
value $.10 per share ("Common Stock"). As of February 26, 1998, 25,348,529
shares of Common Stock were issued and outstanding, including 229,906 shares
issuable on exercise of stock options.
In addition, the Company is authorized to issue 40,000,000 shares of Class
B common stock ("Class B Common Stock"). As of February 26, 1998, 10,780,752
shares of Class B Common Stock were issued and outstanding.
The following table sets forth certain information as of January 23, 1998,
with respect to the shares of Common Stock of the Company beneficially owned by
each person or group that is known by the Company to be a beneficial owner of
more than 5% of the outstanding Common Stock or Class B Common Stock and all
directors and executive officers of the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) OF TOTAL IN
OF BENEFICIAL OWNER TITLE OF CLASS (NUMBER OF SHARES) CLASS
- ------------------- -------------- ----------------------- -----------
<S> <C> <C> <C>
Leonard Miller.......................... Class B Common 9,897,930(2)(4) 91.8
23 Star Island Stock
Miami Beach, FL 33139 Common Stock 9,597 *
Goldman, Sachs & Co..................... Common Stock 3,524,100(3) 13.9
The Goldman Sachs Group, L.P.
85 Broad Street
New York, NY 10004
Cohen & Steers Capital Management, Common Stock 1,949,600(3) 7.7
Inc...................................
757 Third Avenue
New York, NY 10017
FMR Corp................................ Common Stock 1,867,418 7.4
82 Devonshire Street
Boston, MA 02109-3614
Brian L. Bilzin......................... Common Stock 7,820(5) *
LNR Property Corporation
760 N.W. 107th Avenue
Miami, FL 33172
Sue M. Cobb............................. Common Stock 20,000(6) *
LNR Property Corporation
760 N.W. 107th Avenue
Miami, FL 33172
Carlos M. de la Cruz.................... Common Stock 220,000 *
LNR Property Corporation
760 N.W. 107th Avenue
Miami, FL 33172
Stuart A. Miller........................ Common Stock 129,093(4) *
LNR Property Corporation
760 N.W. 107th Avenue
Miami, FL 33172
Steven J. Saiontz....................... Common Stock 130,347(4)(7) *
LNR Property Corporation
760 N.W. 107th Avenue
Miami, FL 33172
Jeffrey P. Krasnoff..................... Common Stock 29,146 *
LNR Property Corporation
760 N.W. 107th Avenue
Miami, FL 33172
Mark A. Griffith........................ Common Stock 6,615(8) *
LNR Property Corporation
760 N.W. 107th Avenue
Miami, FL 33172
</TABLE>
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<PAGE> 61
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) OF TOTAL IN
OF BENEFICIAL OWNER TITLE OF CLASS (NUMBER OF SHARES) CLASS
- ------------------- -------------- ----------------------- -----------
<S> <C> <C> <C>
David G. Levin.......................... Common Stock 4,188 *
LNR Property Corporation
760 N.W. 107th Avenue
Miami, FL 33172
All executive officers and directors.... Class B Common 9,897,930 91.8
as group (17 persons) Stock
Common Stock 566,863 2.2
</TABLE>
- ---------------
(*) Less than 1%.
(1) Includes currently exercisable stock options and stock options which become
exercisable within sixty days after January 23, 1998 as follows: Stuart A.
Miller (52,500), Steven J. Saiontz (28,772), Jeffrey P. Krasnoff (25,893),
Mark A. Griffith (4,192), David G. Levin (411), all directors and executive
officers (118,138). Also includes shares held by the Company's Employee
Stock Ownership/401(k) Plan for the accounts of the named persons.
(2) Leonard Miller's shares are owned by two limited partnerships. A corporation
wholly-owned by Mr. Miller is the sole general partner of those
partnerships. The limited partners consist of Mr. Miller, his wife and a
trust of which Mr. Miller is the primary beneficiary. Does not include
30,000 shares of Class B Common Stock owned by Miller Family Foundation,
Inc., a charitable foundation of which Mr. Miller is the President.
(3) Based on information contained in Schedule 13Gs dated February 14, 1998 with
respect to Goldman, Sachs & Co. and The Goldman Sachs Group, L.P. and dated
February 9, 1998 with respect to Cohen & Steers Capital Management, Inc.
(4) Stuart Miller is the trustee, and Stuart Miller and Mr. Saiontz's wife are
beneficiaries of a trust which holds limited partnership interests in a
partnership which owns 5,500,000 shares of Class B Common Stock. Because
Leonard Miller is the principal beneficiary of the trust and owns the
corporation which is the sole general partner of the partnership, Leonard
Miller is shown as the beneficial owner of the 5,500,000 shares and neither
Stuart Miller nor Mr. Saiontz is shown as a beneficial owner of those
shares.
(5) Includes 415 shares owned by Mr. Bilzin's wife as to which he has no voting
or investment power and 1,405 shares owned by Mr. Bilzin's sons as to which
he has no voting or investment power and as to which he disclaims beneficial
ownership.
(6) Does not include 30,000 shares owned by Ms. Cobb's husband as to which she
has no voting or investment power.
(7) Does not include 9,000 shares held in a trust for Mr. Saiontz's wife.
(8) Includes five shares owned by Mr. Griffith's son as to which he shares
voting and investment power.
On February 26, 1998, The Depository Trust Company owned of record
24,827,379 shares of Common Stock, constituting 97.94% of the outstanding Common
Stock and 799,834 shares of Class B Common Stock, constituting 7.42% of the
outstanding Class B Common Stock. The Company understands those shares were held
beneficially for members of the New York Stock Exchange, some of whom may in
turn have been holding shares beneficially for customers.
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
RELATIONSHIPS WITH LENNAR
In connection with the Spin-off, LNR and Lennar entered into a Separation
and Distribution Agreement and other agreements. Also, Lennar leases office
space from the Company and Lennar and the Company are the two partners in Lennar
Land Partners.
The Separation and Distribution Agreement
The Separation and Distribution Agreement has a number of provisions
relating to the Spin-off and relationships between LNR and Lennar after the
Spin-off. Under the Separation and Distribution Agreement:
- Lennar contributed to LNR prior to the Spin-off all the Lennar
subsidiaries which were engaged wholly or primarily in the real estate
investment and management business and any assets of other subsidiaries
which were not used or expected to be used wholly or primarily in
connection with Lennar's homebuilding business. LNR must transfer back to
Lennar any assets of LNR subsidiaries which were used primarily in
connection with Lennar's homebuilding business.
- Lennar contributed to LNR cash or additional assets so that, after LNR's
assumption of all Lennar's obligations which related primarily to its
real estate investment and management business, and after an adjustment
described below, Lennar's net worth at the effective time of Lennar's
merger with Pacific Greystone (October 31, 1997) was $200 million plus an
amount approximating the anticipated earnings of Lennar and its
homebuilding subsidiaries from September 1, 1997 to the effective time of
the Pacific Greystone merger.
- LNR assumed all the obligations of Lennar and its subsidiaries which
related primarily to its real estate investment and management business,
including the obligations under specified contracts and specified
obligations for borrowed money.
- LNR issued to Lennar the shares Lennar required to complete the Spin-off.
LNR then offered, during a limited period after the Spin-off, to issue
LNR Class B Stock in exchange for LNR Common Stock (which resulted in
10.984 million shares of Class B Stock being issued in exchange for
Common Stock). LNR agreed to issue to Lennar any shares of LNR Common
Stock Lennar is required to distribute to holders of stock options which
were granted by Lennar prior to the date of the Spin-off.
- Lennar agreed that, at least until 2002, Lennar and its homebuilding
(including home mortgage) subsidiaries will not engage in the business of
(i) acquiring and actively managing commercial and residential
multi-family rental real estate other than as an incident to, or
otherwise in connection with, their homebuilding business, (ii) acquiring
portfolios of commercial mortgage loans or real estate assets acquired
through foreclosures of mortgage loans, other than real estate acquired
as sites of homes to be built or sold as part of their homebuilding
business, (iii) making or acquiring mortgage loans, other than mortgage
loans secured by detached or attached homes or residential condominium
units, (iv) constructing office buildings or other commercial or
industrial buildings, other than small shopping centers, professional
office buildings and similar facilities which will be adjuncts to their
residential developments, (v) purchasing commercial mortgage-backed
securities or real estate asset backed securities or (vi) acting as a
servicer or special servicer with regard to securitized commercial
mortgage pools. Lennar and its homebuilding subsidiaries will not,
however, be prevented from owning or leasing office buildings in which
they occupy a majority of the space; acquiring securities backed by pools
of residential mortgages; acquiring an entity which, when it is acquired,
is engaged in one of the prohibited activities as an incidental part of
its activities; owning as a passive investor an interest of less than 10%
of a publicly traded company which is engaged in a prohibited business;
acquiring commercial paper or short-term debt instruments of entities
engaged in one or more of the prohibited businesses; or owning an
interest in, and managing, the Land Partnership.
- LNR agreed that, at least until 2002, the Company will not engage in the
business of (i) building or selling single family detached or attached
homes or condominium units in low-rise residential
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buildings, (ii) developing properties primarily as sites of homes or
condominium units (other than properties included in portfolios acquired
by the Company or partnerships in which it is a partner which Lennar
elects not to acquire for the prices paid by LNR or the partnerships),
(iii) providing first mortgage financing for the purchases of homes or
condominium units or (iv) providing first mortgage refinancing of loans
secured by homes or condominium units. The Company is not, however,
precluded from developing properties acquired upon default of mortgages
or as incidental portions of real estate portfolios until they can be
disposed of in an orderly manner; selling as condominium units apartments
in multi-family buildings which, when the buildings or mortgages secured
by them were acquired by the Company, were being operated as rental
buildings; acquiring securities backed by pools of residential mortgages;
providing financing to homebuilders or land developers, acquiring their
properties upon default and overseeing their operations until they or
their properties can be disposed of in an orderly manner, owning as a
passive investor an interest of less than 10% in a publicly traded
company which is engaged in a prohibited business; acquiring an entity
which, at the time it is acquired by the Company, is engaged in one or
more of the prohibited activities as an incidental part of its
activities; acquiring commercial paper or other short-term debt
instruments of entities engaged in one or more of the prohibited
businesses; or owning an interest in Lennar Land Partners.
- All indebtedness of Lennar or any of its homebuilding subsidiaries to the
Company, and all indebtedness of the Company to Lennar or any of its
homebuilding subsidiaries, was eliminated immediately before the date of
the Spin-off.
- Lennar agreed to indemnify the Company against any liabilities or
expenses relating to (i) Lennar's homebuilding business, (ii) any Lennar
obligations for borrowings incurred before the date of the Spin-off which
were not assumed by LNR, or (iii) any registration statement, proxy
statement, press release or other document issued by Lennar in connection
with the Pacific Greystone merger (except with regard to information
about LNR provided in writing by LNR).
- LNR agreed to indemnify Lennar and each of its homebuilding subsidiaries
against any liabilities or expenses relating to (i) the real estate
investment and management business, (ii) any obligations assumed by LNR
or any of its subsidiaries, (iii) the Spin-off, (iv) the Information
Statement relating to the Spin-off, (v) any press release or any document
issued by LNR with regard to the Spin-off, (vi) any obligations,
including contingent obligations, of Lennar or any of its past or current
subsidiaries or affiliates existing on or before the date of the Spin-off
that did not arise exclusively or primarily in the conduct of Lennar's
homebuilding business (except that indemnification with regard to Lennar
corporate financings or other Lennar corporate activities which did not
specifically relate to any aspects of its operations was limited to 71.5%
of the liability or expense) and (vii) any actual or contingent
liabilities of Lennar or any of its past or current subsidiaries or
affiliates existing on or before the date of the Spin-off relating to any
business or line of business which at any time was treated on Lennar's
consolidated financial statements as a discontinued operation or a
discontinued line of business, or which was divested by Lennar or any of
its current or former subsidiaries prior to the date of the Spin-off.
- LNR agreed that if, other than because of actions taken by Lennar after
its October 31, 1997 merger with Pacific Greystone Corporation, it is
determined that the Spin-off did not qualify as a transaction in which
the LNR stock distributed to the Lennar stockholders did not result in
income or gain to the Lennar stockholders and did not require Lennar to
recognize income or gain, and as a result Lennar incurs any liabilities
for taxes, interest or penalties to any taxing jurisdiction which it
would not have incurred if the Spin-off had been tax free, LNR will pay
Lennar an amount equal to the liabilities incurred for taxes, interest
and penalties as a result of the Spin-off and all related accounting,
legal and professional fees, as well as any costs, expenses or damages
Lennar incurs as a result of stockholder litigation or controversies
because the Spin-off was not tax free. See "Risk Factors."
- LNR and Lennar agreed that all transactions between Lennar or any of its
homebuilding subsidiaries and the Company must be on substantially the
same terms as those which would prevail in a transaction between
unaffiliated persons. Neither Lennar nor any of its homebuilding
subsidiaries may
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enter into any transaction with the Company which will involve a payment
or loan of more than $5 million unless Lennar receives a copy of a
resolution of LNR's Board of Directors in which that Board of Directors
determines that the transaction is on substantially the same terms as
those which would prevail in a transaction between unaffiliated persons.
The Company may not enter into any transaction with Lennar or any of its
homebuilding subsidiaries which will involve a payment or loan of more
than $5 million unless the Company receives a copy of a resolution of
Lennar's Board of Directors in which that Board of Directors determines
that the transaction or loan is on substantially the same terms as those
which would prevail in a transaction between unaffiliated persons. The
requirement that transactions be on substantially the same terms as those
which would prevail in a transaction between unaffiliated persons does
not include transactions with Lennar Land Partners.
- LNR agreed to pay Lennar an amount equal to its share of Lennar's total
income tax liability for the period from December 1, 1996 to the date of
the Spin-off (October 31, 1997), allocating income to the Company on a
basis provided in the Treasury Regulations as if Lennar and LNR had been
separately incorporated members of the same consolidated group during
that period and LNR had owned and operated Lennar's real estate
investment and management business during the period. Lennar and LNR must
give one another access to their books and records and knowledgeable
personnel in order to permit the other of them to prepare financial
statements and tax returns, in connection with audits of tax returns, and
for other business purposes.
- LNR and Lennar agreed that if, after an audit required by the Pacific
Greystone Merger Agreement, it was determined that Lennar's net worth at
the Effective Time of the Pacific Greystone merger (October 31, 1997) was
less or more than $200 million plus an amount approximating the
anticipated earnings of Lennar and its homebuilding subsidiaries from
September 1, 1997 to the date of the Pacific Greystone merger, LNR would
return to Lennar a portion of Lennar's capital contributions to LNR equal
to the amount by which Lennar's net worth was less than that amount, or
Lennar would make additional capital contributions to LNR equal to the
amount by which Lennar's net worth was more than that amount (this
obligation was satisfied in December 1997 by LNR's returning to Lennar
$12.6 million of Lennar's capital contribution).
Lennar Land Partners
Lennar and LNR, through wholly owned subsidiaries, each owns 50% of the
Land Partnership. The purpose of the Land Partnership is to have Lennar and LNR
share the risks and profits of ownership of some real property which had been
acquired by Lennar for use in its homebuilding activities, and possibly
additional properties which will be acquired in the future. Prior to formation
of the Land Partnership, Lennar transferred to the Company approximately 50% in
value of the original properties which were to be contributed to the Land
Partnership. Lennar and LNR then contributed all the original properties to the
Land Partnership in exchange for 50% interests in the Land Partnership.
Lennar manages the day-to-day activities of the Land Partnership under a
management agreement. Lennar is reimbursed by the Land Partnership for all
direct out-of-pocket expenses plus an agreed monthly amount ($500,000 per month
in 1997 and in 1998) for certain indirect expenses. The reimbursement is subject
to adjustment in the Land Partnership's annual business plan.
The Land Partnership is governed by an Executive Committee of not more than
three members designated by each partner, with all the members designated by a
partner acting as representatives of that partner (without fiduciary or other
obligations to the other partner) and together having a single vote. Actions of
the Executive Committee must be by majority vote (based upon one vote per
partner). Therefore, while the LNR and Lennar subsidiaries are the only
partners, each of them will have a veto over all matters presented to the
Executive Committee. Even if there were additional partners, a number of matters
would require the unanimous vote of the Executive Committee (based upon one vote
per partner), including (i) the acquisition by the Land Partnership of real
property, other than the original properties contributed by Lennar and LNR, (ii)
the sale of any real property to a partner or an affiliate of a partner, other
than upon exercise of an option or under a purchase agreement which had been
approved by the Executive Committee, (iii) the adoption of
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<PAGE> 65
an annual business plan, (iv) approval of a master plan relating to a property
owned by the Land Partnership, (v) a borrowing from or loan to any person,
including a partner or its affiliate, (vi) any amendment to the Management
Agreement with Lennar, (vii) any requirement that the partners make additional
capital contributions to the Land Partnership, or (viii) any agreement with a
partner or an affiliate of a partner which is not otherwise subject to the
requirement of unanimous Executive Committee approval.
Although Lennar may recommend that the Land Partnership acquire additional
properties, Lennar will be under no obligation to do so, and Lennar will be free
to acquire properties itself without considering whether they would be suitable
for the Land Partnership. Conversely, because of the requirements discussed
above for unanimous Executive Committee approval of acquisitions of properties,
LNR could, in effect, veto any future property acquisitions by the Land
Partnership. If Lennar failed to recommend that the Land Partnership acquire
additional properties, or LNR vetoed all proposed acquisitions of additional
properties by the Land Partnership, the activities of Land Partnership would be
limited to developing and disposing of the original properties which were
contributed to it when it was formed.
LNR's Bylaws provide that its representatives on the Executive Committee of
the Land Partnership may not vote in favor of any action specified to require
the unanimous vote of the Executive Committee without approval of the
Independent Directors Committee of LNR's Board of Directors, none of the members
of which may be an officer or employee of the Company or a director, officer or
employee of Lennar or any subsidiary of Lennar.
Other Relationships
There are a number of relationships between Lennar and LNR, in addition to
those arising under the Separation and Distribution Agreement or relating to the
Land Partnership. Among other things, immediately after the Spin-off, all the
stockholders of LNR were persons who had been stockholders of Lennar on the
record date for the Spin-off. More importantly, Leonard Miller, who has voting
control of Lennar, also has voting control of LNR through his ownership of LNR
Class B Common Stock. Also, Stuart A. Miller, the Chairman of the Board of LNR,
is the chief executive officer of Lennar, Steven J. Saiontz, the Chief Executive
Officer of LNR, is a director of Lennar, and Leonard Miller, who is a director
and has voting control of LNR, is the Chairman of the Board of Lennar. In
addition, LNR and Lennar will, for a period, share some computers and related
equipment and computer service personnel, Lennar will provide construction
management with regard to four properties owned by the Company until the
properties are completed and Lennar leases office space from LNR. Finally,
because all LNR's employees immediately after the Spin-off were people who were
previously employees of Lennar, LNR had to assume many of Lennar's benefit
obligations with regard to the people who became employees of LNR.
RELATIONSHIP WITH DIRECTOR
Brian L. Bilzin was a partner in the law firm of Rubin Baum Levin Constant
Friedman & Bilzin, which firm was retained by the Company during the fiscal year
ended November 30, 1997. Mr. Bilzin is currently a partner in the law firm of
Bilzin Sumberg Dunn & Axelrod LLP, a law firm that the Company proposes to
retain in the future.
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<PAGE> 66
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following table sets forth the Company's mortgage notes and other debts
payable at November 30, 1997.
<TABLE>
<CAPTION>
NOVEMBER 30,
1997
--------------
(IN THOUSANDS)
<S> <C>
Secured debt without recourse to LNR
Mortgage notes on operating properties and land with a
fixed interest rate of 7.4%, due December 2003......... $ 20,640
Mortgage notes on operating properties and land with a
floating interest rate (8.5% at November 30, 1997), due
July 1999.............................................. 21,998
--------
Total secured debt without recourse to LNR........ 42,638
--------
Secured debt with recourse to LNR
Mortgage notes on operating properties and land with fixed
interest rates from 7.4% to 8.0%, due through 2004..... 25,659
Mortgage notes on operating properties and land with
floating interest rates (4.2% to 9.5% at November 30,
1997), due through December 2010....................... 21,972
Repurchase agreements with floating interest rates (6.7%
to 7.2% at November 30, 1997), secured by CMBS, due
through October 1998................................... 177,386
Revolving credit lines with floating interest rates (6.7%
to 6.9% at November 30, 1997), secured by CMBS and
mortgage loans, due through August 1998................ 110,909
--------
Total secured debt with recourse to LNR........... 335,926
--------
Unsecured note of LNR payable to Lennar with a fixed
interest rate of 10%, repaid in December 1997............. 12,607
--------
Total mortgage notes and other debts payable...... $391,171
========
</TABLE>
Information concerning the Company's more significant debt instruments is
as follows:
Mortgage Notes on Operating Properties
The Company, through certain subsidiaries, has nine mortgage notes on
operating properties, four of which have scheduled principal and interest
payments, and the remainder of which only have scheduled interest payments, with
the principal due at maturity.
Repurchase Agreements
The Company, through certain subsidiaries, has entered into two reverse
repurchase agreements through which it finances selected CMBS. The agreements
have an aggregate commitment of $310 million under which $177 million was
outstanding at November 30, 1997. Interest is variable, corresponds to the
rating assigned to the CMBS and is based on LIBOR plus specified percentages.
The agreements mature during 1998 and are expected to be refinanced or extended
on substantially the same terms as the existing agreements. LNR has guaranteed
the obligations of its subsidiaries under these agreements and the agreements
are collateralized by the CMBS.
Revolving Credit Lines
The Company, through certain subsidiaries, has three revolving credit lines
with an aggregate commitment of $125 million under which $111 million was
outstanding at November 30, 1997. Interest is variable and is based on LIBOR or
commercial paper rates plus specified percentages. The lines are collateralized
by CMBS and mortgage loans. The lines mature during 1998 and are expected to be
refinanced or extended on substantially the same terms as the existing lines.
The agreements also contain certain financial tests and restrictive covenants,
none of which are currently expected to restrict the Company's activities. LNR
has guaranteed the obligations of its subsidiaries under these agreements.
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<PAGE> 67
LNR GUARANTEES OF PARTNERSHIP DEBT
LNR has guaranteed, jointly and severally with Lennar, a $225 million
credit facility of Lennar Land Partners, of which $104 million was outstanding
at November 30, 1997. See "Certain Relationships and
Transactions -- Relationships with Lennar -- Lennar Land Partners."
In addition, LNR was the guarantor of up to $19.4 million of additional
credit facilities of unconsolidated partnerships, under which $15 million was
outstanding at November 30, 1997.
SUBSEQUENT EVENTS
Unsecured Revolving Credit Notes Payable
On December 5, 1997, the Company and certain of its subsidiaries, entered
into a $200 million revolving credit agreement which expires on December 31,
2000, with the option of a one year extension. The unsecured revolving credit
notes payable were amended and restated on March 26, 1998 under principally the
same terms and conditions. Interest is calculated at LIBOR plus a margin, which
varies based on the Company's leverage and debt ratings. Had there been
outstanding amounts under this facility at November 30, 1997, the interest rate
would have been 7.0%. The agreements also contain certain financial tests and
restrictive covenants, including maximum leverage ratio, minimum net worth,
minimum interest and fixed charge coverage ratios and limits on the incurrence
of unsecured senior debt and subordinated debt. In addition, the Company is
required to maintain a borrowing base. None of the covenants is currently
expected to restrict the Company's activities.
Debt Placement
On March 19, 1998, LNR sold $200,000,000 principal amount of 9 3/8% Old
Notes, the proceeds of which were used to repay short term indebtedness.
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<PAGE> 68
DESCRIPTION OF THE NEW NOTES
The New Notes will be issued under an indenture (the "Indenture"), dated as
of March 24, 1998 between LNR and U.S. Bank Trust National Association (formerly
"First Trust of New York, National Association"), as trustee (the "Trustee").
Upon the issuance of the New Notes, if any, or the effectiveness of a Shelf
Registration Statement, the Indenture will be subject to the Trust Indenture Act
of 1939, as amended (the "TIA"). The following summary of certain provisions of
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the TIA, and to all of the provisions
of the Indenture, including the definitions of certain terms in the Indenture
and the definitions made a part of the Indenture by reference to the TIA as in
effect on the date of the Indenture. A copy of the Indenture may be obtained
from LNR. The definitions of certain capitalized terms used in the following
summary are set forth below under "-- Certain Definitions." References to
"interest" will be deemed to include Additional Interest, as described under
"Exchange Offer; Termination of Certain Rights" unless the context requires
otherwise.
The New Notes will be unsecured obligations of LNR, ranking subordinate in
right of payment to all Senior Indebtedness of LNR.
The New Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the New Notes. Subject to
the provisions described under "The Exchange Offer," the Old Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. LNR may
change any Paying Agent and Registrar without notice to holders of the New Notes
(the "Holders"). LNR will pay principal (and premium, if any) on the New Notes
at the Trustee's corporate office in New York, New York. At LNR's option,
interest may be paid at the Trustee's corporate trust office or by check mailed
to the registered address of Holders. Any Old Notes that remain outstanding
after the completion of the Exchange Offer, together with the New Notes issued
in connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Indenture authorizes the issuance from time to time of not more than
$350,000,000 in aggregate principal amount of 9 3/8% Senior Subordinated Notes
due 2008 consisting of either Series A or Series B Notes having identical terms
(except, in certain cases, for the date from which interest will accrue). The
New Notes offered by this Prospectus are limited in aggregate principal amount
to $200,000,000, and will mature on March 15, 2008. Interest on the New Notes
will accrue at the rate of 9 3/8% per annum and will be payable semiannually in
arrears on each March 15 and September 15, commencing on September 15, 1998, to
the persons who are registered Holders at the close of business on the fifteenth
day immediately preceding the applicable interest payment date. Interest on the
New 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.
The New Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. The New Notes will be redeemable, at LNR's option, in
whole or in part at any time, or from time to time, on or after March 15, 2003
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on March 15 of the years set forth
below, plus, in each case, accrued and unpaid interest thereon, if any, to the
date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.............................................. 104.688%
2004.............................................. 103.516
2005.............................................. 102.344
2006.............................................. 101.172
2007 and thereafter............................... 100.000
</TABLE>
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<PAGE> 69
Optional Redemption upon Public Equity Offerings. Notwithstanding the
foregoing, at any time, or from time to time, on or prior to March 15, 2001, LNR
may, at its option, redeem, with the net cash proceeds of one or more Public
Equity Offerings (as defined), up to 35% of the aggregate principal amount of
the New Notes originally issued, at a redemption price equal to 109.375% of the
principal amount of the New Notes to be redeemed, plus accrued interest, if any,
to the date of redemption; provided that at least 65% of the aggregate principal
amount of the New Notes originally issued remains outstanding immediately
following such redemption. In order to effect the foregoing redemption with the
proceeds of a Public Equity Offering, LNR must make the redemption not more than
60 days after the consummation of the Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of LNR pursuant to an
effective registration statement filed with the Commission in accordance with
the Securities Act.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the New Notes are to be redeemed at any
time, selection of such New Notes or portions thereof to be redeemed will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which such New Notes are listed or, if
such New Notes are not then listed on a national securities exchange, by lot, on
a pro rata basis, or by such method as the Trustee shall deem fair and
appropriate; provided, however, that no New Notes of a principal amount of
$1,000 or less shall be redeemed in part; provided further, that if a partial
redemption is made with the proceeds of a Public Equity Offering, selection of
the New Notes or portions thereof to be redeemed shall be made by the Trustee
only 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 shall be mailed by first-class mail at least 30 but not more than
60 days before the redemption date to each Holder of New Notes to be redeemed at
its registered address. If any New Note is to be redeemed in part only, the
notice of redemption that relates to such New Note shall state the portion of
the principal amount thereof to be redeemed. A replacement New Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original New Note. On and
after the redemption date, interest will cease to accrue on New Notes or
portions thereof called for redemption as long as LNR has deposited with the
paying agent funds in satisfaction of the applicable redemption price pursuant
to the Indenture.
SUBORDINATION
The payment of all Obligations on the New Notes will be subordinated in
right of payment to the prior payment in full in cash or cash equivalents of all
Obligations on Senior Indebtedness, whether outstanding on the Issue Date or
thereafter incurred, including without limitation LNR's obligations under the
Credit Agreement. Upon any payment or distribution of assets of LNR 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 assets of LNR or in a
bankruptcy, reorganization, insolvency, receivership or other similar proceeding
relating to LNR or its property, 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 of any kind
or character is made on account of any Obligations on the New Notes, or for the
acquisition of any of the New Notes for cash or property or otherwise. If any
default occurs and is continuing in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any principal of, interest
on, unreimbursed drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Senior Indebtedness, no payment of
any kind or character shall be made by or on behalf of LNR or any other Person
on its or their behalf with respect to any Obligations on the New 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, as such event of default is
defined in the instrument creating or evidencing such Designated
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<PAGE> 70
Senior Indebtedness, permitting the holders of such Designated Senior
Indebtedness then outstanding to accelerate the maturity thereof and if the
Representative for that issue of Designated Senior Indebtedness 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 Representative for 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"), neither
LNR nor any Subsidiary of LNR or any obligor under the Notes shall (x) make any
payment of any kind or character with respect to any Obligations on the New
Notes or (y) acquire any of the New 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 New 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 date of the commencement of any
Blockage Period with respect to the Designated Senior Indebtedness shall be, or
be made, the basis for commencement of a second Blockage Period by the
Representative of such 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 (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
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).
By reason of such subordination, in the event of the insolvency of LNR,
creditors of LNR who are not holders of Senior Indebtedness, including the
Holders of the New Notes, may recover less, ratably, than holders of Senior
Indebtedness.
As of November 30, 1997, on a pro forma basis, giving effect to the sale of
Old Notes and the application of the estimated net proceeds therefrom, the
aggregate amount of Senior Indebtedness outstanding would have been
approximately $329.8 million.
LNR is principally a holding company whose primary assets consist of shares
of Common Stock issued by its Subsidiaries. Accordingly, LNR will be dependent
upon the cash flows of, and receipt of dividends and advances from, or
repayments of advances by, its Subsidiaries in order to meet its debt
obligations including LNR's obligations under the New Notes. The New Notes will
not be guaranteed by LNR's Subsidiaries, and, consequently, LNR's Subsidiaries
are not obligated or required to pay any amounts pursuant to the New Notes or to
make funds available therefor in the form of dividends or advances. See "Risk
Factors -- Structural Subordination to Subsidiary Debt."
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that LNR purchase all or a portion of
such Holder's New Notes pursuant to the offer described below (the "Change of
Control Offer"), at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest to the date of purchase.
Within 30 days following the date upon which a Change of Control occurs,
LNR must send, by first class mail, a notice to each Holder at such Holder's
last registered address, with a copy to the Trustee, which notice shall govern
the terms of the Change of Control Offer. Such notice shall state, among other
things, the purchase date, which must be no earlier than 30 days nor later than
45 days from the date such notice is mailed, other than as may be required by
law (the "Change of Control Payment Date"). Holders electing to have a New Note
purchased pursuant to a Change of Control Offer will be required to surrender
the New Note, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the New Note completed, to the paying agent at the address specified
in the notice prior to the close of business on the third business day prior to
the Change of Control Payment Date.
In connection with any Change of Control, LNR will within 30 days following
any Change of Control, (i) obtain the consents under the Credit Agreement and
all other Senior Indebtedness required to permit the
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<PAGE> 71
repurchase of the New Notes pursuant to a Change of Control Offer or (ii) repay
in full all Indebtedness, and terminate all commitments, under the Credit
Agreement and all other Senior Indebtedness the terms of which would prohibit
the purchase of the New Notes pursuant to a Change of Control Offer.
If LNR is obligated to make a Change of Control Offer, there can be no
assurance that LNR 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 of Control purchase price for all the New Notes that might be
delivered by Holders seeking to accept the Change of Control Offer. In the event
LNR is required to purchase outstanding Notes pursuant to a Change of Control
Offer, LNR would need to seek third party financing to the extent it does not
have available funds to meet its purchase obligations. However, there can be no
assurance that LNR would be able to obtain any such financing.
Neither the Board of Directors of LNR nor the Trustee may waive the
covenant relating to LNR's obligation to repurchase New Notes upon a Change of
Control. That obligation, as well as restrictions in the Indenture on the
ability of LNR and its Subsidiaries to incur additional Indebtedness, to grant
liens on its property and to make Restricted Payments may also make more
difficult or discourage a takeover of LNR, whether favored or opposed by the
management of LNR. Consummation of any such transaction in certain circumstances
may require redemption or repurchase of the New Notes, and there can be no
assurance that LNR or the acquiring party will have sufficient financial
resources to effect such redemption or repurchase. Such obligations and
restrictions, and the restrictions on transactions with Affiliates, may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
LNR or any of its Subsidiaries by the management of LNR. However, the Indenture
may not afford the Holders of New Notes protection in all circumstances from the
adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
The Indenture provides that a Change of Control will occur on, among other
events, the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of each of LNR and its Subsidiaries taken as a
whole. Although there is 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 New Notes to require LNR to repurchase
such Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of LNR and its Subsidiaries taken as
a whole to another Person or group may be uncertain.
LNR will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of New Notes
pursuant to a Change of Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Change of Control" provisions
of the Indenture, LNR shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
"Change of Control" provisions of the Indenture by virtue thereof.
LNR will not be required to make a Change of Control Offer if a third party
makes the Change of Control Offer in compliance with the requirements of the
Indenture and purchases all New Notes validly tendered and not withdrawn under
such Change of Control Offer in response to such Change of Control Offer.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. LNR will not, and
will not cause or permit any of its 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) 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, LNR and its Subsidiaries may incur
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<PAGE> 72
Indebtedness (including, without limitation, Acquired Indebtedness) if on the
date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof:
(i) the Consolidated Fixed Charge Coverage Ratio of LNR is greater
than 1.5 to 1.0;
(ii) the ratio of the aggregate amount of Recourse Indebtedness
outstanding on a consolidated basis to the Consolidated Net Worth of LNR is
less than 5.0 to 1.0;
(iii) the ratio of the aggregate amount of Senior Recourse
Indebtedness outstanding on a consolidated basis to the sum of (A) the
Consolidated Net Worth of LNR and (B) the aggregate amount of the
Subordinated Indebtedness outstanding on a consolidated basis is less than
3.5 to 1.0; and
(iv) the ratio of the aggregate amount of Subordinated Indebtedness
outstanding on a consolidated basis to the Consolidated Net Worth of LNR is
less than 1.0 to 1.0.
No Indebtedness incurred pursuant to the preceding sentence 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 second sentence of this paragraph
(other than an advance under a committed facility), LNR shall deliver to the
Trustee an Officers' Certificate setting forth the calculations by which such
incurrence was determined to be permitted. If, during any month, LNR incurs
Indebtedness pursuant to the second sentence of this paragraph through advances
under a committed facility, LNR shall 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. LNR will not, and will not cause or
permit any of its Subsidiaries to, directly or indirectly, (a) declare or pay
any dividend or make any distribution (other than dividends or distributions
made to LNR or any Subsidiary of LNR 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
Qualified Capital Stock of LNR) on or in respect of shares of LNR's Capital
Stock to holders of such Capital Stock; (b) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of LNR 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 Capital Stock of LNR for Qualified Capital Stock
of LNR); or (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of LNR or a Subsidiary that is subordinate or junior in right
of payment to the New Notes or any guarantee thereof (each of the foregoing
actions set forth in clauses (a), (b) and (c) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after giving
effect thereto, (i) a Default or an Event of Default shall have occurred and be
continuing or (ii) LNR is 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, or
(iii) the aggregate amount of all Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue 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 the Board of Directors of
LNR) shall exceed the sum of: (A) 50% of the cumulative Consolidated Net Income
(or if cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss) of LNR earned during the period beginning on the first day of the fiscal
quarter including the Issue 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 (B) 100% of the aggregate net cash proceeds received by LNR from
any Person (other than a Subsidiary of LNR) from the issuance and sale
subsequent to the Issue Date and on or prior to the Reference Date of Qualified
Capital Stock of LNR, including treasury stock; plus (C) without duplication of
any amounts included in clause (B) above, 100% of the aggregate net cash
proceeds of any equity contribution received by LNR from a holder of LNR's
Capital Stock subsequent to the Issue Date and on or prior to the Reference Date
(excluding, in the case of clauses (B) and (C), any net cash proceeds from a
Public Equity Offering to the extent used to redeem the New Notes); plus (D)
$75,000,000.
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Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph shall 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 Capital Stock of LNR, either (i) solely in exchange for shares of
Qualified Capital Stock of LNR or (ii) through the application of net proceeds
of a substantially concurrent sale for cash (other than to a Subsidiary of LNR)
of shares of Qualified Capital Stock of LNR; (3) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any
Indebtedness of LNR that is subordinate or junior in right of payment to the New
Notes either (i) solely in exchange for shares of Qualified Capital Stock of LNR
or (ii) through the application of net proceeds of a substantially concurrent
sale for cash (other than to a Subsidiary of LNR) of (A) shares of Qualified
Capital Stock of LNR 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, Common Stock of LNR from employees, former
employees, directors or former directors of LNR pursuant to the terms of
agreements or plans approved by the Board of Directors of LNR 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.
In determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, 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,
LNR shall 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. LNR will not, and will not cause or permit any of its
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
Subsidiary of LNR to (a) pay dividends or make any other distributions on or in
respect of its Capital Stock; (b) make loans or advances or pay any Indebtedness
or other obligation owed to LNR or any other Subsidiary of LNR; or (c) transfer
any of its property or assets to LNR or any other Subsidiary of LNR, except for
such encumbrances or restrictions existing under or by reason of: (1) applicable
law; (2) the Indenture; (3) the Credit Agreement; (4) nonassignment provisions
of any contract or any lease governing a leasehold interest of any Subsidiary of
LNR; (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 Issue Date to the extent and in the
manner such agreements are in effect on the Issue 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 LNR in any material respect as determined
by the Board of Directors of LNR 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. LNR will not permit any of
its Subsidiaries to issue any Preferred Stock (other than to LNR or to a Wholly
Owned Subsidiary of LNR) or permit any Person (other than LNR or a Wholly Owned
Subsidiary of LNR) to own any Preferred Stock of any Subsidiary of LNR.
Limitation on Liens and Guarantees. LNR will not, and will not cause or
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or permit or suffer to exist any Liens securing Indebtedness of
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LNR that is expressly subordinate or junior in right of payment to the Notes or
is pari passu in right of payment to New Notes against or upon any property or
assets of LNR or any of its Subsidiaries (whether owned on the Issue Date or
acquired after the Issue Date), or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom, or to grant
any guarantees of such Indebtedness, unless (i) in the case of Liens securing
Indebtedness of LNR that is expressly subordinate or junior in right of payment
to the New Notes, the New Notes are secured by a Lien on such property, assets
or proceeds that is senior in priority to such Liens, (ii) in the case of
guarantees of Indebtedness of LNR that is expressly subordinate or junior in
right of payment to the New Notes, the New Notes are subject to a guarantee from
the same guarantor or guarantors that is senior in priority to such guarantees,
and (iii) in all other cases, the New Notes are equally and ratably secured or
guaranteed as applicable. For purposes of clarification, 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.
Prohibition on Incurrence of Senior Subordinated Debt. LNR will not incur
or suffer 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 New
Notes and expressly subordinate in right of payment to any other Indebtedness of
LNR.
Merger, Consolidation and Sale of Assets. LNR 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 LNR's assets (determined on a consolidated basis for LNR
and its Subsidiaries) unless: (i) either (1) LNR shall be the surviving or
continuing corporation or (2) the Person (if other than LNR) formed by such
consolidation or into which LNR is merged or the Person which acquires by sale,
assignment, transfer, lease, conveyance or other disposition the properties and
assets of LNR and its Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due and
punctual payment of the principal of, premium, if any, and interest on all of
the New Notes and the performance of every covenant of the New Notes, the
Indenture and the Registration Rights Agreement on the part of LNR to be
performed or observed, as the case may be; (ii) immediately after giving effect
to such transaction and the assumption contemplated by clause (i)(2)(y) 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), LNR or such Surviving Entity, as the case may be, (1) shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
LNR 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; (iii) immediately before and immediately after giving
effect to such transaction and the assumption contemplated by clause (i)(2)(y)
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 (iv) LNR 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
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with such
transaction, such 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 Subsidiaries of
LNR, the Capital Stock of which constitutes all or substantially all of the
properties and assets of LNR shall be deemed to be the transfer of all or
substantially all of the properties and assets of LNR.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of LNR in accordance
with the foregoing, in which LNR is not the continuing corporation, the
successor Person formed by such consolidation or into which LNR is merged or to
which such conveyance, lease or transfer is made shall (upon the required
assumption described above) succeed to, and be
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substituted for, and may exercise every right and power of, LNR under the
Indenture and the New Notes with the same effect as if such surviving entity had
been named as such.
Limitations on Transactions with Affiliates. (a) LNR will not, and will
not cause or permit any of its 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 (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are no less favorable to LNR 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 an
Affiliate of LNR or such Subsidiary. All Affiliate Transactions (and each series
of related Affiliate Transactions which are similar or part of a common plan)
involving aggregate payments or other property with a fair market value in
excess of $5.0 million shall be approved by the Board of Directors of LNR or
such Subsidiary, as the case may be, such approval 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 LNR or any Subsidiary of LNR enters into an Affiliate Transaction
(or a series of related Affiliate Transactions related to a common plan)
involving aggregate payments or other property with a fair market value in
excess of $7.5 million, LNR or such Subsidiary, as the case may be, shall, prior
to the consummation thereof, obtain a favorable opinion as to the fairness of
such transaction or series of related transactions to LNR or the relevant
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees, consultants or agents of LNR or any Subsidiary
of LNR as determined in good faith by LNR's Board of Directors or senior
management; (ii) transactions between or among LNR and any of its Wholly Owned
Subsidiaries or between or among such Wholly Owned Subsidiaries provided such
transactions are not otherwise prohibited by the Indenture; (iii) any agreement
as in effect as of the Issue 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 Issue Date; (iv) Restricted
Payments permitted by the Indenture; and (v) transactions between or among LNR
or any Subsidiaries of LNR and the Land Partnership, provided such transactions
are permitted by and are effected in accordance with the terms of the
Partnership Agreement of the Land Partnership and the By-laws of LNR, in each
case, as in effect on the Issue Date.
Conduct of Business. LNR will, and will cause its 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. LNR will deliver to the Trustee within 15 days after
the filing of the same with the Commission, copies of the quarterly and annual
reports and of the information, documents and other reports, if any, which LNR
is required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that LNR may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, LNR will file with the
Commission, 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. LNR will also comply
with the other provisions of 314(a) of the TIA. The Company shall file with the
Commission and provide the Trustee and holders of new Notes with the
information, documents and reports described herein whether or not the Exchange
Offer Registration Statement (as defined under "The Exchange Offer; Termination
of Certain Rights") has been filed or declared effective.
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EVENTS OF DEFAULT
Each of the following events is defined in the Indenture as an "Events of
Default":
(i) the failure to pay interest (including Additional Interest, if
any) on any Notes when the same 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;
(ii) the failure to pay the principal on any New Notes, when such
principal 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 New Notes tendered pursuant to a Change
of Control Offer), whether or not such failure shall be due to the
subordination provisions of the Indenture or agreements with respect to any
other Indebtedness or any other reason;
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after LNR receives 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 New
Notes (except in the case of a 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);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Recourse Indebtedness of LNR or any Subsidiary of LNR, 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;
(v) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against LNR or any of its Subsidiaries and
remain undischarged, unpaid or unstayed for a period of 60 days after such
judgment or judgments become final and nonappealable; and
(vi) certain events of bankruptcy affecting LNR or any of its
Subsidiaries.
The Events of Default described in clauses (iv), (v) and (vi) above with
respect to a Subsidiary shall not apply if such Person was not a Subsidiary at
the time such event or condition occurred unless, in the case of clause (iv) or
(v) above, LNR or another Subsidiary thereof assumes or otherwise becomes liable
for the liability referred to therein or the liabilities generally of such
Person.
If an Event of Default (other than an Event of Default specified in clause
(vi) above) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding New Notes may declare the principal
of and accrued interest on all the New Notes to be due and payable by notice in
writing to LNR and, if such notice is given by Holders, the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) 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 (5) business days after receipt
by LNR 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 (vi) above occurs and is continuing with respect to
LNR, then all unpaid principal of, and premium, if any, and accrued and unpaid
interest on all of the outstanding New Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the New Notes as described in the preceding
paragraph, the Holders of a majority in aggregate principal amount of the New
Notes may rescind and cancel such declaration and its consequences (i) if the
rescission would not conflict with any judgment or decree, (ii) 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, (iii) if
interest on
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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, (iv) if LNR has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (iv) of the description above
of Events of Default, the Trustee shall have 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 right
consequent thereto.
The Holders of a majority in aggregate principal amount of the New 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 New Notes.
Holders of the New Notes may not enforce the Indenture or the New 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 New 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.
Under the Indenture, LNR is required to provide an officers' certificate to
the Trustee promptly upon LNR's obtaining knowledge of any Default or Event of
Default (provided that LNR shall provide such certification at least annually
whether or not it knows of any Default or Event of Default) that has occurred
and, if applicable, describe such Default or Event of Default and the status
thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
LNR may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding New Notes ("Legal Defeasance"). Such
Legal Defeasance means that LNR shall be deemed to have paid and discharged the
entire indebtedness represented by the outstanding New Notes, except for (i) 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, (ii) LNR's
obligations with respect to the New Notes concerning issuing temporary New
Notes, registration of New Notes, replacement of mutilated, destroyed, lost or
stolen New Notes and the maintenance of an office or agency for payments, (iii)
the rights, powers, trust, duties and immunities of the Trustee and LNR's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, LNR may, at its option and at any time, elect to
have the obligations of LNR released with respect to certain covenants that are
described in the Indenture, including the covenants relating to a Change of
Control ("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the New Notes. In the event 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 with respect to the New Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
LNR 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
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; (ii) in the case of Legal
Defeasance, LNR shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (A) LNR has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) 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
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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; (iii) in the case of Covenant Defeasance, LNR shall have delivered
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; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or 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 New Notes concurrently with such
incurrence); (v) 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 LNR or any of its Subsidiaries
is a party or by which LNR or any of its Subsidiaries is bound; (vi) LNR shall
have delivered to the Trustee an officers' certificate stating that the deposit
was not made by LNR with the intent of preferring the Holders over any other
creditors of LNR or with the intent of defeating, hindering, delaying or
defrauding any other creditors of LNR or others; (vii) LNR shall have delivered
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; (viii)
LNR shall have delivered 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,
(A) the trust funds will not be subject to any rights of holders of Indebtedness
of LNR other than the New Notes and (B) the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
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
New Notes, as expressly provided for in the Indenture) as to all outstanding New
Notes when (i) either (a) all the New Notes theretofore authenticated and
delivered (except lost, stolen or destroyed New Notes which have been replaced
or paid and New Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by LNR and thereafter repaid to LNR or
discharged from such trust) have been delivered to the Trustee for cancellation
or (b) all New Notes not theretofore delivered to the Trustee for cancellation
have become due and payable and LNR has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the New Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on the
New Notes to the date of deposit together with irrevocable instructions from LNR
directing the Trustee to apply such funds to the payment thereof; (ii) LNR has
paid all other sums payable under the Indenture by LNR; and (iii) LNR has
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, LNR and the Trustee, without the consent of the Holders,
may amend the Indenture 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. Other modifications, waivers and
amendments of the Indenture may be made with the consent of the Holders of a
majority in principal amount of the then outstanding New Notes issued under the
Indenture, except that, without the consent of each Holder affected thereby, no
amendment or waiver may: (i) reduce the amount of New Notes whose Holders must
consent to an amendment; (ii) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted interest, on any
New Notes; (iii) reduce the principal of or change or
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have the effect of changing the fixed maturity of any New Notes, or change the
date on which any New Notes may be subject to redemption or repurchase, or
reduce the redemption or repurchase price therefor; (iv) make any New Notes
payable in money other than that stated in the New Notes; (v) make any change in
provisions of the Indenture protecting the right of each Holder to receive
payment of principal of and interest on such New 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 New Notes to waive Defaults or Events of
Default; (vi) amend, change or modify in any material respect the obligation of
LNR 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
(vii) modify or change any provision of the Indenture or the related definitions
affecting the subordination or ranking of the New Notes in a manner which
adversely affects the Holders.
GOVERNING LAW
The Indenture provides that it and the New Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man or woman would
exercise or use under the circumstances in the conduct of his or her own
affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of LNR, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided, however,
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of LNR or at
the time it merges or consolidates with or into LNR or any of its Subsidiaries
or assumed by LNR or any of its Subsidiaries in connection with the acquisition
of assets from such Person.
"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 been 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 (a) an Investment by LNR or any Subsidiary of LNR
in any other Person pursuant to which such Person shall become a Subsidiary of
LNR, or shall be merged with or into LNR or any Subsidiary of LNR, or (b) the
acquisition by LNR or any Subsidiary of LNR of the assets of any Person
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(other than a Subsidiary of LNR) which constitute 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.
"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 LNR or any of its
Subsidiaries (including any sale and leaseback transaction) to any Person other
than LNR or a Wholly Owned Subsidiary of LNR of (a) any Capital Stock of any
Subsidiary of LNR, or (b) any other property or assets of LNR or any Subsidiary
of LNR other than in the ordinary course of business.
"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 and, 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 (i) 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 (ii) with respect
to any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of LNR
or Leisure Colony to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of the
Indenture), other than, in the case of Leisure Colony, a transaction with LNR or
any Wholly Owned Subsidiary of LNR; (ii) the approval by the holders of Capital
Stock of LNR of any plan or proposal for the liquidation or dissolution of LNR
(whether or not otherwise in compliance with the provisions of the Indenture);
(iii) any Person or Group (other than Leonard Miller and any Permitted
Transferees of Leonard Miller) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 50% of the aggregate
ordinary voting power represented by the issued and outstanding Capital Stock of
LNR; (iv) Leisure Colony shall cease being a Wholly Owned Subsidiary of LNR; or
(v) a majority of the members of the Board of Directors of LNR are persons who
were not directors on the Issue Date and whose election was not approved by a
vote of at least a majority of the members of the Board of Directors of LNR in
office at the time of the election who either were members of such Board of
Directors on the Issue Date or whose election as members of such Board of
Directors was previously approved by such a majority.
"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 (i) Consolidated Net Income plus (ii) to the extent
Consolidated Net Income has been reduced thereby, (A) 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), (B) Consolidated Interest Expense and
(C) 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.
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"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 (i) the incurrence or
repayment 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 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, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period and (ii) 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 Issue 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.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) 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
(y) 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: (i) 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, (a)
any amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) 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.
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"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; provided,
however, that there shall be excluded therefrom (a) gains (and losses) on an
after-tax effected basis from Asset Sales or abandonments or reserves relating
thereto, (b) items classified as extraordinary or nonrecurring gains or losses
on an after tax-effected basis, (c) 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, (d) 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, (e) the net income or loss of any other Person, other than a
Consolidated Subsidiary of the referent Person, except (A) 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 (d) above), by such other Person or (B) 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, (f) 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 Issue Date, (g) 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), and (h) 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 (i) Disqualified Capital Stock of such Person and (ii) 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.
"Credit Agreement" means the Revolving Credit Agreement dated as of
December 5, 1997 among LNR, certain Subsidiaries of LNR, the lenders party
thereto in their capacities as lenders thereunder and Bank of America National
Trust and Savings Association, as agent, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreement may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided, however, that such increase in
borrowings is permitted by the "Limitation on Incurrence of Additional
Indebtedness" covenant above other than as Permitted Indebtedness) or adding
Subsidiaries of LNR as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect LNR or
any Subsidiary of LNR against fluctuations in currency values.
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"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.
"Designated Senior Indebtedness" means (i) Indebtedness under or in respect
of the Credit Agreement and (ii) any other Indebtedness constituting Senior
Indebtedness which, at the time of determination, has an aggregate principal
amount of at least $25.0 million and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by LNR.
"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 Indebtedness of LNR and its Subsidiaries
(other than Indebtedness under the Credit Agreement) in existence on the Issue
Date, 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
shall be determined by the Board of Directors of LNR acting reasonably and in
good faith and shall be evidenced by a Board Resolution of the Board of
Directors of LNR.
"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.
"Holder" means any holder of New Notes.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) 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), (v) all Obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations in
respect of Indebtedness of any other Person that is referred to in clauses (i)
through (v) above and clause (viii) below, (vii) all Obligations of any other
Person of the kind referred to in clauses (i) through (vi) above and clause
(viii) 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, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) 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 (A) 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 (B) any
Subsidiary of such Person, at the option of such Person, shall be deemed to be
either the amount determined pursuant to clause (A) or the actual outstanding
amount of such Indebtedness. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
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price shall be calculated in accordance with the terms of 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, and 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 (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in LNR or any Subsidiary thereof and (ii) which, in
the judgment of the Board of Directors of LNR, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"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 LNR and
its Subsidiaries on commercially reasonable terms in accordance with normal
trade practices of LNR or such Subsidiary, as the case may be.
"Issue Date" means the date of original issuance of the New Notes.
"Land Partnership" means Lennar Land Partners, a Delaware general
partnership.
"Leisure Colony" means Leisure Colony Management Corp. Co., a Florida
corporation, and its successors including any Subsidiary of LNR to which all or
substantially all the assets of Leisure Colony Management Corp. Co. are sold,
leased or otherwise transferred.
"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 of LNR to be formed
after the Issue Date solely for the purpose of engaging in the mortgage banking
business and incidental activities directly related thereto.
"Non-Recourse Indebtedness" means any Indebtedness of LNR or any of its
Subsidiaries that is (i) (A) specifically advanced to finance the acquisition of
investment assets and (B) secured only by the assets to which such Indebtedness
relates without recourse to LNR or any of its Subsidiaries, (ii) advanced to a
Subsidiary of LNR or group of Subsidiaries of LNR formed for the sole purpose of
acquiring or holding investment assets (A) against which a loan is obtained that
is made without recourse to, and with no cross-collateralization against the
assets of, LNR or any other Subsidiary of LNR, and (B) upon complete or partial
liquidation of which the loan must be correspondingly completely or partially
repaid, as the case may be or (iii) specifically advanced to finance the
acquisition of real property and secured by only the real property to which such
Indebtedness relates without recourse to LNR or any of its Subsidiaries.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the New Notes in an aggregate principal amount
not in excess of $200,000,000;
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(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate outstanding principal amount at any time not to exceed
$220,000,000;
(iii) Interest Swap Obligations of LNR covering Indebtedness of LNR or
any of its Subsidiaries; provided, however, that such Interest Swap
Obligations are entered into to protect LNR and its 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;
(iv) Indebtedness under Currency Agreements; provided, however, that
in the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of LNR and its
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(v) Indebtedness of a Subsidiary to LNR or to a Wholly Owned
Subsidiary of LNR for so long as such Indebtedness is held by LNR or a
Wholly Owned Subsidiary of LNR, in each case subject to no Liens held by
any Person other than LNR or a Wholly Owned Subsidiary of LNR; provided,
however, that if on any date any Person other than LNR or a Wholly Owned
Subsidiary of LNR 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;
(vi) Indebtedness of LNR to a Wholly Owned Subsidiary of LNR for so
long as such Indebtedness is held by a Wholly Owned Subsidiary of LNR, in
each case subject to no Lien; provided, however, that (a) any Indebtedness
of LNR to any Wholly Owned Subsidiary of LNR is unsecured and subordinated,
pursuant to a written agreement, to LNR's obligations under the Indenture
and the New Notes at least to the same extent that the Notes are
subordinated to Senior Indebtedness and (b) if on any date any Person other
than a Wholly Owned Subsidiary of LNR 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 LNR unless such Indebtedness is otherwise permitted under
the Indenture;
(vii) 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;
(viii) Indebtedness of LNR or any of its Subsidiaries represented by
letters of credit for the account of LNR 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;
(ix) Existing Indebtedness outstanding on the Issue Date;
(x) Non-Recourse Indebtedness of the Mortgage Subsidiary;
(xi) additional Indebtedness in an aggregate principal amount not to
exceed $50.0 million at any time outstanding; and
(xii) Refinancing Indebtedness.
"Permitted Transferee" means, with respect to any Person, (i) that Person's
spouse, (ii) a parent or lineal descendant (including an adopted child) of a
parent of that Person, or the spouse of a lineal descendant of a parent of that
Person, (iii) a trustee, guardian or custodian for, or an executor,
administrator or other legal representative of the estate of, that Person, or a
trustee, guardian or custodian for a Permitted Transferee of that Person, (iv)
the trustee of a trust (including a voting trust) for the benefit of that Person
and (v) a corporation, partnership or other entity of which that Person and
Permitted Transferees of that Person are the beneficial owners of a majority in
voting power of the equity.
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"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 Indebtedness of LNR and its Subsidiaries
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 LNR or any Subsidiary
of LNR of Indebtedness incurred in accordance with the "Limitation on Incurrence
of Additional Indebtedness" covenant (other than pursuant to clauses (ii),
(iii), (iv), (v), (vi), (vii), (viii), (x), (xi) or (xii) of the definition of
Permitted Indebtedness), in each case that does not (1) 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 LNR 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 (2)
create Indebtedness with (A) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or (B) a final maturity earlier than the final maturity of the Indebtedness
being Refinanced; provided, however, that (x) if such Indebtedness being
Refinanced is Indebtedness of LNR, then such Refinancing Indebtedness shall be
Indebtedness solely of LNR and (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.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among LNR and the Initial Purchasers.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided,
however, that 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 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
Indebtedness of LNR, 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, (x) all monetary
obligations (including guarantees thereof) of every nature of LNR under the
Credit Agreement, including, without limitation, obligations to pay principal
and interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities, (y) all Interest Swap Obligations (including guarantees
thereof) and (z) all obligations (including guarantees) under Currency
Agreements, in each case whether outstanding on the Issue Date or thereafter
incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(i) any Indebtedness of LNR to a Subsidiary of LNR or any Affiliate of LNR or
any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of
85
<PAGE> 87
LNR or of any Subsidiary of LNR (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) Indebtedness
represented by Disqualified Capital Stock, (v) any liability for federal, state,
local or other taxes owed or owing by LNR, (vi) that portion of any Indebtedness
incurred in violation of the Indenture provisions set forth under "Limitation on
Incurrence of Additional Indebtedness," (vii) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code is without recourse to LNR and (viii) any Indebtedness which is, by
its express terms, subordinated in right of payment to any other Indebtedness of
LNR.
"Senior Recourse Indebtedness" means all Senior Indebtedness other than
Senior Indebtedness that is Non-Recourse Indebtedness plus Subsidiary
Unsubordinated Indebtedness of each Subsidiary of LNR (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 a Non-Recourse
Indebtedness.
"Subordinated Indebtedness" means all Indebtedness of LNR and its
Subsidiaries which expressly provides that such Indebtedness shall be
subordinated in right of payment to any other Indebtedness.
"Subsidiary" means, with respect to any Person, (i) 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, (ii) 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 (iii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) 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 a
Subsidiary of LNR 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 (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) 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 (i) 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 (ii) all the outstanding partnership interests are owned
by such Person or any Wholly Owned Subsidiary of such Person.
BOOK-ENTRY SYSTEM
The certificates representing the New Notes will be issued in fully
registered form. The New Notes initially will be represented by a single,
permanent global New 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 New Notes represented by such Global Note received by such Persons in the
Exchange Offer. Such accounts shall be designated by the Initial Purchasers.
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 of the Securities Act may
hold such interest through 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
86
<PAGE> 88
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.
Payment of principal of and interest on New 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 New Notes
represented thereby for all purposes under the Indenture. The Company has 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 New Notes only if (a) DTC notifies the Company 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) the
Company in its discretion at any time determines not to have all the New 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 New Notes
represented by such Global Note. Any Global Note that is exchangeable for
certificated New Notes pursuant to the preceding sentence will be exchanged for
certificated New 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 New Notes, (a) certificated New 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 New Notes will be payable, and the transfer of the certificated New
Notes will be registerable, at the office or agency of the Company maintained
for such purposes and (c) no service charge will be made for any registration of
transfer or exchange of the certificated New Notes, although the Company 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 New Notes represented by such Global Note for all purposes under
the Indenture and the New Notes. Except as set forth above, owners of beneficial
interests in a Global Note will not be entitled to have the New Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of certificated New Notes in definitive
form and will not be considered to be the owners or holders of any New 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. The Company understands that under existing industry
practices, in the event that the Company requests 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 the Company that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
Exchange Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and
87
<PAGE> 89
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers (which may include the
Initial Purchasers), banks, trust companies, clearing corporations and certain
other organizations some of whom (or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in Global Securities among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Trustee or
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 NEW NOTES RECEIVED BY BROKER-DEALERS
Each broker-dealer that receives New Notes for its own account pursuant to
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New 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 New Notes received in exchange for Old Notes which were acquired
as a result of market-making activities or other trading activities. The Company
has agreed that, starting on the Expiration Date and ending on the close of
business on the first anniversary of the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 1998,
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New 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 New Notes. Any broker-dealer that sells New 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 New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit from sale
of the New 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, the Company 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. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Old Notes other than commissions or concessions of any brokers or
dealers, and the Company will indemnify the holders of the Old Notes (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the New Notes being offered hereby will be passed upon for
the Company by Rogers & Wells LLP, New York.
88
<PAGE> 90
EXPERTS
The consolidated financial statements of the Company as of November 30,
1997 and 1996 and for each of the three years in the period ended November 30,
1997 included in this Prospectus and the related financial statement schedule
included elsewhere in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors as stated in their report appearing herein and
elsewhere in the registration statement, and have been so included in reliance
upon such report of such firm given upon their authority as experts in
accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended November
30, 1997 filed by the Company with the Commission is incorporated by reference
in this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the Exchange Offer will be deemed incorporated by reference in
this Prospectus, and those documents will be deemed to be a part of this
Prospectus from the respective dates on which they are filed with the
Commission. Any statement in this Prospectus or in a document incorporated or
deemed to be incorporated by reference in this Prospectus will be deemed to be
modified or superseded for the purposes of this Prospectus to the extent a
statement contained in this Prospectus or in a subsequently filed document which
is or is deemed to be incorporated by reference in this Prospectus modifies or
supersedes the prior statement. Any statement which is so modified or superseded
will not be deemed to constitute a part of this Prospectus, except as modified.
The Company will provide without charge to each person to whom this
Prospectus is delivered, at the request of such person, a copy of any or all of
the documents incorporated by reference (but not of exhibits to those documents,
unless particular exhibits are specifically incorporated by reference into the
documents that this Prospectus incorporates). Requests should be directed to LNR
Property Corporation, 760 N.W. 107th Avenue, Miami, Florida 33172, Attention:
Investor Relations, (305) 485-2000.
89
<PAGE> 91
INDEX TO FINANCIAL STATEMENTS
LNR PROPERTY CORPORATION AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following audited consolidated financial statements of LNR Property
Corporation and subsidiaries are presented herein on the pages indicated below:
<TABLE>
<CAPTION>
PAGE
AUDITED FINANCIAL STATEMENTS: ----
<S> <C>
Report of Independent Auditors............................ F-2
Consolidated Balance Sheets for the Years Ended November
30, 1997 and 1996...................................... F-3
Consolidated Statements of Earnings for the Years Ended
November 30, 1997, 1996 and 1995....................... F-4
Consolidated Statements of Parent Company Investment and
Stockholders' Equity for the Years Ended November 30,
1997, 1996 and 1995.................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
November 30, 1997, 1996 and 1995....................... F-6
Notes to Consolidated Financial Statements for the Years
Ended November 30, 1997, 1996 and 1995................. F-7
</TABLE>
F-1
<PAGE> 92
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of LNR Property Corporation:
We have audited the accompanying consolidated balance sheets of LNR
Property Corporation and subsidiaries (the "Company") as of November 30, 1997
and 1996 and the related consolidated statements of earnings, cash flows and
Parent Company investment and stockholders' equity for each of the three years
in the period ended November 30, 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LNR Property
Corporation and subsidiaries at November 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended November 30, 1997, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, effective
December 1, 1994, the Company changed its method of accounting for its
investments in debt securities to conform with Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities. Effective December 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
DELOITTE & TOUCHE LLP
Miami, Florida
February 3, 1998
(February 18, 1998, as to Note 16)
F-2
<PAGE> 93
LNR PROPERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF NOVEMBER 30,
----------------------
1997 1996
---------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 34,059 $ 2,295
Restricted cash............................................. 56,637 1,552
Investment securities....................................... 304,660 263,842
Mortgage loans, net......................................... 86,849 64,441
Operating properties and equipment, net..................... 228,598 203,266
Land held for investment.................................... 83,297 91,177
Investments in and advances to partnerships................. 159,359 110,180
Deferred income taxes....................................... 23,974 10,067
Other assets................................................ 45,904 6,148
---------- --------
Total assets...................................... $1,023,337 $752,968
========== ========
LIABILITIES, PARENT COMPANY INVESTMENT AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable.......................................... $ 4,244 $ 2,698
Accrued expenses and other liabilities.................... 36,708 27,931
Mortgage notes and other debts payable.................... 391,171 354,406
---------- --------
Total liabilities................................. 432,123 385,035
---------- --------
Minority interests.......................................... 22,126 885
---------- --------
Commitments and contingent liabilities (Note 13)
Parent Company investment................................... -- 367,048
Stockholders' equity
Common stock, $.10 par value, 150,000 shares authorized,
25,144 shares issued and outstanding................... 2,515 --
Class B common stock, $.10 par value, 40,000 shares
authorized, 10,984 shares issued and outstanding....... 1,098 --
Additional paid-in capital................................ 544,548 --
Retained earnings......................................... 370 --
Unrealized gain on available-for-sale securities, net..... 20,557 --
---------- --------
Total Parent Company investment and stockholders'
equity.......................................... 569,088 367,048
---------- --------
Total liabilities, Parent Company investment and
stockholders' equity............................ $1,023,337 $752,968
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 94
LNR PROPERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------
1997 1996 1995
------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues
Rental income............................................. $56,334 $ 59,215 $ 51,664
Equity in earnings of partnerships........................ 30,149 51,862 31,203
Interest income........................................... 41,446 28,726 20,475
Gains on sales of:
Real estate............................................ 18,076 3,669 15,776
Investment securities.................................. 5,359 1,735 513
Management fees........................................... 13,385 18,229 10,274
Other, net................................................ 2,734 -- 2,910
------- -------- --------
Total revenues.................................... 167,483 163,436 132,815
------- -------- --------
Costs and expenses
Cost of rental operations................................. 35,767 38,126 30,890
General and administrative................................ 26,584 20,756 15,155
Depreciation.............................................. 6,060 5,916 5,671
Other, net................................................ -- 658 --
------- -------- --------
Total costs and expenses.......................... 68,411 65,456 51,716
------- -------- --------
Operating earnings.......................................... 99,072 97,980 81,099
Interest expense............................................ 26,584 20,513 14,692
------- -------- --------
Earnings before income taxes................................ 72,488 77,467 66,407
Income taxes................................................ 28,270 30,212 25,899
------- -------- --------
Net earnings................................................ $44,218 $ 47,255 $ 40,508
======= ======== ========
Net earnings per share...................................... $ 1.21
=======
Weighted average common and common equivalent shares
outstanding............................................... 36,434
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 95
LNR PROPERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARENT COMPANY INVESTMENT
AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
---------------------------------
1997 1996 1995
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Parent Company investment:
Beginning balance....................................... $ 367,048 $370,903 $396,403
Net earnings, December 1, 1996 through October 31,
1997................................................. 43,848 47,255 40,508
Advances (to) from Parent Company....................... 145,617 (53,240) (71,778)
Change in unrealized gain on available-for-sale
securities, net...................................... 10,874 2,130 5,770
Spin-off of LNR from Parent Company..................... (567,387) -- --
--------- -------- --------
Balance at November 30.......................... -- 367,048 370,903
--------- -------- --------
Common Stock:
Beginning balance....................................... -- -- --
Spin-off of LNR from Parent Company..................... 3,613 -- --
Conversion of common stock to Class B common stock...... (1,098) -- --
--------- -------- --------
Balance at November 30.......................... 2,515 -- --
--------- -------- --------
Class B common stock:
Beginning balance....................................... -- -- --
Conversion of common stock to Class B common stock...... 1,098 -- --
--------- -------- --------
Balance at November 30.......................... 1,098 -- --
--------- -------- --------
Additional paid-in capital:
Beginning balance....................................... -- -- --
Spin-off of LNR from Parent Company..................... 545,000 -- --
Cash dividends-common stock............................. (452) -- --
--------- -------- --------
Balance at November 30.......................... 544,548 -- --
--------- -------- --------
Retained earnings:
Beginning balance....................................... -- -- --
Net earnings, November 1 through November 30, 1997...... 370 -- --
--------- -------- --------
Balance at November 30.......................... 370 -- --
--------- -------- --------
Unrealized gain on available-for-sale securities, net:
Beginning balance....................................... -- -- --
Spin-off of LNR from Parent Company..................... 18,774 -- --
Change in unrealized gain on available-for-sale
securities, net, November 1 through November 30,
1997................................................. 1,783 -- --
--------- -------- --------
Balance at November 30.......................... 20,557 -- --
--------- -------- --------
Total Parent Company investment and stockholders'
equity.................................................. $ 569,088 $367,048 $370,903
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 96
LNR PROPERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 44,218 $ 47,255 $ 40,508
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Depreciation............................................ 6,060 5,916 5,671
Minority interest....................................... 238 -- --
Amortization of discount on mortgage loans and loan
costs................................................. (91) (6) (881)
Gains on sales of real estate........................... (18,076) (3,669) (15,776)
Equity in earnings of partnerships...................... (30,149) (51,862) (31,203)
Gain on sales of investment securities.................. (5,359) (1,735) (513)
Decrease in deferred income taxes....................... (21,999) (12,614) (14,742)
Changes in assets and liabilities:
Increase in restricted cash........................... (10,182) (155) (1,397)
Decrease (increase) in other assets................... (17,898) 8,129 (3,892)
Decrease (increase) in mortgage loans held for sale... (14,910) (9,776) 10,285
Increase in accounts payable and accrued
liabilities........................................ 11,886 6,694 8,910
-------- -------- --------
Net cash (used in) operating activities............ (56,262) (11,823) (3,030)
-------- -------- --------
Cash flows from investing activities:
Operating properties and equipment
Additions............................................... (79,830) (19,269) (9,511)
Sales................................................... 71,664 11,667 21,804
Land held for investment
Additions............................................... (21,435) (3,699) (5,911)
Sales................................................... 10,733 4,258 16,365
Investments in and advances to partnerships............... (5,342) (12,138) (70,442)
Distributions from partnerships........................... 79,693 95,361 93,899
Purchases of other investments............................ (21,857) -- --
Purchase of mortgage loans held for investment............ (349) (15,927) (39,730)
Proceeds from mortgage loans held for investment.......... 1,116 9,616 5,374
Purchase of investment securities......................... (96,386) (96,295) (57,450)
Proceeds from sales of investment securities and other.... 110,714 19,773 11,019
Interest received on CMBS in excess of income
recognized.............................................. 21,241 10,123 5,773
-------- -------- --------
Net cash provided by (used in) investing
activities....................................... 69,962 3,470 (28,810)
-------- -------- --------
Cash flows from financing activities:
Payment of dividends...................................... (452) -- --
Net borrowings under repurchase agreements and revolving
credit lines............................................ 240 76,424 109,482
Mortgage notes and other debts payable
Proceeds from borrowings................................ 35,377 1,255 --
Principal payments...................................... (17,101) (18,752) (1,323)
Payments (to) from Parent Company......................... -- (52,478) (73,708)
-------- -------- --------
Net cash provided by financing activities.......... 18,064 6,449 34,451
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 31,764 (1,904) 2,611
Cash and cash equivalents at beginning of year.............. 2,295 4,199 1,588
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 34,059 $ 2,295 $ 4,199
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized........ $ 25,341 $ 20,428 $ 14,489
Cash paid for taxes....................................... $ 3,660 -- --
Supplemental disclosures of non-cash investing and financing
activities:
Purchases of investment securities financed by sellers.... $ 50,280 $ 25,619 $ 24,162
Purchase of an operating property financed by a mortgage
note.................................................... $ -- $ 17,400 --
Contribution of loans held for investment to acquire an
investment in partnership............................... $ -- -- $ 27,651
Purchase of a mortgage loan financed by revolving credit
line.................................................... $ 33,092 -- --
Spin-off of LNR from Parent Company:
Increase in Parent Company investment due to transfer of
certain assets, liabilities and minority interests prior
to Spin-off............................................. $145,617 -- --
Increase in Parent Company investment due to change in
unrealized gain on available-for-sale securities, net... $ 10,874 -- --
Supplemental disclosure of non-cash transfers:
Transfer of mortgage loans to land held for investment.... $ -- $ 2,273 --
Transfer of operating properties to land held for
investment.............................................. $ 1,826 -- --
Transfer of other assets to accounts payable and accrued
expenses................................................ $ 1,563 -- --
Transfer of Parent Company investment to common stock..... $ 3,613 -- --
Transfer of Parent Company investment to additional
paid-in capital......................................... $545,000 -- --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 97
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1997, 1996 AND 1995
1. SUMMARY OF ORGANIZATION, BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
LNR Property Corporation ("LNR") and subsidiaries (collectively, the
"Company"), a Delaware corporation, was formed in June 1997. The Company
operates a real estate investment and management business which engages
principally in (i) developing and managing commercial real estate, (ii)
acquiring, managing and repositioning commercial real estate loans and
properties, (iii) acquiring (often in partnership with financial institutions
and real estate funds) and managing portfolios of real estate assets, (iv)
investing in non-investment grade commercial mortgage backed securities ("CMBS")
as to which the Company has the right to be the special servicer (i.e., to
oversee workouts of underperforming loans) and (v) originating high yielding
real estate related loans.
Spin-off Transaction
Prior to October 31, 1997, Lennar Corporation (the "Parent Company" or
"Lennar") transferred its real estate investment and management business to the
Company. On October 31, 1997, Lennar effected a spin-off of the Company to
Lennar's stockholders (the "Spin-off") by distributing to them one share of LNR
stock for each share of Lennar stock they held.
The assets and liabilities of Lennar and its subsidiaries were divided
between the Company and Lennar and its homebuilding subsidiaries so that Lennar
and its homebuilding subsidiaries would have a net worth of $200 million (with
specified adjustments) and the remaining net worth was transferred to the
Company.
In connection with the Spin-off, Lennar and the Company agreed that at
least until December 2002, Lennar and its homebuilding subsidiaries would not
engage in the businesses in which the Company currently is engaged and the
Company would not engage in the businesses in which Lennar and its homebuilding
subsidiaries currently are engaged (except in limited areas in which the
activities of the two groups overlap).
Basis of Presentation and Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. The assets, liabilities and
results of operations of entities (both corporations and partnerships) in which
the Company has a controlling interest have been consolidated. The ownership
interests of noncontrolling owners in such entities are reflected as minority
interests. The Company's investments in partnerships (and similar entities) in
which less than a controlling interest is held are accounted for by the equity
method (when significant influence can be exerted by the Company), or the cost
method. All significant intercompany transactions and balances have been
eliminated.
For periods prior to the Spin-off, the financial statements of the Company
are presented as if the Company had been a separate combined group. Expenses
which related both to the businesses operated by the Company and the businesses
retained by Lennar have been allocated on a basis which the Company believes is
reasonable. However, the expenses allocated to the Company are not necessarily
the same as those the Company would have incurred if it had operated
independently, and in general, the results of operations, financial position and
cash flows reflected in the consolidated financial statements of the Company are
not necessarily the same as those which would have been realized if the Company
had been operated independently of Lennar during the periods to which those
financial statements relate.
The Company began accumulating retained earnings immediately following the
Spin-off on October 31, 1997.
F-7
<PAGE> 98
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net Earnings Per Share
The Company was formed in June 1997 and had no outstanding stock prior to
formation; therefore, net earnings per share have not been calculated for the
fiscal years ended November 30, 1996 and 1995 in the attached consolidated
financial statements. Earnings per share for 1997 are computed as though the
shares issued in the Spin-off had been outstanding throughout the year.
Net earnings per share is computed by dividing net earnings by the weighted
average number of the total common shares and Class B common shares and common
stock equivalents outstanding during the period. The dilutive effect of all
outstanding stock options is considered common stock equivalents and is
calculated using the treasury stock method.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Due to the
short maturity period of the cash equivalents, the carrying amount of these
instruments approximates their fair value.
Investment Securities
Investment securities are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This standard requires that debt and
equity securities that have determinable fair values are classified as
available-for-sale unless they are classified as held-to-maturity or trading.
Securities classified as held-to-maturity are carried at amortized cost because
they are purchased with the intent and ability to hold to maturity. At November
30, 1997 and 1996, no securities were held for trading purposes.
Securities classified as available-for-sale are recorded at fair value in
the consolidated balance sheet, with unrealized holding gains or losses, net of
tax effects, reported as a separate component of stockholders' equity. Realized
gains and losses, as well as unrealized losses that are other than temporary,
are recognized in earnings. The cost of securities sold is based on the specific
identification method.
Mortgage Loans, Net
Mortgage loans held for sale are recorded at the lower of cost or market,
estimated on a discounted cash flow basis using market interest rates. Purchase
discounts recorded on these loans are presented as a reduction of the carrying
amount of the loans and are not amortized. Mortgage loans held for investment
are carried net of unamortized discounts and are amortized utilizing a
methodology that results in a level yield.
The Company provides an allowance for credit losses related to loans based
upon the Company's historical loss experience and other factors.
Operating Properties and Equipment, Net and Land Held for Investment
Operating properties and equipment and land held for investment are
recorded at cost. Depreciation for operating properties and equipment is
calculated to amortize the cost of depreciable assets over their estimated
useful lives using the straight-line method. The range of estimated useful lives
for operating properties is 15 to 40 years and for equipment is 2 to 10 years.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS No. 121 requires companies to
evaluate long-lived assets for impairment based on the undiscounted future cash
flows of the asset. If a long-lived asset is identified as impaired, the value
of the asset must be reduced to its fair value. The Company's operating
properties and land holdings would be considered long-lived assets under this
F-8
<PAGE> 99
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
pronouncement. The Company adopted this statement in the first quarter of its
fiscal year ended November 30, 1997 and it did not have any material effect on
the Company's financial position, results of operations or cash flows.
Revenue Recognition
Interest income is comprised of interest received plus amortization of the
discount between the carrying value of each mortgage loan held for investment or
investment security and its unpaid principal balance using a methodology which
results in a level yield.
Revenues from sales of real estate (including the sales of land held for
investment and operating properties) are recognized when a significant down
payment is received, the earnings process is complete and the collection of any
remaining receivables is reasonably assured. Management fees are recognized in
income when they are earned and realization is reasonably assured.
The Company applies the provisions of SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
in accounting for sales of investment securities and other financial assets.
This statement requires that transfers of financial and servicing assets be
recognized as sales when control has been surrendered.
Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under SFAS 109,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are measured by
using enacted tax rates expected to apply to taxable income in the years in
which those differences are expected to reverse.
Stock Option Plans
At November 30, 1997, the Company had one stock option plan, which is
described in Note 11. The Company grants stock options to certain employees for
a fixed number of shares with an exercise price not less than the fair value of
the shares at the date of grant. The Company accounts for the stock option
grants in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company applies the disclosure
only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
New Accounting Pronouncements
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
statement is effective for the Company beginning with the first quarter of 1998
and earlier adoption is not permitted. This statement requires that the current
calculations of earnings per share be replaced by basic and diluted earnings per
share calculations. Under the new guidance, basic and diluted earnings per share
would be $1.22 for 1997.
Also in February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information About Capital Structure." SFAS No. 129, which applies to all
entities that have issued securities, requires in summary form, the pertinent
rights and privileges of the various securities outstanding. Examples of
information that must be
F-9
<PAGE> 100
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
disclosed are dividend and liquidation preferences, participation rights, call
prices and dates, conversion or exercise prices or rates and pertinent dates,
sinking-fund requirements, unusual voting rights and significant terms of
contracts to issue additional shares. SFAS No. 129 is effective for financial
statements issued for periods ending after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement is effective for fiscal
years beginning after December 15, 1997, and requires reclassification of
comparative purpose financial statements for all earlier periods presented.
Reclassifications
Certain reclassifications have been made to the prior year consolidated
financial statements to conform to the 1997 presentation.
2. RESTRICTED CASH
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------
1997 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Short-term investment securities............................ $44,902 $ --
Funds held in trust for asset purchases..................... 10,007 --
Tenant security deposits.................................... 1,728 1,552
------- ------
$56,637 $1,552
======= ======
</TABLE>
The short-term investment securities are collateral for a $44.5 million
letter of credit, which provides credit enhancement to $277.3 million of
tax-exempt bonds. The bonds are secured by five high-rise, class A, apartment
buildings in Manhattan, New York. The Company receives interest on the
short-term investment as well as 600 basis points per year for providing the
credit enhancement.
3. INVESTMENT SECURITIES
Investment securities consist of investments in various issues of rated and
unrated portions of CMBS. The Company's investment in rated CMBS is classified
as available-for-sale and its investment in unrated CMBS is classified as
held-to-maturity. In general, principal payments on each class of security are
made in the order of the stated maturities of each class so that no payment of
principal will be made on any class until all classes having an earlier maturity
date have been paid in full. The Company's investment securities have stated
maturity dates in years 2001 through 2028 and carry stated interest rates
ranging from 6.50% to 11.42%. These securities are, in effect, subordinate to
other securities of classes with earlier maturities. The annual principal
repayments on a particular class are dependent upon collections on the
underlying mortgages, affected by prepayments and extensions, and as a result,
the actual maturity of any class of securities may differ from its stated
maturity.
These investments represent securities which are collateralized by pools of
mortgage loans on commercial real estate assets located across the country.
Concentrations of credit risk with respect to these securities are limited due
to the diversity of the underlying loans across geographical areas and diversity
among property types. In addition, the Company only invests in these securities
when it performs significant due diligence analysis on the real estate
supporting the underlying loans and when it has the right to select itself as
special
F-10
<PAGE> 101
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
servicer for the entire securitization. As special servicer, the Company impacts
the performance of the securitization by using its loan workout and asset
management expertise to resolve non-performing loans.
The Company's investment securities consisted of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Available-for-sale.......................................... $188,434 $193,869
Held-to-maturity............................................ 116,226 69,973
-------- --------
$304,660 $263,842
======== ========
</TABLE>
At November 30, 1997 and 1996, the amortized cost and fair value of
investment securities consisted of the following:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ------------------ FAIR
COST GAINS LOSSES VALUE
--------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
Available-for-sale...................... $154,734 $33,918 $ (218) $188,434
Held-to-maturity........................ $116,226 $37,291 -- $153,517
1996
Available-for-sale...................... $180,918 $14,626 $(1,675) $193,869
Held-to-maturity........................ $ 69,973 $19,490 $ -- $ 89,463
</TABLE>
During 1997, proceeds from the sale of available-for-sale securities
amounted to $111.5 million and resulted in gross realized gains of $5.4 million,
primarily as a result of a Re-REMIC securitization transaction. The Re-REMIC
transaction was the securitization of the cash flows from certain pre-existing
CMBS bonds. In that transaction, the Company sold approximately $140.0 million
of rated non-investment grade CMBS bonds to a trust. During 1996, proceeds from
the sale of available-for-sale securities amounted to $18.1 million and resulted
in gross realized gains of $1.7 million.
4. MORTGAGE LOANS, NET
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------
1997 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Mortgage loans.............................................. $95,593 $ 80,271
Allowance for losses........................................ (2,038) (4,979)
Unamortized discounts....................................... (6,706) (10,851)
------- --------
$86,849 $ 64,441
======= ========
</TABLE>
At November 30, 1997 and 1996, the balance of mortgage loans classified as
held for sale were $64.4 million and $41.6 million, respectively, and classified
as held for investment were $22.4 million and $22.8 million, respectively.
F-11
<PAGE> 102
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. OPERATING PROPERTIES AND EQUIPMENT, NET
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Rental apartments........................................... $ 98,068 $ 70,357
Office buildings............................................ 67,455 65,725
Retail centers.............................................. 54,494 60,344
Hotels...................................................... 18,735 18,713
Industrial buildings........................................ 2,862 4,373
Other....................................................... 15,762 14,498
-------- --------
Total land and buildings.................................... 257,376 234,010
Furniture, fixtures and equipment........................... 7,318 5,028
-------- --------
264,694 239,038
Accumulated depreciation.................................... (36,096) (35,772)
-------- --------
$228,598 $203,266
======== ========
</TABLE>
The Company leases as lessor its retail, office and other facilities under
non-cancelable operating leases with terms in excess of twelve months. The
future minimum rental revenues under these leases subsequent to November 30,
1997 are as follows (in thousands): 1998 -- $14,857; 1999 -- $13,599;
2000 -- $11,958; 2001 -- $9,798; 2002 -- $9,786 and thereafter -- $55,435.
6. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS
Summarized financial information on a combined 100% basis related to the
Company's significant partnerships accounted for by the equity method at
November 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Assets
Cash...................................................... $ 36,792 $ 53,109
Portfolio investments..................................... 872,090 839,441
Other assets.............................................. 32,585 16,213
-------- --------
$941,467 $908,763
======== ========
Liabilities and equity
Accounts payable and other liabilities.................... $ 61,105 $ 57,557
Notes and mortgages payable............................... 385,115 425,716
Equity of:
The Company............................................ 164,065 119,133
Others................................................. 331,182 306,357
-------- --------
$941,467 $908,763
======== ========
</TABLE>
The equity of the Company in the partnerships' financial statements shown
above exceeds the Company's recorded investment in and advances to the
partnerships by $4.7 million and $9.0 million at November 30, 1997 and 1996,
respectively, primarily due to purchase discounts. Portfolio investments consist
primarily of mortgage loans and business loans collateralized by real property,
as well as commercial properties and land held for development, investment or
sale.
F-12
<PAGE> 103
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues........................................... $213,238 $257,062 $280,286
Costs and expenses................................. 125,693 87,629 115,269
-------- -------- --------
Earnings of partnerships........................... $ 87,545 169,433 165,017
======== ======== ========
The Company's share of earnings.................... $ 30,149 $ 51,862 $ 31,203
======== ======== ========
</TABLE>
In connection with the Spin-off, Lennar transferred parcels of land to the
Company and the Company transferred these parcels to Lennar Land Partners in
exchange for a 50% partnership interest in Lennar Land Partners. The net book
value of the assets contributed to Lennar Land Partners was $92.3 million.
Lennar Land Partners was formed so that Lennar and the Company could share the
risks and profits of ownership of real property previously acquired by Lennar,
primarily for use in its homebuilding activities. Lennar manages the day-to-day
activities of Lennar Land Partners under a management agreement.
At November 30, 1997 and 1996, the Company's equity interests in all other
significant partnerships ranged from 15% to 50%. These partnerships are involved
in the acquisition and management of portfolios of real estate loans and
properties. The Company shares in the profits and losses of these partnerships
and, when appointed the manager of the partnerships, receives fees for the
management and disposition of the assets. The outstanding debt of Lennar Land
Partners and one second-tier partnership, amounting to $119.0 million at
November 30, 1997, is guaranteed by the Company.
7. MORTGAGE NOTES AND OTHER DEBTS PAYABLE
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Secured without recourse to LNR
Mortgage notes on operating properties and land with a
fixed interest rate of 7.4%, due December 2003......... $ 20,640 $ 23,994
Mortgage notes on operating properties and land with a
floating interest rate (8.5% at November 30, 1997), due
July 1999.............................................. 21,998 --
Other secured debt
Mortgage notes on operating properties and land with fixed
interest rates from 7.4% to 8.0%, due through 2004..... 25,659 47,648
Mortgage notes on operating properties and land with
floating interest rates (4.2% to 9.5% at November 30,
1997), due through December 2010....................... 21,972 --
Repurchase agreements with floating interest rates (6.7%
to 7.2% at November 30, 1997), secured by CMBS, due
through October 1998................................... 177,386 118,182
Revolving credit lines with floating interest rates (6.7%
to 6.9% at November 30, 1997), secured by CMBS and
mortgage loans, due through August 1998................ 110,909 97,582
Unsecured revolving credit notes payable with floating
interest rates............................................ -- 67,000
Unsecured note payable to Lennar with a fixed interest rate
of 10%, due December 1997................................. 12,607 --
-------- --------
$391,171 $354,406
======== ========
</TABLE>
F-13
<PAGE> 104
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information concerning the Company's more significant debt instruments is
as follows:
Repurchase Agreements
The Company, through certain subsidiaries, has entered into two reverse
repurchase agreements through which it finances selected CMBS. The agreements
have an aggregate commitment of $310 million under which $177 million was
outstanding at November 30, 1997. Interest is variable, corresponds to the
rating assigned to the CMBS and is based on LIBOR plus specified percentages.
The agreements mature during 1998 and are expected to be refinanced or extended
on substantially the same terms as the existing agreements. LNR has guaranteed
the obligations of its subsidiaries under these agreements and the agreements
are collateralized by the CMBS.
Revolving Credit Lines
The Company, through certain subsidiaries, has three revolving credit lines
with an aggregate commitment of $125 million under which $111 million was
outstanding at November 30, 1997. Interest is variable and is based on LIBOR or
commercial paper rates plus specified percentages. The lines are collateralized
by CMBS and mortgage loans. The lines mature during 1998 and are expected to be
refinanced or extended on substantially the same terms as the existing lines.
The agreements also contain certain financial tests and restrictive covenants,
none of which are currently expected to restrict the Company's activities. LNR
has guaranteed the obligations of its subsidiaries under these agreements.
Unsecured Revolving Credit Notes Payable
On December 5, 1997, the Company and certain of its subsidiaries, entered
into a $200 million revolving credit agreement (the "Revolving Credit
Agreement") which expires on December 31, 2000, with the option of a one year
extension. As of closing of the Revolving Credit Agreement, the Company had
commitments totaling $82 million. The remaining amount is currently being
syndicated. Interest is calculated at LIBOR plus a margin, which varies based on
the Company's leverage and debt ratings. Had there been outstanding amounts
under this facility at November 30, 1997, the interest rate would have been
7.0%. The agreements also contain certain financial tests and restrictive
covenants, none of which are currently expected to restrict the Company's
activities.
The aggregate principal maturities of mortgage notes and other debts
payable subsequent to November 30, 1997, are as follows (in thousands):
1998 -- $302,668; 1999 -- $24,432; 2000 -- $5,844; 2001 -- $1,359;
2002 -- $7,606 and thereafter -- $49,262. All of the notes secured by land
contain collateral release provisions.
8. MINORITY INTERESTS
Minority interests relate to the third party ownership interest in
partnerships in which the Company has a controlling interest. For financial
reporting purposes the partnerships' assets, liabilities and earnings are
consolidated with those of the Company, and the other partners' interests in the
partnerships are included in the Company's consolidated financial statements as
minority interest. The primary component of minority interests at November 30,
1997, representing $18.9 million, relates to the Company's interest in a
partnership which provides credit enhancement to $44.5 million of a $277.3
million issue of tax-exempt bonds collateralized by commercial real estate. See
Note 2.
9. INCOME TAXES
The Company was included in the consolidated federal income tax returns of
Lennar through the date of the Spin-off. Under the Agreement with Lennar, the
Company is required to reimburse Lennar for the income
F-14
<PAGE> 105
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
taxes resulting from the Company's 1997 activity. Lennar is responsible for the
preparation of all income tax returns prior to the Spin-off and it will be
determined at the time of filing of the relevant returns whether the Company has
under or over paid its portion of the liability. The final cash settlement with
Lennar for income taxes will result in an adjustment of the Company's recorded
deferred tax asset and liability balances. The Company's provision for federal
and state income taxes in the accompanying consolidated statement of earnings
for the period prior to the Spin-off have been calculated based on the Company's
income and temporary differences as if it filed a separate return. For the post
Spin-off period, the provision for income taxes has been based on the
stand-alone operations of the Company.
The provisions for income taxes consisted of the following for the years
ended November 30, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal.......................................... $ 43,802 $ 37,866 $ 35,593
State............................................ 6,467 4,960 5,048
-------- -------- --------
50,269 42,826 40,641
-------- -------- --------
Deferred
Federal.......................................... (18,432) (12,337) (15,303)
State............................................ (3,567) (277) 561
-------- -------- --------
(21,999) (12,614) (14,742)
-------- -------- --------
Total expense............................ $ 28,270 $ 30,212 $ 25,899
======== ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
F-15
<PAGE> 106
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
tax effects of significant temporary differences of the Company's deferred tax
assets and liabilities at November 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets
Reserves and accruals..................................... $ 7,398 $ 8,472
Investment securities income.............................. 19,091 13,043
Investment in partnerships................................ 24,704 11,251
Acquisition adjustments................................... 15,943 3,236
Other..................................................... 277 --
------- -------
Total deferred tax assets......................... 67,413 36,002
------- -------
Deferred tax liabilities
Capitalized expenses...................................... 2,662 2,603
Deferred gains............................................ 10,042 4,306
Acquisition adjustments................................... 16,736 12,786
Installment sales......................................... -- 845
Unrealized gain on available-for-sale securities.......... 13,143 5,051
Other..................................................... 856 344
------- -------
Total deferred tax liabilities.................... 43,439 25,935
------- -------
Net deferred tax asset...................................... $23,974 $10,067
======= =======
</TABLE>
Based on management's assessment, it is more likely than not that the
deferred tax assets will be realized through future taxable income.
A reconciliation of the statutory rate to the effective tax rate for the
years ended November 30, 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
% OF PRE-TAX INCOME
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory rate.............................................. 35.0 35.0 35.0
State income taxes, net of federal income tax benefit....... 4.0 4.0 4.0
Effective rate.............................................. 39.0 39.0 39.0
</TABLE>
10. FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of financial instruments held by the Company at November 30, 1997 and 1996,
using available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies might have a material effect on the estimated fair
value amounts. The table excludes cash and cash equivalents, restricted cash and
accounts payable, which had fair values approximating their carrying values.
F-16
<PAGE> 107
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------------------
1997 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets
Mortgages loans....................... $ 86,849 $ 92,285 $ 64,441 $ 74,809
Investment securities
available-for-sale................. 188,434 188,434 193,869 193,869
Investment securities
held-to-maturity................... 116,226 153,517 69,973 89,463
Liabilities
Mortgage notes and other debts
payable............................ $391,171 $391,171 $354,406 $354,406
</TABLE>
The following methods and assumptions were used by the Company in
estimating fair values:
Mortgages loans: The fair values are based on discounting future cash flows
using the current interest rates at which similar loans would be made or are
estimated by the Company on the basis of financial or other information.
Investment securities available-for-sale and held-to-maturity: The fair
values are based on quoted market prices, if available. The fair values for
instruments which do not have quoted market prices are estimated by the Company
on the basis of the acquisition price paid or financial and other information.
Mortgages notes and other debts payable: The fair value of fixed rate
borrowings is based on discounting future cash flows using the Company's
incremental borrowing rate. Variable rate borrowings are tied to market indices
and thereby, approximate fair value.
11. CAPITAL STOCK
Preferred Stock
The Company has 500,000 shares of authorized preferred stock, $10 par
value. At November 30, 1997, no shares of preferred stock were issued or
outstanding. The preferred stock may be issued in series with any rights, powers
and preferences which may be authorized by the Company's Board of Directors.
Common Stock
The Company has two classes of common stock. The common stockholders have
one vote for each share owned in matters requiring stockholder approval and
during the fourth quarter of 1997 received quarterly dividends of $.0125 per
share. Class B common stockholders have ten votes for each share of stock owned
and during the fourth quarter of 1997 received quarterly dividends of $.01125
per share. As of November 30, 1997, Mr. Leonard Miller, a member of the Board of
Directors, owned or controlled 9.9 million shares of Class B common stock, which
represented approximately 74% of the voting control of the Company.
Stock Option Plan
In connection with the Spin-off, the Company adopted the 1997 Stock Option
Plan (the "1997 Plan"). The 1997 Plan provides for the granting of options to
certain officers, employees and directors of the Company to purchase shares at
prices not less than market value on the date of the grant. Options granted
under the 1997 Plan will expire not more than 10 years after the date of grant,
except that options granted to a key employee who is a 10% stockholder will
expire not more than five years after the date of grant. The exercise price of
each stock option granted under the 1997 Plan will be 100% of the fair market
value of the common stock on the date the stock option is granted, except in the
case of a key employee who is a 10% stockholder, in which case the option price
may not be less than 110% of the fair market value of the common stock on the
F-17
<PAGE> 108
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
date the stock option is granted, and except as to stock options granted to
replace Lennar stock options held by Lennar employees who became employees of
the Company as a result of the Spin-off.
The following table summarizes the status of the 1997 Plan (in thousands,
except for option prices):
<TABLE>
<CAPTION>
OUTSTANDING
WEIGHTED OUTSTANDING WEIGHTED EXERCISABLE
OPTION AVERAGE WEIGHTED AVERAGE WEIGHTED
PRICE # OF REMAINING AVERAGE EXERCISE AVERAGE
PER SHARE OPTIONS LIFE FAIR VALUE PRICE FAIR VALUE
--------- ------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Options assumed at
Spin-off................. $ 3.98 --
$16.23 410 5.13 Years $18.70 $ 7.64 $19.05
Options granted............ $24.82 1,069 9.72 Years $13.28 $24.82 --
-----
Ending balance............. 1,479
=====
Exercisable................ 61
=====
Options available for
future grant............. 521
=====
</TABLE>
The Company has elected to account for its employee stock options under APB
25 and related Interpretations. No compensation expense is recorded under APB 25
because the exercise price of the Company's employee common stock options
equaled the market price for the underlying common stock on the grant date.
Under the terms of the Lennar 1991 Stock Option Plan (the "Lennar Option
Plan"), participants in the Lennar Option Plan who exercise their options after
the Spin-off (and who did not amend the terms of their options prior to the
Spin-off to provide otherwise) will receive upon exercise of Lennar stock
options both shares of Lennar common stock and LNR common stock. The Company has
agreed to deliver shares of its common stock to participants in the Lennar
Option Plan who exercise options and are entitled to LNR common stock. There
were Lennar stock options outstanding at the time of the Spin-off which could
entitle the holders to purchase up to 615,600 shares of LNR common stock. None
of these options had been exercised as of November 30, 1997. The Company will
not receive any portion of the exercise price of the Lennar stock options.
SFAS 123 requires "as adjusted" information regarding net income and net
income per share to be disclosed for new options granted after fiscal year 1996.
The Company determined this information using the fair value method of that
statement. The fair value of these options was determined at the date of grant
using the Black-Scholes option-pricing model. The significant weighted average
assumptions used were as follows for the year ended November 30, 1997: expected
dividend yield, .20%; calculated volatility rate, .45%; risk-free interest rate,
5.50%; and expected life of the option in years, 2-7 years.
The estimated fair value of the options is recognized in expense over the
options' vesting period for "as adjusted" disclosures. The net income per share
"as adjusted" for the effects of SFAS 123 is not indicative of the effects on
reported net income/loss for future years. For purposes of these calculations,
the Company has excluded shares subject to options which are held by
participants in the Lennar Option Plan who are not employees, and do not
otherwise receive compensation from, the Company. The Company's reported "as
adjusted" information for the year ended November 30, 1997 is as follows (in
thousands, except per share amounts):
<TABLE>
<S> <C>
Net earnings....................................... $44,218
Net earnings "As adjusted"......................... $43,042
Net earnings per share as reported -- primary...... $ 1.21
Net earnings per share "As adjusted"-- primary..... $ 1.18
</TABLE>
F-18
<PAGE> 109
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In management's opinion, existing stock option valuation models do not
provide a reliable single measure of the fair value of employee stock options
that have vesting provisions and are not transferable. In addition,
option-pricing models require the input of highly subjective assumptions,
including expected stock price volatility.
Employee Stock Ownership Plan /401(k) Plan
The Employee Stock Ownership Plan/401(k) Plan (the "Plan") provides shares
of stock to employees who have completed one year of continuous service with the
Company. All contributions for employees with five years or more of service are
fully vested. Under the 401(k) portion of the Plan, employees may make
contributions which are invested on their behalf, and the Company may also make
contributions for the benefit of employees. The Company records as compensation
expense an amount which approximates the vesting of the contributions to the
Employee Stock Ownership portion of the Plan, as well as the Company's
contribution to the 401(k) portion of the Plan. Amounts contributed by the
Company to the Plan during 1997, 1996 and 1995 were immaterial.
Restrictions on Payments of Dividends
Other than as required to maintain the financial ratios and net worth
requirements under the revolving credit and term loan agreements, there are no
restrictions on the payment of dividends on common stock by the Company. The
cash dividends paid with regard to a share of Class B common stock in a calendar
year may not be more than 90% of the cash dividends paid with regard to a share
of common stock in that calendar year. One of the Company's major subsidiaries
is also restricted on the payment of dividends to its parent company, LNR
Property Corporation, under the revolving credit and loan agreements.
12. RELATED PARTY TRANSACTIONS
During the period December 1, 1996 through October 31, 1997, and for the
years ended November 30, 1996 and 1995, Lennar provided various general and
administrative services to the Company including: data processing, treasury,
legal, human resources, payroll, accounting, risk management and others. Costs
for these services are designed to approximate the actual costs incurred by
Lennar to render these services. Management believes the methods used to
determine these costs are reasonable, however, such costs may not be
representative of those which would be incurred if the Company had operated as
an independent entity during the periods presented. Charges for these costs are
included in general and administrative expenses and amounted to $3.3 million,
$3.1 million and $2.6 million for the period December 1, 1996 through October
31, 1997 and for the years ended November 30, 1996 and 1995, respectively.
The Company provided a portion of Lennar's facilities on a rent-free basis
for the period December 1 through October 31, 1997 and for the years ended
November 30, 1996 and 1995. Subsequent to the Spin-off, the Company has
negotiated market-based lease agreements with Lennar and its subsidiaries that
result in additional rental income of over $1.4 million annually.
The Company has entered into agreements whereby Lennar provides data
processing and construction management services for a period of up to one year
from the Spin-off. Data processing services are charged at a monthly rate of
$16,000. Services under this agreement were provided after the Spin-off and
aggregated $16,000 for 1997. No charges were incurred under the construction
management services agreement in 1997 and charges for 1998 are not expected to
be material.
F-19
<PAGE> 110
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, the
disposition of these matters will not have a material adverse effect on the
financial condition, results of operations or cash flows of the Company.
The Company is subject to the usual obligations associated with entering
into contracts for the purchase, development and sale of real estate as well as
the management of partnerships and special servicing of CMBS in the routine
conduct of its business.
The Company is committed, under various letters of credit or other
agreements, to provide certain guarantees. Outstanding letters of credit and
guarantees under these arrangements totaled approximately $56.2 million at
November 30, 1997.
The Company leases certain premises and equipment under various
noncancellable operating leases with terms expiring through 2003, exclusive of
renewal option periods. The annual aggregate minimum rental commitments under
these leases are summarized as follows (in thousands): 1998 -- $182;
1999 -- $163; 2000 -- $149; 2001 -- $158; 2002 -- $166 and thereafter $170.
14. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
Revenues........................................ $44,760 $44,411 $43,368 $34,944
Operating earnings.............................. $27,166 $29,150 $26,689 $16,067
Earnings before income taxes.................... $20,357 $22,758 $19,168 $10,205
Net earnings.................................... $12,418 $13,882 $11,693 $ 6,225
1996
Revenues........................................ $38,814 $41,773 $41,336 $41,513
Operating earnings.............................. $22,801 $27,081 $23,739 $24,359
Earnings before income taxes.................... $18,169 $21,721 $18,405 $19,172
Net earnings.................................... $11,083 $13,250 $11,227 $11,695
</TABLE>
15. SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
As a result of the Spin-off and formation of Lennar Land Partners, the
Company believes that pro forma information provides the best information to
compare the results of operations and trends in earnings and costs. Results for
1997 have been adjusted to give pro forma effect to these transactions as if
such transactions had been completed as of the beginning of the period. The pro
forma information does not purport to be
F-20
<PAGE> 111
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
indicative of the results of operations which would actually have been reported
if the transactions had occurred on the dates or for the periods indicated:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
1997 ADJUSTMENTS 1997
---------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues
Rental income................................. $ 56,334 $ 56,334
Equity in earnings of partnerships............ 30,149 $13,292(a) 43,441
Interest income............................... 41,446 41,446
Gains on sales of:
Real estate................................ 18,076 18,076
Investment securities...................... 5,359 5,359
Management fees............................... 13,385 13,385
Other, net.................................... 2,734 2,734
-------- ------- --------
Total revenues........................ 167,483 13,292 180,775
Costs and expenses
Cost of rental operations..................... 35,767 35,767
General and administrative.................... 26,584 (4,408)(b) 22,176
Depreciation.................................. 6,060 6,060
-------- ------- --------
Total costs and expenses.............. 68,411 (4,408) 64,003
-------- ------- --------
Operating earnings.............................. 99,072 17,700 116,772
Interest expense................................ 26,584 (2,100)(c) 24,484
-------- ------- --------
Earnings before income taxes.................... 72,488 19,800 92,288
Income taxes.................................... 28,270 7,721(d) 35,991
-------- ------- --------
Net earnings.................................... $ 44,218 $12,079 $ 56,297
======== ======= ========
Net earnings per share.......................... $ 1.21 $ 1.55
======== ========
</TABLE>
Adjustments to the historical results to arrive at the pro forma results
are as follows:
(a) Represents entries to reflect the Company's 50% interest in the earnings of
Lennar Land Partners.
(b) Represents entries to reflect the elimination of costs related to the
Spin-off and addition of incremental administrative costs associated with
creating a stand-alone public company. 1997 adjustment is comprised of a
one-time adjustment to remove Spin-off related costs and add costs
associated with creating a separate public company.
(c) Represents entries to reflect reductions in interest expense due to the use
of proceeds from funds advanced by Lennar to repay debt.
(d) The adjustment to taxes represents the estimated income tax effect of the
pro forma adjustments to the Company's effective tax rate of 39.0%.
16. SUBSEQUENT EVENTS
In February 1998, the Company agreed to purchase interests in 41 entities
that own approximately 6,000 residential rental apartments. The purchase price,
which is subject to closing adjustments, is approximately $86 million plus the
assumption of approximately $44 million of future equity commitments, subject to
certain adjustments. The Company will manage the existing assets and is expected
to both develop and acquire new low-income tax credit properties. The
transaction remains subject to the receipt of third party consents.
F-21
<PAGE> 112
======================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY LNR OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF ANY 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 HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Forward-Looking Statements............ 15
Risk Factors.......................... 15
The Exchange Offer.................... 23
Capitalization........................ 29
Pro Forma Consolidated Financial
Data................................ 29
Selected Consolidated Financial
Data................................ 31
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 33
Business.............................. 44
Management............................ 56
Principal Stockholders................ 59
Certain Relationships and
Transactions........................ 61
Description of Certain Indebtedness... 65
Description of the New Notes.......... 67
Sales of New Notes Received By Broker-
Dealers............................. 88
Legal Matters......................... 88
Experts............................... 89
Incorporation of Certain Documents by
Reference........................... 89
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
$200,000,000
LNR PROPERTY CORPORATION
OFFER TO EXCHANGE 9 3/8% SERIES B
SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT FOR ANY AND ALL
OUTSTANDING 9 3/8% SERIES A SENIOR
SUBORDINATED NOTES DUE 2008
[LOGO]
------------------------
PROSPECTUS
------------------------
DATED , 1998
======================================================
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty, except
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the DGCL (providing for liability of directors for the unlawful payment
of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which a director derived an improper personal benefit.
Section 145 of the DGCL empowers the Company to indemnify, subject to the
standards set forth therein, any person in connection with any action, suit or
proceeding brought before or threatened by reason of the fact that the person
was a director, officer, employee or agent of such company, or is or was serving
as such with respect to another entity at the request of such company. The DGCL
also provides that the Company may purchase insurance on behalf of any such
director, officer, employee or agent.
The Company's Certificate of Incorporation provides for the indemnification
by the Company of each director and officer of the Company to the fullest extent
permitted by applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
1.1 Purchase Agreement, dated March 19, 1998, by and among LNR
Property Corporation (the "Company"), BT Alex. Brown
Incorporated and Donaldson Lufkin & Jenrette Securities
Corporation (the "Initial Purchasers").
3.1 Certificate of Incorporation.*
3.2 By-laws.*
4.1 Indenture, dated as of March 24, 1998, by and among the
Company and U.S. Bank Trust National Association (the
"Trustee"), including Form of 9 3/8% Series A Senior
Subordinated Notes due 2008 and Form of 9 3/8% Series B
Senior Subordinated Notes due 2008.
4.2 Registration Agreement, dated as of March 24, 1998, by and
among the Company and the Initial Purchasers.
5.1 Opinion of Rogers & Wells LLP.
10.1 Separation and Distribution Agreement between the Company
and Lennar Corporation, dated June 10, 1997.*
10.2 LNR Property Corporation Employee Stock Ownership/401(k)
Plan.*
10.3 Shared Facilities Agreement between LNR Property Corporation
and Lennar Corporation.*
10.4 Partnership Agreement by and between Lennar Land Partners
Sub, Inc. and LNR Land Partners Sub, Inc.*
10.5 Revolving Credit Agreement dated as of December 5, 1997,
among LNR Property Corporation and certain subsidiaries and
Bank of America National Trust and Savings Association, as
lender and agent.*
10.6 Master Repurchase Agreement dated as of December 8, 1997,
between LNR Sands Holdings, Inc. and Goldman Sachs Mortgage
Company.*
10.7 Reverse Repurchase Agreement dated as of October 21, 1997,
between DLJ Mortgage Capital, Inc. and LNR Property
Corporation, Lennar Capital Services, Inc., Nevada
Securities Holdings, Inc., Lennar Securities Holdings, Inc.,
Lennar MBS, Inc. and LFS Asset Corp.*
</TABLE>
II-1
<PAGE> 114
<TABLE>
<C> <S>
10.8 Amended and Restated Credit Agreement dated as of October
31, 1997, between Lennar Capital Services Inc. and Lennar
MBS, Inc. as borrowers and Nationsbank of Texas, N.A. as
lender.*
10.9 Credit Agreement among Lennar Land Partners as borrower, and
the First National Bank of Chicago, et al.*
10.10 Revolving Credit Agreement dated as of November 6, 1997, by
and between Lennar Capital Services, Inc. and The Bank of
New York.*
10.11 Reverse Repurchase Agreement dated as of June 7, 1996,
between CS First Boston (Hong Kong) Limited and Lennar
Financial Services, Inc., Lennar MBS, Inc., Lennar
Securities Holdings, Inc. and LFS Asset Corp.*
11.1 Statement re computation of Per Share Earnings.*
21.1 List of subsidiaries.*
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Rogers & Wells LLP (to be contained in the
opinion filed as Exhibit 5.1).
24.1 Power of attorney (incorporated by reference in the
signature pages).
25.1 Form T-1 Statement of Eligibility and Qualification of U.S.
Bank Trust National Association, as trustee.
27.1 Financial Data Schedule*
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement.
</TABLE>
- ---------------
* Previously filed.
ITEM 22. UNDERTAKING.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrants hereby undertake:
(i) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
II-2
<PAGE> 115
(ii) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(iii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iv) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-3
<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
New York, on April 13, 1998.
LNR PROPERTY CORP.
By: /s/ STEVEN J. SAIONTZ
------------------------------------
Steven J. Saiontz
Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeffrey P. Krasnoff and Shelly Rubin his true and
lawful attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this registration
statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully for all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirement of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ STUART A. MILLER Chairman of the Board; Director April 13, 1998
- ---------------------------------------------------
Stuart A. Miller
/s/ STEVEN J. SAIONTZ Chief Executive Officer; April 13, 1998
- --------------------------------------------------- Director
Steven J. Saiontz
/s/ JEFFREY P. KRASNOFF President; Director April 13, 1998
- ---------------------------------------------------
Jeffrey P. Krasnoff
/s/ SHELLY RUBIN Financial Vice President April 13, 1998
- ---------------------------------------------------
Shelly Rubin
/s/ JOHN T. MCMICKLE Controller April 13, 1998
- ---------------------------------------------------
John T. McMickle
/s/ LEONARD MILLER Director April 13, 1998
- ---------------------------------------------------
Leonard Miller
</TABLE>
II-4
<PAGE> 117
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ SUE M. COBB Director April 13, 1998
- ---------------------------------------------------
Sue M. Cobb
/s/ CARLOS M. DE LA CRUZ Director April 13, 1998
- ---------------------------------------------------
Carlos M. de la Cruz
/s/ BRIAN BILZIN Director April 13, 1998
- ---------------------------------------------------
Brian Bilzin
</TABLE>
II-5
<PAGE> 118
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- ------------
1.1 Purchase Agreement, dated March 19, 1998, by and among LNR
Property Corporation (the "Company"), BT Alex. Brown
Incorporated and Donaldson Lufkin & Jenrette Securities
Corporation (the "Initial Purchasers").
3.1 Certificate of Incorporation.*
3.2 By-laws.*
4.1 Indenture, dated as of March 24, 1998, by and among the
Company and U.S. Bank Trust National Association (the
"Trustee"), including Form of 9 3/8% Series A Senior
Subordinated Notes due 2008 and Form of 9 3/8% Series B
Senior Subordinated Notes due 2008.
4.2 Registration Agreement, dated as of March 24, 1998, by and
among the Company and the Initial Purchasers.
5.1 Opinion of Rogers & Wells LLP.
10.1 Separation and Distribution Agreement between the Company
and Lennar Corporation, dated June 10, 1997.*
10.2 LNR Property Corporation Employee Stock Ownership/401(k)
Plan.*
10.3 Shared Facilities Agreement between LNR Property Corporation
and Lennar Corporation.*
10.4 Partnership Agreement by and between Lennar Land Partners
Sub, Inc. and LNR Land Partners Sub, Inc.*
10.5 Revolving Credit Agreement dated as of December 5, 1997,
among LNR Property Corporation and certain subsidiaries and
Bank of America National Trust and Savings Association, as
lender and agent.*
10.6 Master Repurchase Agreement dated as of December 8, 1997,
between LNR Sands Holdings, Inc. and Goldman Sachs Mortgage
Company.*
10.7 Reverse Repurchase Agreement dated as of October 21, 1997,
between DLJ Mortgage Capital, Inc. and LNR Property
Corporation, Lennar Capital Services, Inc., Nevada
Securities Holdings, Inc., Lennar Securities Holdings, Inc.,
Lennar MBS, Inc. and LFS Asset Corp.*
<PAGE> 119
Exhibit
No. Description
- ------- ------------
10.8 Amended and Restated Credit Agreement dated as of October
31, 1997, between Lennar Capital Services Inc. and Lennar
MBS, Inc. as borrowers and Nationsbank of Texas, N.A. as
lender.*
10.9 Credit Agreement among Lennar Land Partners as borrower, and
the First National Bank of Chicago, et al.*
10.10 Revolving Credit Agreement dated as of November 6, 1997, by
and between Lennar Capital Services, Inc. and The Bank of
New York.*
10.11 Reverse Repurchase Agreement dated as of June 7, 1996,
between CS First Boston (Hong Kong) Limited and Lennar
Financial Services, Inc., Lennar MBS, Inc., Lennar
Securities Holdings, Inc. and LFS Asset Corp.*
11.1 Statement re computation of Per Share Earnings.*
21.1 List of subsidiaries.*
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Rogers & Wells LLP (to be contained in the
opinion filed as Exhibit 5.1).
24.1 Power of attorney (incorporated by reference in the
signature pages).
25.1 Form T-1 Statement of Eligibility and Qualification of U.S.
Bank Trust National Association, as trustee.
27.1 Financial Data Schedule*
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement.
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* Previously filed.
<PAGE> 1
Exhibit 1.1
LNR PROPERTY CORPORATION
$200,000,000
9 3/8% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
------------------
March 19, 1998
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
c/o BT Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
LNR Property Corporation ("LNR"), a Delaware corporation, hereby
confirms its agreement with each of BT Alex. Brown Incorporated and Donaldson,
Lufkin & Jenrette Securities Corporation (collectively, the "Initial
Purchasers"), as set forth below.
1. The Notes. Subject to the terms and conditions herein contained,
LNR proposes to issue and sell to the Initial Purchasers $200,000,000 aggregate
principal amount of LNR's 9 3/8% Senior Subordinated Notes due 2008 (the
"Notes"). The Notes are to be issued under an indenture (the "Indenture") to be
dated as of March 24, 1998 between LNR and First Trust of New York, National
Association, as trustee (the "Trustee").
The Notes will be offered and sold to you without being registered
under the Securities Act of 1933, as amended (the "Act"), in reliance on
exemptions therefrom.
In connection with the sale of the Notes, LNR has prepared a
preliminary offering memorandum dated March 2, 1998 (the "Preliminary
Memorandum") and a final offering memorandum dated March 19, 1998 (the "Final
Memorandum", the Preliminary Memorandum and the Final Memorandum each herein
being referred to as a "Memorandum") setting forth or including a description of
the terms of the Notes, the terms of the offering of the Notes, a description of
LNR and any material developments relating to LNR occurring after the date of
the most recent historical financial statements included therein.
LNR understands that the Initial Purchasers propose to make an
offering of the Notes only on the terms and in the manner set forth in the Final
Memorandum and Section 8
<PAGE> 2
hereof as soon as the Initial Purchasers deem advisable after this Agreement has
been executed and delivered, to persons in the United States whom the Initial
Purchasers reasonably believe to be qualified institutional buyers ("Qualified
Institutional Buyers" or "QIBs") as defined in Rule 144A under the Act, as such
rule may be amended from time to time ("Rule 144A"), in transactions under Rule
144A, and outside the United States to certain persons in reliance on Regulation
S under the Act.
The Initial Purchasers and the direct and indirect transferees of
the Notes will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration Rights
Agreement"), to be dated as of the Closing Date (as defined in Section 3 below),
pursuant to which LNR will agree, among other things, to file a registration
statement (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") registering the Notes or the Exchange Notes (as
defined in the Registration Rights Agreement) under the Act.
2. Representations and Warranties of LNR. LNR represents and
warrants to and agrees with each of the Initial Purchasers that:
(a) Neither the Preliminary Memorandum, nor the Final Memorandum nor
any amendment or supplement thereto as of the date thereof and at all
times subsequent thereto up to the Closing Date contained or will contain
any untrue statement of a material fact or omitted or will omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 2(a) do not
apply to statements or omissions made in reliance upon and in conformity
with information relating to the Initial Purchasers or to their resale of
the Notes furnished to LNR in writing by the Initial Purchasers expressly
for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto.
(b) Each subsidiary listed on Exhibit 21.1 to LNR's Annual Report on
Form 10-K for the year ended November 30, 1997 is a Subsidiary (as defined
below ) and the subsidiaries listed on such Exhibit constitute all the
subsidiaries of LNR other than Subsidiaries that, if considered in the
aggregate as a single subsidiary, would not constitute a "significant
subsidiary" of LNR, within the meaning of Rule 1-02(w) of the Commission's
Regulation S-X. There are no "significant subsidiaries" of LNR other than
the Designated Subsidiaries and the Investment Affiliates. LW Real Estate
Investments, L.P. and the Land Partnership (as defined below) constitute
all the Investment Affiliates (as defined below). Each of LNR, the
Subsidiaries and the Investment Affiliates is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has all requisite corporate or other power and authority
to own its properties and conduct its business as now conducted and as
described in the Final Memorandum; each of LNR, the Subsidiaries and the
Investment Affiliates is duly qualified to do business and is in good
standing in all other jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification,
except where the failure to be so qualified would not, individually or in
the
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<PAGE> 3
aggregate, have a material adverse effect on the general affairs,
management, business, condition (financial or otherwise), prospects or
results of operations of LNR and the Subsidiaries, taken as a whole (any
such event, a "Material Adverse Effect"). For purposes of this Agreement,
a "Subsidiary" means a direct or indirect "subsidiary" of LNR, as such
term is defined in Rule 405 under the Act, financial results of which are
consolidated under generally accepted accounting principles with the
financial results of LNR on the consolidated financial statements of LNR.
For purposes of this Agreement, the following Subsidiaries are "Designated
Subsidiaries": Leisure Colony Management Corp., Lennar Capital Services,
Inc., Lennar Securities Holdings, Inc., Nevada Securities Holdings, Inc.,
LNR Land Partners SUB, Inc., LFS Asset Corp., Lennar Commercial
Properties, Inc., Lennar MBS, Inc. and LNR Sands Holdings, Inc. For
purposes of this Agreement, an "Investment Affiliate" means any entity in
which LNR, directly or indirectly, has an ownership interest, (i) the
financial results of which are not consolidated under generally accepted
accounting principles with the financial results of LNR on the
consolidated financial statements of LNR and (ii) which is a "significant
subsidiary" of LNR, as such term is defined within Rule 1-02(w) of the
Commission's Regulation S-X.
(c) As of the Closing Date, LNR will have the authorized, issued and
outstanding capitalization set forth in the Final Memorandum, except that
additional shares of common stock of LNR may have been issued since
November 30, 1997 upon the exercise of employee stock options; all of the
outstanding shares of capital stock of LNR and each of the Subsidiaries
have been, and as of the Closing Date will be, duly authorized and validly
issued, are fully paid and nonassessable and were not issued in violation
of any preemptive or similar rights; all of the outstanding shares of
capital stock of the Subsidiaries are owned, and, as of the Closing Date,
will be owned by LNR or another Subsidiary (except to the extent set forth
as "minority interests" on the consolidated balance sheet of LNR as of
November 30, 1997 included in the Final Memorandum) , free and clear of
all liens (other than liens created pursuant to the Credit Agreement (as
defined below)), encumbrances, equities and claims or restrictions on
transferability or voting (other than restriction on transferability
imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions and restrictions on transferability and voting with respect
to Subsidiaries in which persons other than LNR or other Subsidiaries hold
interests); except as set forth in the Final Memorandum and except for the
class B common stock of LNR, there are no outstanding (i) options,
warrants or other rights to purchase, (ii) agreements or other obligations
to issue or (iii) other rights to convert any obligation into, or exchange
any securities for, shares of capital stock of or ownership interests in
LNR or any of the Subsidiaries or Investment Affiliates. LNR indirectly
owns a 50% interest in Lennar Land Partners, a Delaware general
partnership (the "Land Partnership"). All of the interests in the
Investment Affiliates owned by LNR or a Subsidiary (including the 50%
interest in the Land Partnership) have been duly authorized and validly
issued and, except as otherwise disclosed in the Final Memorandum are, and
as of the Closing Date will be, free and clear of all liens, encumbrances,
equities and claims.
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<PAGE> 4
(d) LNR has all requisite corporate power and authority to execute,
deliver and perform each of its obligations under the Notes, the Exchange
Notes and the Private Exchange Notes (each as defined in the Registration
Rights Agreement and the Indenture). The Notes, when issued, will be in
the form contemplated by the Indenture. The Notes, the Exchange Notes and
the Private Exchange Notes have each been duly and validly authorized by
LNR and, when executed by LNR and authenticated by the Trustee in
accordance with the provisions of the Indenture and, in the case of the
Notes, when delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, will have been duly executed,
issued and delivered and will constitute valid and legally binding
obligations of LNR (assuming the due authorization, execution and delivery
of the Indenture by the Trustee and the due authorization and delivery of
the Notes by the Trustee in accordance with the Indenture), entitled to
the benefits of the Indenture, and enforceable against LNR in accordance
with their terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(e) LNR has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Indenture. The Indenture
meets the requirements for qualification under the Trust Indenture Act of
1939, as amended (the "TIA"). The Indenture has been duly and validly
authorized by LNR and, when executed and delivered in accordance with its
terms (assuming the due authorization, execution and delivery by the
Trustee), will have been duly executed and delivered and will constitute a
valid and legally binding agreement of LNR, enforceable against LNR in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(f) LNR has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Registration Rights
Agreement. The Registration Rights Agreement has been duly and validly
authorized by LNR and, when executed and delivered by LNR (assuming due
authorization, execution and delivery by the Initial Purchasers), will
have been duly executed and delivered and will constitute a valid and
legally binding agreement of LNR, enforceable against LNR in accordance
with its terms, except that (A) the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law) and (B)
-4-
<PAGE> 5
any rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy considerations.
(g) LNR has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. This Agreement and the consummation
by LNR of the transactions contemplated hereby have been duly and validly
authorized by LNR. This Agreement has been duly executed and delivered by
LNR.
(h) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the
performance of this Agreement by LNR or the consummation by it of the
transactions contemplated hereby, except (i) such as may be required under
and have been obtained or made under the Credit Agreement, (ii) such as
may be required under state securities or "Blue Sky" laws in connection
with the purchase and resale of the Notes by the Initial Purchasers and
(iii) such as may be required under applicable federal securities laws
with respect to the registration of the Exchange Notes and Private
Exchange Notes, if applicable, pursuant to the Registration Rights
Agreement. Neither LNR nor any of the Subsidiaries or the Land Partnership
is: (i) in violation of its certificate of incorporation or bylaws, or
other comparable organizational documents; (ii) in breach or violation of
any statute, judgment, decree, order, rule or regulation applicable to any
of them or any of its respective properties or assets, except for any such
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect; or (iii) in breach of or default under
(nor has any event occurred which, with notice or passage of time or both,
would constitute a default under) or in violation of any of the terms or
provisions of any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate, contract
or other agreement or instrument to which any of them is a party or to
which its respective properties or assets are subject (collectively,
"Contracts"), except for any such breach, default, violation or event
which would not, individually or in the aggregate, have a Material Adverse
Effect. For purposes of this Agreement, the "Credit Agreement" means the
Revolving Credit Agreement dated as of December 5, 1997 among LNR, certain
Subsidiaries, the parties thereto in their capacities as lenders
thereunder and Bank of America National Trust and Savings Association, as
agent.
(i) The execution, delivery and performance by LNR of this
Agreement, the Indenture, the Notes, the Exchange Notes, the Private
Exchange Notes and the Registration Rights Agreement, the consummation of
the transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof and thereof, will not conflict with or constitute or
result in a breach of or a default under (or an event which with notice or
passage of time or both would constitute a default under) or violation of
or cause an acceleration of any obligation under, or result in the
imposition or creation of (or the obligation to create or impose) a lien
on any property or assets of LNR or any Subsidiary or Investment Affiliate
with respect to: (i) the terms or provisions of any Contract, except for
any such conflict, breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse Effect; (ii) the
certificate of incorporation or
-5-
<PAGE> 6
bylaws or other comparable organizational documents of LNR or any of the
Subsidiaries or Investment Affiliates; or (iii) (assuming compliance with
all applicable state securities or "Blue Sky" laws) any statute, judgment,
decree, order, rule or regulation of any court or governmental agency or
body applicable to LNR, the Subsidiaries, the Investment Affiliates or any
of their respective properties or assets, except for any such conflict,
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect.
(j) Each of the Indenture, the Notes, the Exchange Notes and the
Registration Rights Agreement conforms in all material respects to the
description thereof in the Preliminary Memorandum and in the Final
Memorandum.
(k) The consolidated financial statements of LNR and the related
notes thereto included in the Preliminary Memorandum and in the Final
Memorandum present fairly the financial position, results of operations
and cash flows of LNR and its subsidiaries at the dates and for the
periods to which they relate and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis,
except as otherwise stated therein, and comply as to form in all material
respects with the applicable accounting requirements of the Act and the
rules and regulations thereunder. The summary and selected financial and
statistical data included in the Preliminary Memorandum and in the Final
Memorandum present fairly in all material respects the information shown
therein and have been prepared and compiled on a basis consistent with the
audited financial statements included therein, except as otherwise stated
therein, and comply as to form in all material respects with any
applicable accounting requirements of the Act and the rules and
regulations thereunder. Deloitte & Touche LLP, who has certified certain
of the consolidated financial statements of LNR as set forth in its
reports included in the Preliminary Memorandum and in the Final
Memorandum, is an independent public accounting firm as required by the
Act and the rules and regulations thereunder.
(l) The pro forma financial statements (including the notes thereto)
and other pro forma financial information included in the Preliminary
Memorandum and in the Final Memorandum (A) comply as to form in all
material respects with the applicable requirements of Regulation S-X
promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"), (B) have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements and (C) have
been properly computed on the bases described therein. The assumptions
used in the preparation of the pro forma financial statements and other
pro forma financial information included in the Preliminary Memorandum and
in the Final Memorandum are reasonable and the adjustments used therein
are appropriate to give effect to the transactions or circumstances
referred to therein.
(m) Except as set forth in the Final Memorandum, there is not
pending or, to the best knowledge of LNR, threatened any action, suit,
proceeding, inquiry or investigation to which LNR or any of its
Subsidiaries or Investment Affiliates is a party,
-6-
<PAGE> 7
or to which any of its properties or assets are subject, before or brought
by any court, arbitrator or governmental agency or body, which, if
determined adversely to LNR or any such Subsidiary or Investment
Affiliate, would, individually or in the aggregate, have a Material
Adverse Effect, or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Notes
to be sold hereunder or the consummation of the other transactions
described in the Final Memorandum.
(n) Each of LNR, the Subsidiaries and the Investment Affiliates owns
or possesses adequate licenses or other rights to use all patents,
trademarks, service marks, trade names, copyrights and know-how necessary
to conduct the businesses operated by it as described in the Final
Memorandum except where the failure to own or possess such of the
foregoing would not have a Material Adverse Effect, and neither LNR nor
any of the Subsidiaries or Investment Affiliates has received any notice
of infringement of or conflict with (or knows of any such infringement of
or conflict with) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how which, if
such assertion of infringement or conflict were sustained, would,
individually or in the aggregate, have a Material Adverse Effect.
(o) Each of LNR, the Subsidiaries and the Investment Affiliates
possesses all licenses, permits, certificates, consents, orders, approvals
and other authorizations from, and has made or will have made all
declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts
and other tribunals presently required or necessary to own or lease, as
the case may be, and to operate its properties and to carry on its
business as set forth in the Final Memorandum ("Permits"), except where
the failure to obtain such Permits would not, individually or in the
aggregate, have a Material Adverse Effect; each of LNR, the Subsidiaries
and the Investment Affiliates has fulfilled and performed all of its
obligations with respect to such Permits and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such Permit except where such revocation,
termination or impairment would not have a Material Adverse Effect; and
neither LNR nor any Subsidiary or Investment Affiliate has received any
notice of any proceeding relating to revocation or modification of any
such Permit, except as described in the Final Memorandum or except where
such revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect.
(p) Since the respective dates as of which information is given in
the Final Memorandum, except as described therein, there has been no
material adverse change or any fact, taken by itself, which could
reasonably be expected to result in a material adverse change, in the
general affairs, management, business, condition (financial or otherwise)
or results of operations of LNR and the Subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary course of
business, or any loss of, or damage to, properties (whether or not
insured) which could reasonably be expected to affect materially and
adversely the general affairs, management, business, condition (financial
or otherwise) or results of operations of LNR and the Subsidiaries taken
as a
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<PAGE> 8
whole. Since the date of the latest balance sheet presented in the Final
Memorandum, except as expressly disclosed in or contemplated by the Final
Memorandum, (i) neither LNR nor any of its Subsidiaries or Investment
Affiliates has (x) incurred or undertaken any liabilities or obligations,
direct or contingent, that are material to LNR and the Subsidiaries taken
as a whole other than in the ordinary course of business consistent with
past practice or (y) entered into any material transaction not in the
ordinary course of business and consistent with past practice, and (ii)
LNR has not declared or paid any dividend or made any distribution on any
shares of its capital stock or redeemed, purchased or otherwise acquired
or agreed to redeem, purchase or otherwise acquire any shares of its
capital stock.
(q) Each of LNR, the Subsidiaries and the Investment Affiliates has
filed all necessary federal, state and foreign income and franchise tax
returns, except where the failure to so file such returns would not,
individually or in the aggregate, have a Material Adverse Effect, and has
paid all taxes shown as due thereon; and other than tax deficiencies which
LNR or any of the Subsidiaries or Investment Affiliates is contesting in
good faith and for which LNR or such Subsidiary has provided adequate
reserves, there is no tax deficiency that has been asserted against LNR or
any Subsidiary or Investment Affiliate that would have, individually or in
the aggregate, a Material Adverse Effect.
(r) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which LNR reasonably
believes to be reliable and accurate.
(s) Neither LNR nor any of the Subsidiaries nor any agent acting on
their behalf has taken or will take any action that might cause this
Agreement or the sale of the Notes to violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in
effect, or as the same may hereafter be in effect, on the Closing Date.
(t) Each of LNR, the Subsidiaries and the Investment Affiliates has
good title to all personal property described in the Final Memorandum as
being owned by it, good and valid title to all real property described in
the Final Memorandum as being owned by it and good and valid title to a
leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum
or to the extent the failure to have such title or the existence of such
liens, charges, encumbrances or restrictions would not, individually or in
the aggregate, have a Material Adverse Effect. All leases, contracts and
agreements to which LNR or any Subsidiary or Investment Affiliate is a
party or by which LNR or such Subsidiary or Investment Affiliate is bound
are valid and enforceable against LNR or such Subsidiary or Investment
Affiliate, to the knowledge of LNR are valid and enforceable against the
other party or parties thereto and are in full force and effect with only
such exceptions as would not, individually or in the aggregate, have a
Material Adverse Effect.
-8-
<PAGE> 9
(u) There are no legal or governmental proceedings involving or
affecting LNR, any of the Subsidiaries or Investment Affiliates or any of
their respective properties or assets which would be required to be
described in a prospectus pursuant to the Act that are not described in
the Final Memorandum, nor are there any material contracts or other
documents which would be required to be described in a prospectus pursuant
to the Act that are not described in the Final Memorandum.
(v) Except as described in the Final Memorandum or as would not,
individually or in the aggregate, have a Material Adverse Effect, (A) each
of LNR, the Subsidiaries and the Investment Affiliates is in compliance
with and not subject to liability under applicable Environmental Laws, (B)
each of LNR, the Subsidiaries and the Investment Affiliates has made all
filings and provided all notices required under any applicable
Environmental Law, and has and is in compliance with all Permits required
under any applicable Environmental Laws and each of them is in full force
and effect, (C) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter or request for information pending or,
to the knowledge of LNR, threatened against LNR or any Subsidiary or
Investment Affiliate under any Environmental Law, (D) no lien, charge,
encumbrance or restriction has been recorded under any Environmental Law
with respect to any assets, facility or property owned, operated, leased
or controlled by LNR or any Subsidiary or Investment Affiliate, (E)
neither LNR nor any Subsidiary or Investment Affiliate has received notice
that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or any comparable state law and (F) no
property or facility of LNR or any Subsidiary or Investment Affiliate is
(i) listed or proposed for listing on the National Priorities List under
CERCLA or (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to
CERCLA, or on any comparable list maintained by any state or local
governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder, relating to pollution or
protection of public or employee health and safety or the environment,
including, without limitation, laws relating to (i) emissions, discharges,
releases or threatened releases of hazardous materials, into the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), (ii) the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of hazardous materials, and (iii) underground and
aboveground storage tanks, and related piping, and emissions, discharges,
releases or threatened releases therefrom.
(w) There is no strike, labor dispute, slowdown or work stoppage
with the employees of LNR or the Subsidiaries or the Investment Affiliates
which is pending or, to the knowledge of LNR, threatened, which would have
a Material Adverse Effect.
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<PAGE> 10
(x) Each of LNR, the Subsidiaries and the Investment Affiliates
carries insurance in such amounts and covering such risks as is adequate
for the conduct of its business and the value of its properties.
(y) Neither LNR nor any Subsidiary has any liability for any
prohibited transaction within the meaning of ss.406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or funding
deficiency within the meaning of ss.302 of ERISA or any complete or
partial withdrawal liability under ss.4201 of ERISA with respect to any
pension, profit sharing or other plan which is subject to ERISA to which
LNR or any Subsidiary makes or ever has made a contribution and in which
any employee of LNR or any Subsidiary is or has ever been a participant.
With respect to such plans, each of LNR and the Subsidiaries is in
compliance in all material respects with all applicable provisions of
ERISA.
(z) Each of LNR, the Subsidiaries and the Investment Affiliates (i)
makes and keeps accurate books and records and (ii) maintains internal
accounting controls which provide reasonable assurance that (A)
transactions are executed in accordance with management's authorization,
(B) transactions are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(aa) Neither LNR nor any Subsidiary is an "investment company" or
"promoter" or "principal underwriter" for an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder.
(bb) No holder of securities of LNR (other than the Registrable
Notes (as defined in the Registration Rights Agreement)) will be entitled
to have such securities registered under the registration statements
required to be filed by LNR pursuant to the Registration Rights Agreement
other than as expressly permitted thereby.
(cc) Prior to and immediately after the consummation of the
transactions contemplated by this Agreement, the fair value and present
fair salable value of the assets of LNR and the Subsidiaries, on a
consolidated basis, will exceed the sum of its consolidated stated
liabilities and identified contingent liabilities; neither LNR nor any of
the Subsidiaries is, or will be after giving effect to the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, (a) left with unreasonably small capital
with which to carry on its business as it is proposed to be conducted, (b)
unable to pay its debts (contingent or otherwise) as they mature or (c)
otherwise insolvent.
(dd) Neither LNR nor any of its Affiliates (as defined in Rule
501(b) of Regulation D under the Act) has directly, or through any agent,
(i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of any "security" (as defined in
-10-
<PAGE> 11
the Act) which is or could be integrated with the sale of the Notes in a
manner that would require the registration under the Act of the Notes or
(ii) engaged in any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) in connection with
the offering of the Notes or in any manner involving a public offering
within the meaning of Section 4(2) of the Act.
(ee) Assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 8 hereof, it is not necessary in
connection with the offer, sale and delivery of the Notes to the Initial
Purchasers in the manner contemplated by this Agreement to register any of
the Notes under the Act or to qualify the Indenture under the TIA.
(ff) No securities of LNR are of the same class (within the meaning
of Rule 144A under the Act) as the Notes and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or
quoted in a U.S. automated inter-dealer quotation system.
(gg) Neither LNR nor any Subsidiary has taken, nor will take,
directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation
of the price of the Notes.
(hh) Neither LNR nor any of its Affiliates has, directly or through
any agent, engaged in any directed selling efforts (as that term is
defined in Regulation S under the Act ("Regulation S")) with respect to
the Notes; LNR and its Affiliates and any person acting on any of its
behalf have complied with the offering restrictions requirement of
Regulation S.
(ii) LNR has complied with all provisions of Section 517.075 Florida
Statutes, relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
(jj) Except as disclosed in the Final Memorandum, there are no
business relationships or related party transactions which would be
required to be disclosed in a registration statement under the Act by Item
404 of Regulation S-K of the Commission, and each business relationship or
related party transaction described in the Preliminary Memorandum or the
Final Memorandum is a fair and accurate description of the relationships
and transactions so described in all material respects.
(kk) LNR had all requisite corporate power and authority to execute,
deliver and perform each of its obligations under the Purchase and Sale
Agreement, dated as of February 18, 1998, between LNR and Pacific Harbor
Capital, Inc. (the "AHG Acquisition Agreement"). The AHG Acquisition
Agreement has been duly and validly authorized, executed and delivered by
LNR and constitutes a valid and legally binding obligation of LNR,
enforceable against LNR in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to
-11-
<PAGE> 12
creditors' rights generally, and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor
may be brought (regardless of whether such enforcement is considered
in a proceeding in equity or at law).
Any certificate signed by any officer of LNR and delivered to any
Initial Purchasers or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by LNR to each Initial Purchaser as to the matters
covered thereby.
3. Purchase, Sale and Delivery of the Notes. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, LNR agrees to issue and
sell to the Initial Purchasers, and each of the Initial Purchasers agrees
severally, but not jointly, to purchase from LNR, the Notes set forth opposite
such Initial Purchaser's name on Schedule I hereto, at 97.059% of their
principal amount.
One or more certificates in definitive form for the Notes that the
Initial Purchasers have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Initial Purchasers
request upon notice to LNR at least 48 hours prior to the Closing Date, shall
be delivered by or on behalf of LNR to the Initial Purchasers, against payment
by or on behalf of the Initial Purchasers of the purchase price therefor by
wire transfer of immediately available funds payable to such account or
account as LNR shall specify prior to the Closing Date, or by such means as
the parties hereto shall agree prior to the Closing Date. Such delivery of and
payment for the Notes shall be made at the offices of Willkie Farr & Gallagher,
One Citicorp Center, 153 East 53rd Street, New York, New York 10022, at
10:00 A.M., New York time, on March 24, 1998, or at such other place, time or
date as the Initial Purchasers and LNR may agree upon, such time and date of
delivery against payment being herein referred to as the "Closing Date." LNR
will make such certificate or certificates for the Notes available for
checking and packaging by the Initial Purchasers at the offices of BT Alex.
Brown Incorporated in New York, New York or such other place as the Initial
Purchasers may designate, at least 24 hours prior to the Closing Date.
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Notes at the price and upon the terms set
forth in the Final Memorandum as soon as practicable after this Agreement is
entered into and as in the sole judgment of the Initial Purchasers is advisable.
5. Covenants of LNR. LNR covenants and agrees with the Initial
Purchasers that:
(a) LNR will not amend or supplement the Final Memorandum or any
amendment or supplement thereto of which the Initial Purchasers and
counsel to the Initial Purchasers shall not previously have been advised
and furnished a copy for a reasonable period of time prior to the proposed
amendment or supplement and as to which the Initial Purchasers shall not
have given their consent, which consent shall not be unreasonably
withheld. LNR will promptly, upon the reasonable request of the Initial
Purchasers or counsel for the Initial Purchasers, make any amendments or
supplements to the Preliminary Memorandum or the Final Memorandum that may
be necessary or advisable in connection with the resale of the Notes by
the Initial Purchasers.
(b) LNR will cooperate with the Initial Purchasers in arranging for
the qualification of the Notes for offering and sale under the securities
or "Blue Sky"
- -PAGE 12-
<PAGE> 13
laws of such jurisdictions as the Initial Purchasers may designate and
will continue such qualification in effect for as long as may be necessary
to complete the resale of the Notes by the Initial Purchasers; provided,
however, that in connection therewith LNR shall not be required to qualify
as a foreign corporation or to execute a general consent to service of
process in any jurisdiction.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Notes or the Private Exchange Notes, any
event occurs or information becomes known as a result of which the Final
Memorandum as then amended or supplemented would include an untrue
statement of a material fact, or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Final Memorandum in order
to comply with applicable law, LNR will promptly notify the Initial
Purchasers thereof and will prepare, at LNR's expense, an amendment or
supplement to the Final Memorandum that corrects such statement or
omission or effects such compliance.
(d) LNR will, without charge, provide to the Initial Purchasers and
to counsel for the Initial Purchasers as many copies of the Preliminary
Memorandum and the Final Memorandum or any amendment or supplement thereto
as the Initial Purchasers may reasonably request.
(e) LNR will apply the net proceeds from the sale of the Notes as
set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any Notes remain outstanding, LNR will furnish to
the Initial Purchasers copies of all reports and other communications
(financial or otherwise) furnished by LNR to the Trustee or the holders of
the Notes and, as soon as available, copies of any reports or financial
statements filed by LNR with the Commission or furnished to any national
securities exchange on which any class of securities of LNR may be listed.
(g) Prior to the Closing Date, LNR will furnish to the Initial
Purchasers, as soon as they have been prepared by or are available to LNR,
a copy of any unaudited interim consolidated financial statements of LNR
for any period subsequent to the period covered by its most recent
financial statements appearing in the Final Memorandum.
(h) Neither LNR nor any of its Affiliates will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) that could be integrated with the sale
of the Notes in a manner that would require the registration under the Act
of the Notes.
(i) LNR will not, and will not permit any of the Subsidiaries to,
engage in any form of general solicitation or general advertising
- -PAGE 13-
<PAGE> 14
(as those terms are used in Regulation D under the Act) in connection with
the offering of the Notes or in any manner involving a public offering
within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding, LNR will
make available, upon request, to any holder of such Notes and any
prospective purchasers thereof the information specified in Rule
144A(d)(4) under the Act, unless LNR is then subject to Section 13 or
15(d) of the Exchange Act.
(k) LNR will use its best efforts to (i) permit the Notes to be
designated PORTAL securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. (the
"NASD") relating to trading in the Private Offerings, Resales and Trading
through Automated Linkages market (the "PORTAL Market") and (ii) permit
the Notes to be eligible for clearance and settlement through The
Depository Trust Company.
(l) In connection with any Notes offered and sold in an offshore
transaction (as defined in Regulation S), LNR will not register any
transfer of such Notes not made in accordance with the provisions of
Regulation S and will not, except in accordance with the provisions of
Regulation S, if applicable, issue any such Notes in the form of
definitive Notes.
(m) For as long as any Notes or Exchange Notes remain outstanding,
LNR shall take such steps as shall be necessary to ensure that neither LNR
nor any subsidiary of LNR shall become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the rules
and regulations thereunder if LNR's becoming an investment company would
affect the ability of LNR to perform any of its obligations with regard to
the Notes or Exchange Notes or would affect any holder's rights with
regard to the Notes or Exchange Notes or restrict any holder's ability to
transfer the Notes or Exchange Notes.
6. Expenses. LNR agrees to pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to: (i)
the printing, word processing or other production of documents with respect to
such transactions, including any costs of printing the Preliminary Memorandum
and the Final Memorandum and any amendments or supplements thereto, and any
"Blue Sky" memoranda, (ii) all arrangements relating to the delivery to the
Initial Purchasers of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by LNR, (iv) the preparation (including printing), issuance and
delivery to the Initial Purchasers of the Notes, (v) the qualification of the
Notes under state securities and "Blue Sky" laws, including filing fees and
reasonable fees and disbursements of counsel for the Initial Purchasers relating
- -PAGE 14-
<PAGE> 15
thereto, (vi) the expenses of LNR in connection with any meetings with
prospective investors in the Notes, (vii) the fees and expenses of the Trustee,
including fees and expenses of its counsel, (viii) all expenses and listing fees
incurred in connection with the application for quotation of the Notes on the
PORTAL Market and (ix) any fees charged by investment rating agencies for the
rating of the Notes. If the issuance and sale of the Notes provided for herein
is not consummated because any condition to the obligation of the Initial
Purchasers set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Sections 11(a)(i)(y) or 11(a)(v) hereof or
because of any failure, refusal or inability on the part of LNR to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder (other than solely by reason of a default by the Initial Purchasers of
their obligations hereunder after all conditions hereunder have been satisfied
in accordance herewith), LNR will promptly reimburse the Initial Purchasers upon
demand for all reasonable out-of-pocket expenses (including fees, disbursements
and charges of Willkie Farr & Gallagher, counsel for the Initial Purchasers)
that shall have been incurred by the Initial Purchasers in connection with the
proposed purchase and sale of the Notes.
7. Conditions of the Initial Purchasers' Obligations. The several
obligation of the Initial Purchasers to purchase and pay for the Notes shall, in
their sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Rogers & Wells LLP, counsel for LNR, in form and substance
satisfactory to counsel for the Initial Purchasers, to the effect that:
(i) Each of LNR, the Designated Subsidiaries and the Land
Partnership is duly organized, validly existing and, as to LNR and
the Designated Subsidiaries that are corporations, in good standing
under the laws of its jurisdiction of organization and, has all
requisite corporate or other power and authority to own, lease and
operate its properties and to conduct its business as described in
the Final Memorandum. Each of LNR, the Designated Subsidiaries and
the Land Partnership is duly qualified to do business and in good
standing in each jurisdiction where the ownership or leasing of its
properties or the conduct of its business requires such
qualification and where LNR has informed such counsel the failure to
be so qualified would, individually or in the aggregate, have a
Material Adverse Effect.
(ii) LNR has the authorized capitalization as set forth in the
Final Memorandum; all of the outstanding shares of capital stock of
LNR and each Designated Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable and were not issued
in violation of any preemptive or similar rights; all of the
outstanding shares
- -PAGE 15-
<PAGE> 16
of capital stock of the Designated Subsidiaries are owned by LNR or
another Subsidiary, insofar as such counsel is aware, free and clear
of all liens (other than those created pursuant to the Credit
Agreement), encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Act and the
securities or "Blue Sky" laws of certain jurisdictions)or voting;
LNR indirectly owns a 50% interest in the Land Partnership; such
interest in the Land Partnership has been duly authorized and
validly issued and is, insofar as such counsel is aware, free and
clear of all liens, encumbrances, equities and claims.
(iii) Insofar as such counsel is aware, except as set forth in
the Final Memorandum, (A) there are no outstanding options, warrants
or other rights to purchase from LNR or any Designated Subsidiary or
the Land Partnership shares of capital stock or ownership interests
in LNR or any Designated Subsidiary or ownership interests in the
Land Partnership, (B) other than LNR's class B common stock, there
are no outstanding agreements or other obligations of LNR or any
Designated Subsidiary to issue, or other rights to cause LNR or any
Designated Subsidiary or the Land Partnership to convert, any
obligation into, or exchange any securities for, shares of capital
stock or ownership interests in LNR or any Designated Subsidiary or
ownership interests in the Land Partnership and (C) no holder of
securities of LNR or any Designated Subsidiary (other than the
Registrable Notes) is entitled to have such securities registered
under a registration statement filed by LNR pursuant to the
Registration Rights Agreement and the Indenture.
(iv) LNR has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Notes, the
Exchange Notes, the Private Exchange Notes, the Indenture and the
Registration Rights Agreement.
(v) The Indenture is in sufficient form for qualification
under the TIA; the Indenture has been duly and validly authorized,
executed and delivered by LNR, and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes the valid
and legally binding agreement of LNR, enforceable against LNR in
accordance with its terms, except that the enforcement thereof may
be subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which
any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
- -PAGE 16-
<PAGE> 17
(vi) The Notes are in the form contemplated by the Indenture.
The Notes have each been duly and validly authorized, executed and
delivered by LNR and, when paid for by the Initial Purchasers in
accordance with the terms of this Agreement (assuming the due
authorization, execution and delivery of the Indenture by the
Trustee and due authentication and delivery of the Notes by the
Trustee in accordance with the Indenture), will constitute the valid
and legally binding obligations of LNR, entitled to the benefits of
the Indenture, and enforceable against LNR in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor
may be brought (regardless of whether such enforcement is considered
in a proceeding in equity or at law).
(vii) The Exchange Notes and the Private Exchange Notes have
been duly and validly authorized by LNR, and when the Exchange Notes
and the Private Exchange Notes have been duly executed and delivered
by LNR in accordance with the terms of the Registration Rights
Agreement and the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee and due
authentication and delivery of the Exchange Notes and the Private
Exchange Notes by the Trustee in accordance with the Indenture),
will constitute the valid and legally binding obligations of LNR
entitled to the benefits of the Indenture, and enforceable against
LNR, in accordance with their respective terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion
of the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(viii) The Registration Rights Agreement has been duly and
validly authorized, executed and delivered by LNR, and (assuming due
authorization, execution and delivery thereof by the Initial
Purchasers) constitutes the valid and legally binding agreement of
LNR enforceable against LNR in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law) and (B) any
- -PAGE 17-
<PAGE> 18
rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy considerations.
(ix) LNR has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby; this
Agreement and the consummation by LNR of the transactions
contemplated hereby have been duly and validly authorized by LNR.
This Agreement has been duly executed and delivered by LNR.
(x) The Indenture, the Notes, the Exchange Notes and the
Registration Rights Agreement conform as to legal matters in all
material respects to the descriptions thereof contained in the Final
Memorandum.
(xi) Insofar as such counsel is aware there are (i) no legal
or governmental proceedings pending or threatened to which LNR or
any Designated Subsidiary or the Land Partnership is a party or to
which the property or assets of LNR or any Designated Subsidiary or
the Land Partnership is subject which would be required under the
Act to be described in a registration statement or in a prospectus
and are not described in the Final Memorandum, or which seek to
restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Notes to be sold hereunder or
the consummation of the other transactions described in the Final
Memorandum and (ii) no contracts, agreements or other documents to
which LNR or any Designated Subsidiary or the Land Partnership is
a party which would be required under the Act to be described in a
registration statement or prospectus and are not described in the
Final Memorandum. The descriptions in the Final Memorandum of the
Credit Agreement, the AHG Acquisition Agreement, the partnership
agreement of the Land Partnership, the separation and distribution
agreement relating to the spin-off of LNR and the By-Laws of LNR
are accurate in all material respects and fairly summarize the
provisions of such agreements and documents which they purport to
summarize.
(xii) Insofar as such counsel is aware, neither LNR nor any
Designated Subsidiary is in violation of its certificate of
incorporation or bylaws or other comparable organizational documents
and the Land Partnership is not in violation of the partnership
agreement under which it was formed.
(xiii) The execution, delivery and performance of this
Agreement, the Indenture and the Registration Rights Agreement, and
- -PAGE 18-
<PAGE> 19
the consummation of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the Notes
to the Initial Purchasers) will not conflict with or constitute or
result in a breach or a default under (or an event which with notice
or passage of time or both would constitute a default under) or
violation of or cause an acceleration of any obligation under, or
result in the imposition or creation of (or the obligation to create
or impose) a lien on any property or assets of LNR or any Subsidiary
or Investment Affiliate with respect to (i) the terms or provisions
of any of the terms or provisions of any material contract,
agreement or instrument of which such counsel is aware to which LNR
or any Designated Subsidiary or the Land Partnership is a party or
by which LNR or any Designated Subsidiary or the Land Partnership
may be bound, (ii) the certificate of incorporation or bylaws or
other comparable organizational documents of LNR or any Designated
Subsidiary or the partnership agreement of the Land Partnership, or
(iii) (assuming compliance with all applicable state securities or
"Blue Sky" laws and assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8 hereof) any
statute, judgment, decree, order, rule or regulation generally
applicable to transactions of the type contemplated by the Final
Memorandum or known to such counsel to be applicable to LNR or any
Designated Subsidiary or the Land Partnership.
(xiv) No consent, approval, authorization or order of any
governmental authority is required for the issuance and sale by LNR
of the Notes to the Initial Purchasers or the other transactions
contemplated in this Agreement, except (i) as may be required under
applicable securities laws in connection with the registration under
the Act of the Notes, and the Private Exchange Notes, if applicable,
pursuant to the Registration Rights Agreement and (ii) as may be
required under state securities or blue sky laws (as to which such
counsel need express no opinion).
(xv) Neither LNR nor any of its subsidiaries is, or
immediately after the sale of the Notes to be sold hereunder and the
application of the proceeds from such sale (as described in the
Final Memorandum under the caption "Use of Proceeds") will be, an
"investment company" as such term is defined in the Investment
Company Act of 1940, as amended, and the rules and regulations
thereunder.
(xvi) No registration under the Act of the Notes is required
in connection with the sale of the Notes to the Initial Purchasers
as contemplated by this Agreement and the Final Memorandum or in
connection with the initial resale of the Notes by the Initial
Purchasers in accordance with Section 8 of this Agreement, and prior
to the commencement of the Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of the Shelf
Registration Statement (as defined in the Registration
- -PAGE 19-
<PAGE> 20
Rights Agreement), the Indenture is not required to be qualified
under the TIA, in each case assuming (i) that the purchasers who buy
such Notes in the initial resale thereof are QIBs or Accredited
Investors, (ii) the accuracy of the Initial Purchasers'
representations in Section 8 and those of LNR contained in this
Agreement regarding the absence of a general solicitation in
connection with the sale of such Notes to the Initial Purchasers and
the initial resale thereof and (iii) the due performance by the
Initial Purchasers of the agreements set forth in Section 8 hereof
and the offering and transfer procedures set forth in the Final
Memorandum.
(xvii) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Notes will violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
(xviii) LNR had all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the AHG
Acquisition Agreement. The AHG Acquisition Agreement has been duly
and validly authorized, executed and delivered by LNR and
constitutes a valid and legally binding obligation of LNR,
enforceable against LNR in accordance with its terms, except that
the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
At the time the foregoing opinion is delivered, such counsel shall additionally
state that it has participated in conferences with officers and other
representatives of LNR, representatives of the independent public accountants
for LNR, representatives of the Initial Purchasers and counsel for the Initial
Purchasers, at which conferences the contents of the Preliminary Memorandum and
the Final Memorandum and related matters were discussed, and, although it has
not independently verified and is not passing upon and assumes no responsibility
for the accuracy, completeness or fairness of the statements contained in the
Final Memorandum (except to the extent specified in subsection 7(a)(x)), no
facts have come to its attention which lead it to believe that the Final
Memorandum, on the date thereof or at the Closing Date, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such firm need express no belief with
respect to the financial statements and related notes thereto and the other
financial or statistical data included in the Final Memorandum).
In rendering such opinion, such counsel may state that they express no opinion
as to the laws of any jurisdiction other than the federal laws of the United
States and the laws of the States of New York and Delaware. Such counsel may
also state that with respect to opinions as to the laws of jurisdictions other
than Delaware and New York, such counsel has relied on the opinion of local
counsel in such other
- -PAGE 20-
<PAGE> 21
jurisdictions, provided that in each case Rogers & Wells LLP shall state that
they, the Initial Purchasers and counsel for the Initial Purchasers are
justified in relying on such opinion of local counsel.
(b) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of Willkie Farr & Gallagher, counsel for the Initial
Purchasers, with respect to certain legal matters relating to this
Agreement, and such other related matters as the Initial Purchasers may
reasonably require. In rendering such opinion, Willkie Farr & Gallagher
shall have received and may rely upon such certificates and other
documents and information as they may reasonably request to pass upon such
matters.
(c) The Initial Purchasers shall have received from Deloitte &
Touche LLP, independent public accountants for LNR, comfort letters, dated
the date hereof and the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers.
(d) The representations and warranties of LNR contained in this
Agreement shall be true and correct in all material respects on and as of
the Closing Date as if made on and as of the Closing Date; LNR shall have
performed in all material respects all covenants and agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date; and, except as set forth in the
Final Memorandum (exclusive of any amendment or supplement thereto after
the date hereof) subsequent to the date of the most recent financial
statements in such Final Memorandum, there shall have been no event or
development that, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect.
(e) The issuance and sale of the Notes pursuant to this Agreement
shall not be enjoined (temporarily or permanently) and no restraining
order or other injunctive order shall have been issued or any action, suit
or proceeding shall have been commenced with respect to this Agreement
before any court or governmental authority.
(f) The Initial Purchasers shall have received a certificate, dated
the Closing Date, signed by LNR's Chief Executive Officer and its chief
financial officer to the effect that:
(i) The representations and warranties of LNR in this
Agreement are true and correct in all material respects as if made
on and as of the Closing Date, and LNR has performed in all material
respects all covenants and agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to
the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), no event or events have occurred, no information has
- -PAGE 21-
<PAGE> 22
become known nor does any condition exist that, individually or in
the aggregate, would have a Material Adverse Effect;
(iii) Such officer has carefully examined the Final
Memorandum; in such officer's opinion and to the best of such
officer's knowledge, neither the Final Memorandum nor any amendment
or supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(iv) Since the date hereof or since the date of which
information is given in the Final Memorandum, except as described in
or contemplated by the Final Memorandum, neither LNR nor any of the
Subsidiaries or Investment Affiliates has incurred any liabilities
or obligations direct or contingent (other than in the ordinary
course of business) that are material to LNR and its Subsidiaries
taken as a whole or entered into any transactions not in the
ordinary course of business that are material to the business,
condition (financial or other) or results of operations or prospects
of LNR and the Subsidiaries, taken as a whole, and there has not
been any change in the capital stock or long-term indebtedness of
LNR or any of the Subsidiaries or Investment Affiliates that is
material to the business, condition (financial or other) or results
of operations or prospects of LNR and the Subsidiaries at and as of
the Closing Date, taken as a whole; and
(v) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently).
(g) On the Closing Date, the Initial Purchasers shall have received
the Registration Rights Agreement executed by LNR and such agreement shall
be in full force and effect at all times from and after the Closing Date.
(h) The Indenture shall have been duly executed and delivered by LNR
and the Trustee, and the Notes shall have been duly executed by LNR, and
the Notes shall have been duly authenticated by the Trustee.
(i) On or before the Closing Date, the Initial Purchasers and
counsel for the Initial Purchasers shall have received such further
documents, certificates and schedules or instruments relating to the
business, corporate, legal and financial affairs of LNR as they shall have
heretofore reasonably requested from LNR.
All such documents, opinions, certificates and schedules or instruments
delivered pursuant to this Agreement will comply with the provisions hereof only
if they are reasonably satisfactory in all material
- -PAGE 22-
<PAGE> 23
respects to the Initial Purchasers and counsel for the Initial Purchasers. LNR
shall furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates and schedules or instruments in such quantities as the
Initial Purchasers shall reasonably request.
8. Offering of Notes, Restrictions on Transfer. Each of the Initial
Purchasers represents and warrants that it is a QIB. Each of the Initial
Purchasers agrees with LNR that (i) it has not and will not solicit offers for,
or offer or sell, the Notes by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act; and (ii) it has and will solicit offers for the Notes only from, and will
offer and sell the Notes only to (A) in the case of offers inside the United
States, persons whom the Initial Purchasers reasonably believe to be QIBs or, if
any such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A and (B) in the case of offers outside
the United States, to persons other than U.S. persons ("foreign purchasers,"
which term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)); provided, that for the purposes of this clause (B) the
Initial Purchasers may rely upon the fact that in purchasing Notes such persons
are deemed to have represented and agreed as provided under the caption
"Transfer Restrictions" contained in the Final Memorandum.
9. Indemnification and Contribution. (a) LNR agrees to indemnify and
hold harmless the Initial Purchasers and the affiliates, directors, officers,
agents, representatives and employees of the Initial Purchasers, and each other
person, if any, who controls the Initial Purchasers within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which the Initial
Purchasers or any such affiliate, director, officer, agent, representative,
employee or controlling person may become subject under the Act, the Exchange
Act or otherwise, insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Memorandum or any amendment or
supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by LNR or based upon
written information furnished by or on behalf of LNR filed in any
jurisdiction in order to qualify the Notes under the securities or
"Blue Sky" laws thereof or filed with any securities association or
securities exchange (each, an "Application"); or
(ii) the omission or alleged omission to state, in any
Memorandum or any amendment or supplement thereto, or any
Application, a material fact required to be stated therein or
necessary to
- -PAGE 23-
<PAGE> 24
make the statements therein, in the light of the circumstances under
which they were made, not misleading,
and will reimburse, promptly upon request, the Initial Purchasers and each such
affiliate, director, officer, agent, representative and employee and each such
controlling person for any legal or other expenses reasonably incurred by the
Initial Purchasers, such affiliate, director, officer, agent, representative or
employee or such controlling person in connection with investigating, defending
against or appearing as a third-party witness in connection with any such loss,
claim, damage, liability or action; provided, however, that LNR will not be
liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Memorandum or any
amendment or supplement thereto, or any Application, in reliance upon and in
conformity with written information concerning the Initial Purchasers or their
resale of the Notes furnished to LNR by the Initial Purchasers specifically for
use therein; provided further, however, that the indemnity agreement contained
________________
in this Section 9(a) shall not inure to the benefit of any Initial Purchaser to
the extent that it is determined by a final, non-appealable judgment that
(i) the Preliminary Memorandum contained an untrue statment of a material fact
or omitted to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, (ii) the sale to the person asserting
any such losses, claims, damages or liabilities was an initial resale of the
Notes by such Initial Purchaser, (iii) any such loss, claim, damage or
liability of such indemnified party results from the fact that such Initial
Purchaser failed to send or give to such person, at or prior to the written
confirmation of the sale of such Notes to such person, a copy of the Final
Memorandum or the Final Memorandum as amended or supplemented, and LNR had
previously furnished copies thereof to such Initial Purchaser and (iv) the Final
Memorandum or the Final Memorandum as amended or supplemented corrected such
untrue statement or omission. This indemnity agreement will be in addition to
any liability that LNR may otherwise have to the indemnified parties. LNR shall
not be liable under this subsection (a) for any settlement of any claim or
action effected without its consent, which consent shall not be unreasonably
withheld or delayed.
(b) The Initial Purchasers, severally and not jointly, agree to
indemnify and hold harmless LNR, its affiliates, directors, officers, agents,
representatives and employees and each other person, if any, who controls LNR
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities to which LNR or any such
affiliate, director, officer, agent, representative, employee or controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum or any amendments or
supplement thereto, or any Application or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto, or any Application, or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon
-24-
<PAGE> 25
and in conformity with written information concerning the Initial Purchasers
furnished to LNR by the Initial Purchasers specifically for use therein; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, promptly upon request, any legal or other expenses reasonably
incurred by LNR or any such affiliate, director, officer, agent, representative,
employee or controlling person in connection with investigating or defending
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action in respect thereof. This indemnity agreement
will be in addition to any liability that the Initial Purchasers may otherwise
have to the indemnified parties. No Initial Purchaser shall be liable under this
Section 9 for any settlement of any claim or action effected without its
consent, which consent shall not be unreasonably withheld or delayed. LNR shall
not, without the prior written consent of the Initial Purchasers, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which the Initial Purchasers are or could have been a party, or indemnity could
have been sought hereunder by the Initial Purchasers, unless such settlement (A)
includes an unconditional written release of the Initial Purchasers, in form and
substance reasonably satisfactory to the Initial Purchasers, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of the Initial Purchasers.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under subsection (a) or (b) above unless
and to the extent such failure results in the forfeiture or waiver by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in subsections (a) and
(b) above. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be
-25-
<PAGE> 26
liable to such indemnified party under this Section 9 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by BT Alex. Brown Incorporated in the case subsection (a) of this
Section 9 or LNR in the case of subsection (b) of this Section 9, representing
the indemnified parties under such subsection (a) or subsection (b), as the case
may be, who are parties to such action or actions) or (ii) the indemnifying
party has authorized in writing the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the prior written consent of the indemnifying
party (which consent shall not be unreasonably withheld).
(d) In circumstances in which the indemnity agreement provided for
in the preceding subsections of this Section 9 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by LNR on the one
hand and the Initial Purchasers on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (before deducting expenses)
received by LNR bear to the total discounts and commissions received by the
Initial Purchasers. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by LNR on the one hand, or the Initial
Purchasers on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission or
alleged statement or omission, and any other equitable considerations
appropriate in the circumstances. LNR and the Initial Purchasers agree that it
would not be just and equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this subsection (d). Notwithstanding any other
provision of this subsection (d), no Initial Purchaser shall be obligated to
make contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any
-26-
<PAGE> 27
damages that such Initial Purchaser has otherwise been required to pay by reason
of the untrue or alleged untrue statements or the omissions or alleged omissions
to state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this subsection (d), each affiliate,
director, officer, agent, representative and employee of the Initial Purchasers
and each person, if any, who controls any Initial Purchaser within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as such Initial Purchaser, and each affiliate, director,
officer, agent, representative and employee of LNR and each person, if any, who
controls LNR within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as LNR.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of LNR, its officers and
the Initial Purchasers set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of LNR, any of
its officers or directors, the Initial Purchasers or any controlling person
referred to in Section 9 hereof and (ii) delivery of and payment for the Notes.
The respective agreements, covenants, indemnities and other statements set forth
in Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to LNR given prior to the Closing
Date in the event that LNR shall have failed, refused or been unable to perform,
in all material respects, all obligations and satisfy all conditions on its part
to be performed or satisfied hereunder at or prior thereto or, if after the date
of this Agreement and at or prior to the Closing Date:
(i) either (x) LNR or any Subsidiary or Investment Affiliate
shall have sustained any loss or interference with respect to its
businesses or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any
strike, labor dispute, slow down or work stoppage or any legal or
governmental proceeding, which loss or interference, in the sole
judgment of the Initial Purchasers, has had or has a Material
Adverse Effect, or (y) there shall have been, in the sole judgment
of the Initial Purchasers, any event or development that,
individually or in the aggregate, has or could be reasonably likely
to have a Material Adverse Effect (including without limitation a
change in control of LNR or any Subsidiary or Investment Affiliate),
except in each case as described in or contemplated by the Final
Memorandum (exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market
shall have been suspended or maximum or minimum prices shall have
been established on any such exchange or market;
-27-
<PAGE> 28
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B)
an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or
international calamity or emergency or (C) any material change in
the financial markets of the United States that, in the case of (A),
(B) or (C) above and in the sole judgment of the Initial Purchasers,
makes it impracticable or inadvisable to proceed with the offering
or the delivery of the Notes as contemplated by the Final
Memorandum; or
(v) any securities of LNR shall have been downgraded or placed
on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The statements
set forth in the last paragraph of the cover page and the third, fifth, sixth,
seventh and eighth paragraphs of the section entitled "Private Placement"
constitute the only information furnished by the Initial Purchasers to LNR for
the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and,
if sent to the Initial Purchasers, shall be mailed or delivered or telecopied
and confirmed in writing to BT Alex. Brown Incorporated, One Bankers Trust
Plaza, 130 Liberty Street, New York, New York 10006, Attention: Corporate
Finance Department, with a copy to Willkie Farr & Gallagher, One Citicorp
Center, 153 East 53rd Street, New York, New York 10022, Attention: John S.
D'Alimonte, Esq., and if sent to LNR, shall be mailed, delivered or telecopied
and confirmed in writing to LNR at: 760 N.W. 107th Avenue, Miami, Florida 33172,
Attention: President, with a copy to Rogers & Wells LLP, 200 Park Avenue, New
York, New York 10166, Attention: David W. Bernstein, Esq.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, LNR and their respective successors,
assigns and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the Initial Purchasers, LNR and their respective successors, assigns
and legal representatives and for the benefit of no other person except that (i)
the indemnities of LNR contained in Section 9 of this Agreement shall also be
for the benefit of the affiliates, directors, officers, agents, representatives
and employees of the Initial Purchasers and any person or persons who control
the Initial Purchasers within the meaning of Section 15 of the Act or Section 20
of the Exchange Act and (ii) the indemnities of the Initial Purchasers contained
in Section 9 of this Agreement
-28-
<PAGE> 29
shall also be for the benefit of the affiliates, directors, officers, agents,
representatives and employees of LNR and any person or persons who control LNR
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No purchaser of any of the Notes from the Initial Purchasers will be deemed a
successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-29-
<PAGE> 30
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among LNR and the
several Initial Purchasers.
Very truly yours,
LNR PROPERTY CORPORATION
By:
------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
BT ALEX. BROWN INCORPORATED
By:
---------------------------------
Name:
Title
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
---------------------------------
Name:
Title
-30-
<PAGE> 31
SCHEDULE I
INITIAL PURCHASER PRINCIPAL AMOUNT OF NOTES
BT Alex. Brown Incorporated $130,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation
70,000,000
----------
$200,000,000
============
-31-
<PAGE> 1
Exhibit 4.1
================================================================================
LNR PROPERTY CORPORATION
as Issuer
and
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
as Trustee
-----------------------------------
INDENTURE
Dated as of March 24, 1998
-----------------------------------
up to $350,000,000
9 3/8% Senior Subordinated Notes due 2008, Series A
9 3/8% Senior Subordinated Notes due 2008, Series B
================================================================================
<PAGE> 2
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
310(a)(1)................................................... 7.10
(a)(2).................................................. 7.10
(a)(3).................................................. N.A.
(a)(4).................................................. N.A.
(a)(5).................................................. 7.10
(b)..................................................... 7.8; 7.10; 11.2
(c)..................................................... N.A.
311(a)...................................................... 7.11
((b).................................................... 7.11
(c)..................................................... N.A.
312(a)...................................................... 2.5
(b)..................................................... 11.3
(c)..................................................... 11.3
313(a)...................................................... 7.6
(b)(1).................................................. N.A.
(b)(2).................................................. 7.6
(c)..................................................... 7.6; 11.2
(d)..................................................... 7.6
314(a)...................................................... 4.6; 4.8; 11.2
(b)..................................................... N.A.
(c)(1).................................................. 7.2; 11.4
(c)(2).................................................. 7.2; 11.4
(c)(3).................................................. N.A.
(d)..................................................... N.A.
(e)..................................................... 11.5
(f)..................................................... N.A.
315(a)...................................................... 7.1(b)
(b)..................................................... 7.5; 11.2
(c)..................................................... 7.1(a)
(d)..................................................... 6.5; 7.1(c)
(e)..................................................... 6.11
316(last sentence).......................................... 2.9
(a)(1)(A)............................................... 6.5
(a)(1)(B)............................................... 6.4
(a)(2).................................................. N.A.
(b)..................................................... 6.7
(c)..................................................... 9.4
317(a)(1)................................................... 6.8
(a)(2).................................................. 6.9
(b)..................................................... 2.4
318(a)...................................................... 11.1
(c)..................................................... 11.1
</TABLE>
- ----------
N.A. means Not Applicable.
Note: This cross-reference table shall not, for any purpose, be deemed to be a
part of the Indenture.
(i)
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C> <C>
SECTION 1.1. Definitions............................................... 1
SECTION 1.2. Incorporation by Reference of TIA......................... 20
SECTION 1.3. Rules of Construction..................................... 21
ARTICLE II. THE NOTES
SECTION 2.1. Form and Dating........................................... 21
SECTION 2.2. Execution and Authentication; Aggregate Principal
Amount................................................. 22
SECTION 2.3. Registrar and Paying Agent................................ 24
SECTION 2.4. Paying Agent to Hold Assets in Trust...................... 24
SECTION 2.5. Holder Lists.............................................. 25
SECTION 2.6. Transfer and Exchange..................................... 25
SECTION 2.7. Replacement Notes......................................... 26
SECTION 2.8. Outstanding Notes......................................... 26
SECTION 2.9. Treasury Notes............................................ 26
SECTION 2.10. Temporary Notes........................................... 27
SECTION 2.11. Cancellation.............................................. 27
SECTION 2.12. Defaulted Interest........................................ 27
SECTION 2.13. CUSIP Number.............................................. 28
SECTION 2.14. Deposit of Monies......................................... 29
SECTION 2.15. Restrictive Legends....................................... 29
SECTION 2.16. Book-Entry Provisions for Global Security................. 29
SECTION 2.17. Special Transfer Provisions............................... 30
SECTION 2.18. Liquidated Damages Under Registration Rights
Agreement.............................................. 33
ARTICLE III. REDEMPTION
SECTION 3.1. Notices to Trustee........................................ 34
SECTION 3.2. Selection of Notes to Be Redeemed......................... 34
SECTION 3.3. Optional Redemption....................................... 34
SECTION 3.4. Notice of Redemption...................................... 35
SECTION 3.5. Effect of Notice Defect................................... 36
SECTION 3.6. Deposit of Redemption Price............................... 36
SECTION 3.7. Notes Redeemed in Part.................................... 36
ARTICLE IV. COVENANTS
SECTION 4.1. Payment of Notes.......................................... 37
SECTION 4.2. Maintenance of Office or Agency........................... 37
SECTION 4.3. Corporate Existence....................................... 37
SECTION 4.4. Payment of Taxes and Other Claims......................... 38
SECTION 4.5. Maintenance of Properties and Insurance................... 38
SECTION 4.6. Compliance Certificate; Notice of Default................. 38
SECTION 4.7. Compliance with Laws...................................... 39
SECTION 4.8. Commission Reports........................................ 39
SECTION 4.9. Waiver of Stay, Extension or Usury Laws................... 40
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 4.10. Limitation on Restricted Payments......................... 40
SECTION 4.11. Limitation on Transactions with Affiliates................ 43
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness........................................... 44
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries................................. 45
SECTION 4.14. Change of Control......................................... 46
SECTION 4.15. Limitation on Preferred Stock of Subsidiaries............. 48
SECTION 4.16. Limitation on Liens and Guarantees........................ 48
SECTION 4.17. Conduct of Business....................................... 49
SECTION 4.18. Prohibition on Incurrence of Senior Subordinated Debt..... 49
ARTICLE V. SUCCESSOR CORPORATION
SECTION 5.1. Merger, Consolidation and Sale of Assets.................. 49
SECTION 5.2. Successor Corporation Substituted......................... 50
ARTICLE VI. REMEDIES
SECTION 6.1. Events of Default......................................... 50
SECTION 6.2. Acceleration.............................................. 52
SECTION 6.3. Other Remedies............................................ 53
SECTION 6.4. Waiver of Past Defaults................................... 53
SECTION 6.5. Control by Majority....................................... 54
SECTION 6.6. Limitation on Suits....................................... 54
SECTION 6.7. Right of Holders To Receive Payment....................... 54
SECTION 6.8. Collection Suit by Trustee................................ 55
SECTION 6.9. Trustee May File Proofs of Claim.......................... 55
SECTION 6.10. Priorities................................................ 56
SECTION 6.11. Undertaking for Costs..................................... 56
SECTION 6.12. Restoration of Rights and Remedies........................ 56
ARTICLE VII. TRUSTEE
SECTION 7.1. Duties of Trustee......................................... 57
SECTION 7.2. Rights of Trustee......................................... 58
SECTION 7.3. Individual Rights of Trustee.............................. 59
SECTION 7.4. Trustee's Disclaimer...................................... 59
SECTION 7.5. Notice of Default......................................... 59
SECTION 7.6. Reports by Trustee to Holders............................. 60
SECTION 7.7. Compensation and Indemnity................................ 60
SECTION 7.8. Replacement of Trustee.................................... 61
SECTION 7.9. Successor Trustee by Merger, Etc.......................... 62
SECTION 7.10. Eligibility; Disqualification............................. 62
SECTION 7.11. Preferential Collection of Claims Against LNR............. 63
ARTICLE VIII. DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Termination of Company's Obligations...................... 63
SECTION 8.2. Application of Trust Money................................ 66
SECTION 8.3. Repayment to LNR.......................................... 66
</TABLE>
(iii)
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<TABLE>
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SECTION 8.4. Reinstatement............................................. 67
SECTION 8.5. Acknowledgment of Discharge by Trustee.................... 67
ARTICLE IX. MODIFICATION OF THE INDENTURE
SECTION 9.1. Without Consent of Holders................................ 67
SECTION 9.2. With Consent of Holders................................... 68
SECTION 9.3. Compliance with TIA....................................... 68
SECTION 9.4. Revocation and Effect of Consents......................... 69
SECTION 9.5. Notation on or Exchange of Notes.......................... 69
SECTION 9.6. Trustee to Sign Amendments, Etc........................... 69
ARTICLE X. SUBORDINATION
SECTION 10.1. Notes Subordinated to Senior Indebtedness Upon
Effectiveness of the Merger............................ 70
SECTION 10.2. Suspension of Payment When Senior Indebtedness is in
Default................................................ 70
SECTION 10.3. Notes Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or
Reorganization of Company.............................. 72
SECTION 10.4. Holders to Be Subrogated to Rights of Holders of
Senior Indebtedness.................................... 73
SECTION 10.5. Obligations of LNR Unconditional.......................... 73
SECTION 10.6. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice...................................... 75
SECTION 10.7. Application by Trustee of Assets Deposited with It........ 75
SECTION 10.8. No Waiver of Subordination Provisions..................... 75
SECTION 10.9. Holders Authorize Trustee to Effectuate Subordination
of Notes............................................... 76
SECTION 10.10. Right of Trustee to Hold Senior Indebtedness.............. 77
SECTION 10.11. This Article X Not to Prevent Events of Default........... 77
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness........................................... 77
ARTICLE XI. MISCELLANEOUS
SECTION 11.1. TIA Controls.............................................. 77
SECTION 11.2. Notices................................................... 78
SECTION 11.3. Communications by Holders with Other Holders.............. 79
SECTION 11.4. Certificate and Opinion as to Conditions Precedent........ 79
SECTION 11.5. Statements Required in Certificate or Opinion............. 79
SECTION 11.6. Rules by Trustee, Paying Agent, Registrar................. 80
SECTION 11.7. Legal Holidays............................................ 80
SECTION 11.8. Governing Law............................................. 80
SECTION 11.9. No Adverse Interpretation of Other Agreements............. 80
SECTION 11.10. No Personal Liability..................................... 80
SECTION 11.11. Successors................................................ 80
SECTION 11.12. Duplicate Originals....................................... 81
</TABLE>
(iv)
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SECTION 11.13. Severability.............................................. 81
</TABLE>
(v)
<PAGE> 7
INDENTURE, dated as of March 24, 1998, between LNR Property
Corporation, a Delaware corporation ("LNR"), and First Trust of New York,
National Association, as Trustee (the "Trustee").
LNR has duly authorized the creation of an issue of its 9 3/8%
Senior Subordinated Notes due 2008, Series A, and its 9 3/8% Senior Subordinated
Notes due 2008, Series B, to be issued in exchange for the 9 3/8% Senior
Subordinated Notes due 2008, Series A, pursuant to the Registration Rights
Agreement (as defined herein) and, to provide therefor, LNR has duly authorized
the execution and delivery of this Indenture. All things necessary to make the
Notes (as defined), when duly issued and executed by LNR, and authenticated and
delivered hereunder, the valid obligations of LNR, and to make this Indenture a
valid and binding agreement of LNR, have been done.
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders (as defined) of
LNR's 9 3/8% Senior Subordinated Notes due 2008, Series A and Series B.
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of LNR or at
the time it merges or consolidates with or into LNR or any of its Subsidiaries
or assumed by LNR or any of its Subsidiaries in connection with the acquisition
of assets from such Person, and in each case not incurred by such Person or any
of its Subsidiaries in connection with, or in anticipation or contemplation of,
such Person becoming a Subsidiary of LNR or such acquisition, merger or
consolidation.
"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 been otherwise been payable by such
Person and its Consolidated Subsidiaries for such period.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
"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
<PAGE> 8
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.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by LNR or any Subsidiary
of LNR in any other Person pursuant to which such Person shall become a
Subsidiary of LNR, or shall be merged or consolidated with or into LNR or any
Subsidiary of LNR, or (b) the acquisition by LNR or any Subsidiary of LNR of the
assets of any Person (other than a Subsidiary of LNR) which constitute 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.
"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 LNR or
any of its Subsidiaries (including any sale and leaseback transaction) to any
Person other than LNR or a Wholly Owned Subsidiary of LNR of (a) any Capital
Stock of any Subsidiary of LNR, or (b) any other property or assets of LNR or
any Subsidiary of LNR other than in the ordinary course of business.
"Authenticating Agent" has the meaning provided in Section 2.2.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal,
state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.2.
"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.
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"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in the City of New York are required or
authorized by law or other governmental action to be closed.
"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 and, 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 (i) 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 (ii)
with respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Service ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) money market funds which
invest substantially all their assets in securities of the types described in
clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of LNR or Leisure Colony to any Person or group of related Persons
for purposes of
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<PAGE> 10
Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture), other than, in the case of Leisure Colony, a transaction with LNR or
any Wholly Owned Subsidiary of LNR; (ii) the approval by the holders of Capital
Stock of LNR of any plan or proposal for the liquidation or dissolution of LNR
(whether or not otherwise in compliance with the provisions of this Indenture);
(iii) any Person or Group (other than Leonard Miller and any Permitted
Transferees of Leonard Miller) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 50% of the aggregate
ordinary voting power represented by the issued and outstanding Capital Stock of
LNR; (iv) Leisure Colony shall cease being a Wholly Owned Subsidiary of LNR; or
(v) a majority of the members of the Board of Directors of LNR are persons who
were not directors on the Issue Date and whose election was not approved by a
vote of at least a majority of the members of the Board of Directors of LNR in
office at the time of the election who either were members of such Board of
Directors on the Issue Date or whose election as members of such Board of
Directors was previously approved by such a majority.
"Change of Control Offer" has the meaning provided in Section 4.14.
"Change of Control Payment Date" has the meaning provided in Section
4.14.
"Commission" means the Securities and Exchange Commission.
"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 nonvoting) 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 (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) 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), (B) Consolidated Interest
Expense and (C) 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.
"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
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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 (i) the incurrence or repayment 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 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, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) 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 Issue 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
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<PAGE> 12
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.
"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) 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 (y) 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: (i) 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,
(a) any amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) 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;
provided, however, that there shall be excluded therefrom (a) gains (and losses)
on an after-tax effected basis from Asset Sales or abandonments or reserves
relating thereto, (b) items classified as extraordinary or nonrecurring gains or
losses on an after tax-effected basis, (c) 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, (d) 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, (e) the net income or loss of any other Person, other than a
Consolidated Subsidiary of the referent Person, except (A) to the extent (in the
case of net income) of
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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 (d) above), by such other Person or (B) 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, (f) 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 Issue Date, (g) 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), and (h) 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 (i) Disqualified Capital Stock of such Person and (ii) 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 subsidiary are
consolidated with the financial statements of such Person in accordance with
GAAP.
"consolidation" means, with respect to any Person, the consolidation
of the accounts of the Subsidiaries of such Person with those of such Person,
all in accordance with GAAP. The term "consolidated" has a correlative meaning
to the foregoing.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 100 Wall Street, 16th Floor, New York, New York 10005.
"Covenant Defeasance" has the meaning set forth in Section 8.1.
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<PAGE> 14
"Credit Agreement" means the Revolving Credit Agreement dated as of
December 5, 1997 among LNR, certain Subsidiaries of LNR, the lenders party
thereto in their capacities as lenders thereunder and Bank of America National
Trust and Savings Association, as agent, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreement may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided, however, that such increase in
borrowings is permitted by Section 4.12 other than as Permitted Indebtedness) or
adding Subsidiaries of LNR as additional borrowers or guarantors thereunder) all
or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect LNR
or any Subsidiary of LNR against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"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.
"Defeasance Payment" means any distribution from any defeasance
trust described under Section 8.1.
"Depository" means The Depository Trust Company, its nominees and
successors.
"Designated Senior Indebtedness" means (i) Indebtedness under or in
respect of the Credit Agreement and (ii) any other Indebtedness constituting
Senior Indebtedness which, at the time of determination, has an aggregate
principal amount of at least $25.0 million and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by LNR.
"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 of the Notes.
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"Event of Default" has the meaning provided in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" means the 9 3/8% Senior Subordinated Notes due
2008, Series B to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.2, a
registration rights agreement substantially identical to the Registration Rights
Agreement.
"Exchange Offer" has the meaning provided in the Registration Rights
Agreement.
"Existing Indebtedness" means Indebtedness of LNR and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, 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 shall be determined by the Board of Directors of LNR acting reasonably and
in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of LNR.
"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.
"Global Note" has the meaning provided in Section 2.1.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
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assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part) (but if in part, only to the extent
thereof); provided, however, that the term "guarantee" shall not include (A)
endorsements for collection or deposit in the ordinary course of business and
(B) guarantees (other than guarantees of Indebtedness) by LNR in respect of
assisting one or more Subsidiaries in the ordinary course of their respective
businesses, including without limitation guarantees of trade obligations and
operating leases, on ordinary business terms. The term "guarantee" used as a
verb has a corresponding meaning.
"Holder" means any holder of Notes.
"IAI Global Note" means, a permanent global note in registered form
representing the aggregate principal amount of Notes sold to Institutional
Accredited Investors.
"incur" has the meaning set forth in Section 4.12.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) 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), (v) all
Obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) guarantees and other
contingent obligations in respect of Indebtedness of any other Person that is
referred to in clauses (i) through (v) above and clause (viii) below, (vii) all
Obligations of any other Person of the kinds referred to in clauses (i) through
(vi) above and clause (viii) 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, (viii) all Obligations under currency agreements and
interest swap agreements of such Person and (ix) 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 (A) 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
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deemed to equal the maximum amount of such liability and (B) any Subsidiary of
such Person, at the option of such Person, shall be deemed to be either the
amount determined pursuant to clause (A) or the actual outstanding amount of
such Indebtedness. For purposes hereof, 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 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 this Indenture, and
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.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in LNR or any Subsidiary thereof and (ii) which, in
the judgment of the Board of Directors of LNR, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Notes" means, collectively, (i) the 9 3/8% Senior
Subordinated Notes due 2008, Series A, of LNR issued on the Issue Date and (ii)
one or more series of 9 3/8% Senior Subordinated Notes due 2008 that are issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.2, in
each case for so long as such securities constitute Restricted Securities.
"Initial Purchasers" means BT Alex. Brown Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest" means, when used with respect to any Note, the amount of
all interest accruing on such Note, including any applicable defaulted interest
pursuant to Section 2.12 and any Additional Interest pursuant to the
Registration Rights Agreement.
"Interest Payment Date" means the stated maturity of an installment
of interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person,
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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.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"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
LNR and its Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of LNR or such Subsidiary, as the case may be.
"Issue Date" means March 24, 1998.
"Land Partnership" means Lennar Land Partners, a Delaware general
partnership.
"Legal Defeasance" has the meaning set forth in Section 8.1.
"Legal Holiday" has the meaning provided in Section 11.7.
"Leisure Colony" means Leisure Colony Management Corp. Co., a
Florida corporation, and its successors including any Subsidiary of LNR to which
all or substantially all the assets of Leisure Colony Management Corp. Co. are
sold, leased or otherwise transferred.
"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).
"LNR" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor and also includes for the purposes of any provision contained herein
and required by the TIA any other obligor on the Notes.
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"Maturity Date" means March 15, 2008.
"Mortgage Subsidiary" means a Wholly Owned Subsidiary of LNR to be
formed after the Issue Date solely for the purpose of engaging in the mortgage
banking business and incidental activities directly related thereto.
"Non-Recourse Indebtedness" means any Indebtedness of LNR or any of
its Subsidiaries that is (i) (A) specifically advanced to finance the
acquisition of investment assets and (B) secured only by the assets to which
such Indebtedness relates without recourse to LNR or any of its Subsidiaries,
(ii) advanced to a Subsidiary of LNR or group of Subsidiaries of LNR formed for
the sole purpose of acquiring or holding investment assets (A) against which a
loan is obtained that is made without recourse to, and with no
cross-collateralization against the assets of, LNR or any other Subsidiary of
LNR, and (B) upon complete or partial liquidation of which the loan must be
correspondingly completely or partially repaid, as the case may be or (iii)
specifically advanced to finance the acquisition of real property and secured by
only the real property to which such Indebtedness relates without recourse to
LNR or any of its Subsidiaries.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means, collectively, the Initial Notes, the Private Exchange
Notes, if any, and the Unrestricted Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of such Person, or any other officer designated by the Board of
Directors serving in a similar capacity.
"Officers' Certificate" means a certificate signed by the Chairman
of the Board of Directors, the Chief Executive Officer, the President or any
Vice President and the Chief Financial Officer, Controller or any Treasurer of
LNR and otherwise complying with the requirements of Section 11.4 and 11.5.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee complying
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with the requirements of Sections 11.4 and 11.5, as they relate to the giving of
an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.3.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Notes in an aggregate principal amount
not in excess of $200,000,000;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate outstanding principal amount at any time not to exceed
$220,000,000;
(iii) Interest Swap Obligations of LNR covering Indebtedness of LNR
or any of its Subsidiaries; provided, however, that such Interest Swap
Obligations are entered into to protect LNR and its Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance with
this 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;
(iv) Indebtedness under Currency Agreements; provided, however, that
in the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of LNR and its
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(v) Indebtedness of a Subsidiary to LNR or to a Wholly Owned
Subsidiary of LNR for so long as such Indebtedness is held by LNR or a
Wholly Owned Subsidiary of LNR, in each case subject to no Liens held by
any Person other than LNR or a Wholly Owned Subsidiary of LNR; provided,
however, that if as of any date any Person other than LNR or a Wholly
Owned Subsidiary of LNR owns or holds any such Indebtedness or holds a
Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness unless such Indebtedness is otherwise
permitted under this Indenture;
(vi) Indebtedness of LNR to a Wholly Owned Subsidiary of LNR for so
long as such Indebtedness is held by a Wholly Owned Subsidiary of LNR, in
each case subject to no Lien; provided, however, that (a) any Indebtedness
of LNR to any Wholly Owned Subsidiary of LNR is unsecured and
subordinated, pursuant to a written agreement, to LNR's obligations under
the Indenture and the Notes at least to the same extent that the Notes are
subordinated to Senior Indebtedness and (b) if
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as of any date any Person other than a Wholly Owned Subsidiary of LNR owns
or holds any such Indebtedness or a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by LNR unless such Indebtedness is otherwise
permitted under this Indenture;
(vii) 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;
(viii) Indebtedness of LNR or any of its Subsidiaries represented by
letters of credit for the account of LNR 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;
(ix) Existing Indebtedness outstanding on the Issue Date;
(x) Non-Recourse Indebtedness of the Mortgage Subsidiary;
(xi) additional Indebtedness in an aggregate principal amount not to
exceed $50.0 million at any time outstanding; and
(xii) Refinancing Indebtedness.
"Permitted Transferee" means, with respect to any Person, (i) that
Person's spouse, (ii) a parent or lineal descendant (including an adopted child)
of a parent of that Person, or the spouse of a lineal descendant of a parent of
that Person, (iii) a trustee, guardian or custodian for, or an executor,
administrator or other legal representative of the estate of, that Person, or a
trustee, guardian or custodian for a Permitted Transferee of that Person, (iv)
the trustee of a trust (including a voting trust) for the benefit of that Person
and (v) a corporation, partnership or other entity of which that Person and
Permitted Transferees of that Person are the beneficial owners of a majority in
voting power of the equity.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.1.
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"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.
"principal" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness determined in accordance with GAAP plus
(but without the duplication) the premium, if any, on such Indebtedness.
"Private Exchange Notes" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on
the Initial Notes in the form set forth in Exhibit A.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock of LNR pursuant to an effective registration statement
filed with the Commission in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A.
"Record Date" means the Record Dates specified in the Notes.
"Recourse Indebtedness" means all Indebtedness of LNR and its
Subsidiaries other than Non-Recourse Indebtedness.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption pursuant to this Indenture and the
Notes.
"Redemption Price means, when used with respect to any Note to be
redeemed, the price fixed for such redemption, including principal and premium,
if any, pursuant to this Indenture and the Notes.
"Reference Date" has the meaning set forth in Section 4.10.
"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
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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 LNR or any
Subsidiary of LNR of Indebtedness incurred in accordance with Section 4.12
(other than pursuant to clauses (ii), (iii), (iv), (v), (vi), (vii), (viii),
(x), (xi) or (xii) of the definition of Permitted Indebtedness), in each case
that does not (1) 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 LNR 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 this Indenture or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided, however,
that (x) if such Indebtedness being Refinanced is Indebtedness of LNR, then such
Refinancing Indebtedness shall be Indebtedness solely of LNR and (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.
"Registrar" has the meaning provided in Section 2.3.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date among LNR and the Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a permanent global note in
registered form representing the aggregate principal amount of Notes sold in
reliance on Regulation S under the Securities Act.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Indebtedness; provided,
however, that 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.
"Restricted Payment" shall have the meaning set forth in Section
4.10.
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"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"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 Indebtedness of LNR, 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, (x) all monetary
obligations (including guarantees thereof) of every nature of LNR under the
Credit Agreement, including, without limitation, obligations to pay principal
and interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities, (y) all Interest Swap Obligations (including guarantees
thereof) and (z) all obligations (including guarantees) under Currency
Agreements, in each case whether outstanding on the Issue Date or thereafter
incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(i) any Indebtedness of LNR to a Subsidiary of LNR or any Affiliate of LNR or
any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of LNR or of any
Subsidiary of LNR (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) Indebtedness
represented by Disqualified Capital Stock, (v) any liability for federal, state,
local or other taxes owed or owing by LNR, (vi) that portion of any Indebtedness
incurred in violation of Section 4.12, (vii) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code is without recourse to LNR and (viii) any Indebtedness which is, by
its express terms, subordinated in right of payment to any other Indebtedness of
LNR.
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"Senior Recourse Indebtedness" means all Senior Indebtedness other
than Senior Indebtedness that is Non-Recourse Indebtedness plus Subsidiary
Unsubordinated Indebtedness of each Subsidiary of LNR (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 Indebtedness of LNR and its
Subsidiaries which expressly provides that such Indebtedness shall be
subordinated in right of payment to any other Indebtedness.
"Subsidiary" means, with respect to any Person, (i) 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, (ii) 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 (iii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) 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 a
Subsidiary of LNR other than Subordinated Indebtedness thereof.
"Surviving Entity" shall have the meaning set forth in Section 5.1.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.3.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer this Indenture, or in the case of
a successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
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"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Unrestricted Notes" means one or more Notes that do not and are not
required to bear the Private Placement Legend, including, without limitation,
the Exchange Notes.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) 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 (i) 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 (ii) all the outstanding partnership interests
are owned by such Person or any Wholly Owned Subsidiary of such Person.
SECTION 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means LNR or any other obligor
on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
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SECTION 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) any reference to a statute, law or regulation means that
statute, law or regulation as amended and in effect from time to time and
includes any successor statute, law or regulation; provided, however, that
any reference to the Bankruptcy Law shall mean the Bankruptcy Law as
applicable to the relevant case.
ARTICLE II.
THE NOTES
SECTION 2.1. Form and Dating.
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto,
provided, that any Initial Notes issued in a public offering shall be
substantially in the form of Exhibit B hereto. The Exchange Notes and the
Trustee's certificate of authentication relating thereto shall be substantially
in the form of Exhibit B hereto. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or depository rule or usage.
LNR and the Trustee shall approve the form of the Notes and any notation, legend
or endorsement on them. Each Note shall be dated the date of its issuance and
shall show the date of its authentication.
The terms and provisions contained in the Notes annexed hereto as
Exhibits A and B shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, LNR and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
Notes offered and sold in reliance on Rule 144A and Notes offered
and sold in reliance on Regulation S shall be
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issued initially in the form of one or more permanent global Notes in registered
form, substantially in the form set forth in Exhibit A (each, a "Global Note"),
deposited with the Trustee, as custodian for the Depository, duly executed by
LNR and authenticated by the Trustee as hereinafter provided and shall bear the
legend set forth in Exhibit C. The aggregate principal amount of the Global Note
may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes issued in exchange for interests in a Global Note pursuant to
Section 2.16 may be issued and Notes offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued in the form of permanent certificated
Notes in registered form in substantially the form set forth in Exhibit A (the
"Physical Notes").
All Notes offered and sold in reliance on Regulation S shall remain
in the form of a Global Note until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement; provided, however, that all of
the time periods specified in the Registration Rights Agreement to be complied
with by LNR have been so complied with.
SECTION 2.2. Execution and Authentication; Aggregate Principal
Amount.
Two Officers, or an Officer and an Assistant Secretary of LNR shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for LNR by manual or facsimile
signature. Both such signatures may be facsimile.
If an Officer or Assistant Secretary whose signature is on a Note
was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue
in the aggregate principal amount not to exceed $350,000,000 in one or more
series, (ii) Private Exchange Notes from time to time for issue only in exchange
for a like principal amount of Initial Notes and (iii) Unrestricted Notes from
time to time only (A) in exchange for a like principal amount of Initial Notes
or (B) in an aggregate principal amount of not more than the excess of
$350,000,000 over the sum of the aggregate
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principal amount of (1) Initial Notes then outstanding, (2) Private Exchange
Notes then outstanding, (3) Unrestricted Notes issued in accordance with
(iii)(A) above, and (4) the aggregate principal amount of Notes, if any,
theretofore redeemed or paid, in each case upon a written order of LNR in the
form of an Officers' Certificate of LNR. Each such written order shall specify
the amount of Notes to be authenticated and the date on which the Notes are to
be authenticated, whether the Notes are to be Initial Notes, Private Exchange
Notes or Unrestricted Notes and whether the Notes are to be issued as Physical
Notes or Global Notes or such other information as the Trustee may reasonably
request. The aggregate principal amount of Notes outstanding at any time may not
exceed $350,000,000, except as provided in Sections 2.7 and 2.8.
In the event that LNR shall issue and the Trustee shall authenticate
any Notes issued under this Indenture subsequent to the Issue Date pursuant to
clauses (i) and (iii) of the first sentence of the immediately preceding
paragraph, LNR shall use its reasonable efforts to obtain the same "CUSIP"
number for such Notes as is printed on the Notes outstanding at such time and
provided written notice to the Trustee to such effect; provided, however, that
if any series of Notes issued under this Indenture subsequent to the Issue Date
is determined, pursuant to an Opinion of Counsel of LNR in a form reasonably
satisfactory to the Trustee to be a different class of security than the Notes
outstanding at such time for federal income tax or securities laws purposes, LNR
shall use its reasonable efforts to obtain a "CUSIP" number for such Notes that
is different than the "CUSIP" number printed on the Notes then outstanding and
cause such opinion to be delivered to the Trustee. Notwithstanding the foregoing
or any other provision herein to the contrary, all Notes issued under this
Indenture shall vote and consent together on all matters as one class and no
series of Notes will have the right to vote or consent as a separate class on
any matter.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to LNR to authenticate Notes. Unless otherwise
provided in the appointment, an Authenticating Agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with LNR
or with any Affiliate of LNR.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3. Registrar and Paying Agent.
LNR shall maintain an office or agency (which shall be located in
the Borough of Manhattan in the City of New York, State of New York) where (a)
Notes may be presented or
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surrendered for registration of transfer or for exchange ("Registrar"), (b)
Notes may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands to or upon LNR in respect of the Notes and this Indenture
may be served. The Registrar shall keep a register of the Notes and of their
transfer and exchange. LNR may have one or more co-Registrars and one or more
additional paying agents reasonably acceptable to the Trustee. The term "Paying
Agent" includes any additional Paying Agent. LNR may act as its own Paying
Agent, except that for the purposes of payments on the Notes pursuant to Section
4.14, neither LNR nor any Affiliate of LNR may act as Paying Agent. If LNR
elects to act as its own paying agent, LNR will notify the Trustee of its
election and will hold for the benefit of the Holders all assets for the payment
of principal of premium, if any, or interest on, the Notes.
LNR shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which agreement shall incorporate the provisions
of the TIA and implement the provisions of this Indenture that relate to such
Agent. LNR shall notify the Trustee of the name and address of any such Agent.
If LNR shall fail to maintain a Registrar or Paying Agent the Trustee shall act
as such.
LNR initially appoints the Trustee as Registrar, Paying Agent and
agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. Any of
the Registrar, the Paying Agent or any other agent may resign upon 30 days'
notice to LNR.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
LNR shall require each Paying Agent other than the Trustee to agree
in writing that such Paying Agent shall hold in trust for the benefit of the
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, or interest on, the Notes (whether such assets
have been distributed to it by LNR or any other obligor on the Notes), and LNR
and the Paying Agent shall notify the Trustee of any Default by LNR (or any
other obligor on the Notes) in making any such payment. LNR at any time may
require a Paying Agent to distribute all assets held by it to the Trustee and
account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered to the Paying Agent, the Paying Agent
shall have no further liability for such assets.
SECTION 2.5. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of
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the names and addresses of the Holders and shall otherwise comply with TIA ss.
312(a). If the Trustee is not the Registrar, LNR shall furnish or cause the
Registrar to furnish to the Trustee five (5) Business Days before each Record
Date and at such other times as the Trustee may request in writing a list as of
such date and in such form as the Trustee may reasonably require of the names
and addresses of the Holders, which list may be conclusively relied upon by the
Trustee, and LNR shall otherwise comply with TIA ss. 312(a).
SECTION 2.6. Transfer and Exchange.
Subject to Sections 2.16 and 2.17, when Notes are presented to the
Registrar or a co-Registrar with a request to register the transfer of such
Notes or to exchange such Notes for an equal principal amount of Notes of other
authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes presented or surrendered
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written instrument of transfer in form satisfactory to LNR, the Trustee and
the Registrar or co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing. To permit registration of transfers and
exchanges, LNR shall execute and the Trustee shall authenticate Notes at the
Registrar's or co-Registrar's request. No service charge shall be made for any
registration of transfer or exchange, but LNR may require payment of a sum
sufficient to cover any transfer tax, fee or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant to Section
2.10, 3.4, 4.14 or 9.5, in which event LNR shall be responsible for the payment
of such taxes or charges).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article III, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry system.
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SECTION 2.7. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note claims that the Note has been lost, destroyed or wrongfully taken, LNR
shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or LNR, such Holder
must provide an indemnity bond or other indemnity of reasonable tenor,
sufficient in the reasonable judgment of LNR and the Trustee, to protect LNR,
the Trustee or any Agent from any loss which any of them may suffer if a Note is
replaced. Every replacement Note shall constitute an additional obligation of
LNR.
SECTION 2.8. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.9, a Note does not cease to be outstanding
because LNR or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.7 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a protected purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.7.
If, on a Redemption Date or the Maturity Date, the Paying Agent
holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of
the principal, premium, if any, and interest due on the Notes payable on that
date and is not prohibited from paying such money to the Holders thereof
pursuant to the terms of this Indenture, then on and after that date such Notes
shall be deemed not to be outstanding and interest on them shall cease to
accrue.
SECTION 2.9. Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver, consent or notice, Notes owned
by LNR or an Affiliate of LNR shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee has been informed in writing by LNR
to be so owned shall be so considered. LNR shall notify the Trustee, in writing,
when either it or, to its knowledge, any of its Affiliates repurchases or
otherwise acquires Notes, of the aggregate principal amount of such Notes so
repurchased or otherwise acquired and such other information
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as the Trustee may reasonably request and the Trustee shall be entitled to rely
thereon.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, LNR may prepare and
the Trustee shall authenticate temporary Notes upon receipt of a written order
of LNR in the form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of temporary Notes to be authenticated and the date on which
the temporary Notes are to be authenticated. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that LNR
consider appropriate for temporary Notes and so indicate in the Officers'
Certificate. Without unreasonable delay, LNR shall prepare and the Trustee shall
authenticate, upon receipt of a written order of LNR pursuant to Section 2.2,
definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
LNR at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment. The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent, and no one else,
shall cancel and, at the written direction of LNR, shall dispose, in its
customary manner, of all Notes surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.7, LNR may not issue new Notes to replace
Notes that they have paid or delivered to the Trustee for cancellation. If LNR
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
SECTION 2.12. Defaulted Interest.
LNR will pay interest on overdue principal from time to time on
demand at the rate of interest then borne by the Notes. LNR shall, to the extent
lawful, pay interest on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate of interest
then borne by the Notes. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months, and, in the case of a partial month, the
actual number of days elapsed.
If LNR defaults in a payment of interest on the Notes, it shall pay
the defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date, which special record date shall be the fifteenth day next preceding
the date fixed by LNR for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. LNR shall notify the
Trustee in writing of the amount of
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defaulted interest proposed to be paid on each Note and the date of the proposed
payment (a "Default Interest Payment Date"), and at the same time LNR shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to the
date of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such defaulted interest as provided in
this Section; provided, however, that in no event shall LNR deposit monies
proposed to be paid in respect of defaulted interest later than 11:00 a.m. New
York City time of the proposed Default Interest Payment Date. At least 15 days
before the subsequent special record date, LNR shall mail (or cause to be
mailed) to each Holder, as of a recent date selected by LNR, with a copy to the
Trustee at least 20 days prior to such special record date, a notice that states
the subsequent special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.1(i) shall be paid to
Holders as of the regular record date for the Interest Payment Date for which
interest has not been paid. Notwithstanding the foregoing, LNR may make payment
of any defaulted interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange.
SECTION 2.13. CUSIP Number.
In issuing the Notes, LNR may use a "CUSIP" number, and, if so, the
Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided, however, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. LNR shall
promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Monies.
Prior to 11:00 a.m. New York City time on each Interest Payment
Date, Maturity Date, Redemption Date or Change of Control Payment Date, LNR
shall have deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date,
Maturity Date, Redemption Date or Change of Control Payment Date, as the case
may be, in a timely manner which permits the Paying Agent to remit payment to
the Holders on such Interest Payment Date, maturity Date, Redemption Date or
Change of Control Payment Date, as the case may be.
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SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the Private Placement Legend on the face thereof until after
the second anniversary of the later of the Issue Date and the last date on which
LNR or any Affiliate of LNR was the owner of such Note (or any predecessor
security) (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) (or such longer period of
time as may be required under the Securities Act or applicable state securities
laws in the opinion of counsel for LNR, unless otherwise agreed by LNR and the
Holder thereof).
Each Global Note shall also bear the legend as set forth in Exhibit
C.
SECTION 2.16. Book-Entry Provisions for Global Security.
(a) The Global Notes initially shall (i) be registered in the name
of the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear the legend as set forth
in Exhibit C.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by LNR, the Trustee and any
Agent of LNR or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
LNR, the Trustee or any Agent of LNR or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of a Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addition, Physical Notes shall
be transferred to all beneficial owners in exchange for their beneficial
interests in a Global Note if (i) the Depository notifies LNR that it is
unwilling or unable to continue as Depository for the Global Notes and a
successor depositary is not appointed by LNR within 90 days of such notice or
(ii) an Event of Default has occurred and is continuing and the Registrar has
received a written request from the Depository to issue Physical Notes.
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(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal amount of the beneficial
interest in the Global Note to be transferred, and LNR shall execute and the
Trustee shall authenticate and deliver, one or more Physical Notes of like tenor
and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b) of this Section 2.16, such Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and LNR
shall execute and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest in
the Global Note, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered
in exchange for an interest in a Global Note pursuant to paragraph (b) or (c) of
this Section 2.16 shall, except as otherwise provided by paragraphs (a)(i)(x)
and (c) of Section 2.17, bear the Private Placement Legend.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the
second anniversary of the Issue Date (provided, however, that neither LNR
nor any Affiliate of LNR has held any beneficial interest in such Note, or
portion thereof, or predecessor security at any time on or prior to the
second anniversary of the Issue Date) or (y) (1) in the case of a transfer
to an Institutional Accredited Investor which is not a QIB (excluding
Non-U.S. Persons), the proposed transferee has delivered to the Registrar
a certificate substantially in the form of Exhibit D hereto or (2) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has
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delivered to the Registrar a certificate substantially in the form of
Exhibit E hereto; and
(ii) if the proposed transferee is an Agent Member and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the IAI Global Note or Regulation S Global
Note, as the case may be, upon receipt by the Registrar of (x) written
instructions given in accordance with the Depository's and the Registrar's
procedures and (y) the appropriate certificate, if any, required by clause
(y) of paragraph (i) above, the Registrar shall register the transfer and
reflect on its books and records the date and an increase in the principal
amount of the IAI Global Note or Regulation S Global Note, as to case may
be, in an amount equal to the principal amount of Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and the
Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, the Registrar shall
register the transfer and reflect on its books and records the date and
(A) a decrease in the principal amount of the Global Note from which such
interests are to be transferred in an amount equal to the principal amount
of the Notes to be transferred and (B) an increase in the principal amount
of the IAI Global Note or the Regulation S Global Note, as the case may
be, in an amount equal to the principal amount of the Notes to be
transferred.
(b) Transfers to QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Restricted
Security if such transfer is being made by a proposed transferor who has
checked the box provided for on the form of Note stating, or has otherwise
advised LNR and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has signed
the certification provided for on the form of Note stating, or has
otherwise advised LNR and the Registrar in writing, that it is purchasing
the Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
QIB within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding LNR as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is
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aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in a Global Note, upon receipt by the Registrar
of written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of such Global
Note in an amount equal to the principal amount of the Physical Notes to
be transferred, and the Trustee shall cancel the Physical Notes so
transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in the IAI Global Note or the Regulation S Global
Note, upon receipt by the Registrar of written instructions given in
accordance with the Depository's and the Registrar's procedures, the
Registrar shall register the transfer and reflect on its books and records
the date and (A) a decrease in the principal amount of the IAI Global Note
or the Regulation S Global Note, as the case may be, in an amount equal to
the principal amount of the Notes to be transferred and (B) an increase in
the principal amount of the Global Note in an amount equal to the
principal amount of the Notes to be transferred.
(c) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(d) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the second anniversary of the Issue
Date (provided, however, that neither LNR nor any Affiliate of LNR has held any
beneficial interest in such Note, or portion thereof, or any predecessor
security at any time prior to or on the second anniversary of the Issue Date),
or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to LNR and the Trustee to the effect that neither such legend nor
the related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
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(e) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
LNR shall have the right to inspect and make copies of all such letters, notices
or other written communications at any reasonable time during the Registrar's
normal business hours upon the giving of reasonable written notice to the
Registrar.
(f) Transfer of Notes Held by Affiliates. Any certificate (i)
evidencing a Note that has been transferred to an Affiliate of LNR within two
years after the Issue Date, as evidenced by a notation on the Assignment Form
for such transfer or in the representation letter delivered in respect thereof
or (ii) evidencing a Note that has been acquired from an Affiliate of LNR (other
than by an Affiliate of LNR) in a transaction or a chain of transactions not
involving any public offering, shall, until two years after the last date on
which LNR or any Affiliate of LNR was an owner of such Note, in each case, bear
the Private Placement Legend, unless otherwise agreed by LNR (with written
notice thereof to the Trustee).
(g) Notice of Affiliate Purchases. In connection with the purchase
or sale of any Note or any beneficial interest therein by LNR or any Affiliate
thereof (other than a sale to the Initial Purchasers pursuant to the Purchase
Agreement), LNR shall file with the Trustee and Registrar a written notice
identifying the transaction as such for the purposes hereof.
SECTION 2.18. Liquidated Damages Under Registration Rights
Agreement.
Under certain circumstances, LNR shall be obligated to pay certain
liquidated damages to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
ARTICLE III.
REDEMPTION
SECTION 3.1. Notices to Trustee.
If LNR elects to redeem Notes pursuant to Paragraph 5 of the Notes,
it shall notify the Trustee and the Paying Agent in writing of the Redemption
Date and the principal amount of the Notes to be redeemed.
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LNR shall give each notice provided for in this Section 3.1 to the
Trustee at least 45 days before the Redemption Date (unless a shorter notice
period shall be satisfactory to the Trustee for its administrative convenience,
as evidenced in a writing signed on behalf of the Trustee), together with an
Officers' Certificate stating that such redemption shall comply with the
conditions contained herein and in the Notes. Any such notice may be canceled at
any time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
SECTION 3.2. Selection of Notes to Be Redeemed.
In the event that less than all of the Notes are to be redeemed at
any time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, by lot, on a pro rata basis or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided
further, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to Depository procedures), unless such method is
otherwise prohibited.
SECTION 3.3. Optional Redemption.
The Notes will be redeemable, at LNR's option, in whole or in part
at any time, or from time to time, on or after March 15, 2003, upon not less
than 30 nor more than 60 days' notice to the Holders, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on March 15 of the years set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the Redemption Date:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.............................................104.688%
2004.............................................103.516%
2005.............................................102.344%
2006.............................................101.172%
2007 and thereafter..............................100.000%
</TABLE>
Notwithstanding the foregoing, at any time, or from time to time, on
or prior to March 15, 2001, LNR may, at its option, redeem, with the net cash
proceeds of one or more Public Equity Offerings, up to 35% of the aggregate
principal amount of the Notes issued and sold by LNR at a redemption price equal
to 109.375% of the principal amount thereof, plus accrued interest
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thereon, if any, to the Redemption Date; provided that at least 65% of the
aggregate principal amount of the Notes issued and sold by LNR remain
outstanding immediately following such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, LNR shall
make such redemption not more than 60 days after the consummation of any such
Public Equity Offering.
SECTION 3.4. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
LNR shall mail or cause to be mailed a notice of redemption by first-class mail
to each Holder of Notes to be redeemed at its registered address, with a copy to
the Trustee and any Paying Agent. At LNR's request, the Trustee shall give the
notice of redemption in LNR's name and at LNR's expense. LNR shall provide such
notices of redemption to the Trustee at least five days before the intended
mailing date.
Each notice of redemption shall identify (including the CUSIP
number) the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless LNR defaults in making the redemption payment,
interest on Notes or applicable portions thereof called for redemption will
cease to accrue on and after the Redemption Date, and the only remaining right
of the Holders of such Notes will be to receive payment of the Redemption Price
plus accrued interest as of the Redemption Date, if any, upon surrender to the
Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Note, a new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portions thereof) to be redeemed, as
well as the aggregate principal amount of Notes to be redeemed and the aggregate
principal amount of
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Notes to be outstanding after such partial redemption.
LNR will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes.
SECTION 3.5. Effect of Notice Defect.
Once notice of redemption is mailed in accordance with Section 3.4,
such notice of redemption shall be irrevocable and Notes called for redemption
shall become due and payable on the Redemption Date and at the Redemption Price
plus accrued interest as of such date, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be paid at the Redemption
Price plus accrued interest thereon to the Redemption Date, but installments of
interest, the maturity of which is on or prior to the Redemption Date, shall be
payable to Holders of record at the close of business on the relevant record
dates referred to in the Notes. Interest shall cease to accrue on or after the
Redemption Date unless LNR defaults in payment of the Redemption Price.
SECTION 3.6. Deposit of Redemption Price.
On or before the Redemption Date and in accordance with Section
2.14, LNR shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price plus accrued interest, if any, of all Notes to be
redeemed on that date. The Paying Agent shall promptly return to LNR any U.S.
Legal Tender so deposited which is not required for that purpose, except with
respect to monies owed as obligations to the Trustee pursuant to Article Seven.
Unless LNR fails to comply with the preceding paragraph and defaults
in the payment of such Redemption Price plus accrued interest, if any, interest
on the Notes to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Notes are presented for payment.
SECTION 3.7. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
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ARTICLE IV.
COVENANTS
SECTION 4.1. Payment of Notes.
(a) LNR shall pay the principal of, premium, if any, and interest on
the Notes on the dates and in the manner provided in the Notes and in this
Indenture.
(b) An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
LNR or any of its Affiliates) holds, prior to 11:00 a.m. New York City time on
that date, U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, LNR may, to the extent it is required to do so by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from payments hereunder.
SECTION 4.2. Maintenance of Office or Agency.
LNR shall maintain the office or agency required under Section 2.3.
LNR shall give prior written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time LNR shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in Section
11.2.
SECTION 4.3. Corporate Existence.
Except as otherwise permitted by Article V, LNR shall do or cause to
be done, at its own cost and expense, all things necessary to preserve and keep
in full force and effect its corporate existence and the corporate existence of
each of its Subsidiaries in accordance with the respective organizational
documents of each such Subsidiary and the material rights (charter and
statutory) and franchises of LNR and each such Subsidiary; provided, however,
that LNR shall not be required to preserve, with respect to itself, any material
right or franchise and, with respect to any of its Subsidiaries, any such
existence, material right or franchise, if the Board of Directors of LNR shall
determine in good faith that the preservation thereof is no longer desirable in
the conduct of the business of LNR and its Subsidiaries, taken as a whole.
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SECTION 4.4. Payment of Taxes and Other Claims.
LNR shall pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all material lawful claims
for labor, materials and supplies that, if unpaid, might by law become a Lien
upon the property of LNR or any of its Subsidiaries; provided, however, that LNR
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate negotiations or proceedings
properly instituted and diligently conducted for which adequate reserves, to the
extent required under GAAP, have been taken.
SECTION 4.5. Maintenance of Properties and Insurance.
(a) LNR shall, and shall cause each of the Subsidiaries to, maintain
all properties used or useful in the conduct of its business in good working
order and condition (subject to ordinary wear and tear) and make all necessary
repairs, renewals, replacements, additions, betterments and improvements thereto
and actively conduct and carry on its business; provided, however, that nothing
in this Section 4.5 shall prevent LNR or any of the Subsidiaries of LNR from
discontinuing the operation and maintenance of any of its properties, if such
discontinuance is (i) in the ordinary course of business pursuant to customary
business terms or (ii) in the good faith judgment of the respective Boards of
Directors or other governing body of LNR or such Subsidiary, as the case may be,
desirable in the conduct of their respective businesses and is not
disadvantageous in any material respect to the Holders.
(b) LNR shall provide or cause to be provided, for itself and each
of the Subsidiaries of LNR, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the good faith judgment of LNR, are
adequate and appropriate for the conduct of the business of LNR and its
Subsidiaries in a prudent manner, with reputable insurers.
SECTION 4.6. Compliance Certificate; Notice of Default.
(a) LNR shall deliver to the Trustee, within 90 days after the end
of each of LNR's fiscal years, an Officers' Certificate (provided, however, that
one of the signatories to each such Officers' Certificate shall be LNR's
principal executive officer, principal financial officer or principal accounting
officer), as to such Officers' knowledge, of LNR's compliance with all
conditions and covenants under this Indenture
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(without regard to any period of grace or requirement of notice provided
hereunder) and in the event any Default exists, such Officers shall specify the
nature of such Default. Each such Officers' Certificate shall also notify the
Trustee of any change in LNR's fiscal year-end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.8 shall be accompanied by a written
report of LNR's independent certified public accountants (who shall be a firm of
established national reputation) stating (A) that their audit examination has
included a review of the terms of this Indenture and the form of the Notes as
they relate to accounting matters, and (B) whether, in connection with their
audit examination, any Default or Event of Default has come to their attention
and if such a Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; provided, however, that,
without any restriction as to the scope of the audit examination, such
independent certified public accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, LNR shall
deliver to the Trustee, at its address set forth in Section 11.2, by registered
or certified mail or by facsimile transmission followed by hard copy by
registered or certified mail an Officers' Certificate specifying such event,
notice or other action promptly upon LNR's becoming aware of such occurrence.
SECTION 4.7. Compliance with Laws.
LNR shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as could not singly or in the
aggregate reasonably be expected to have a material adverse effect on the
financial condition or results of operations of LNR and its Subsidiaries taken
as a whole.
SECTION 4.8. Commission Reports.
(a) LNR shall file with the Commission all information, documents
and reports to be filed with the
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Commission pursuant to Section 13 or 15(d) of the Exchange Act, whether or not
LNR is subject to such filing requirements so long as the Commission will accept
such filings. LNR (at its own expense) shall deliver to the Trustee within 15
days after it files them with the Commission, copies of the quarterly and annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which LNR files with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Upon qualification of this Indenture under the TIA, LNR
shall also comply with the provisions of TIA ss. 314(a).
(b) At LNR's expense, regardless of whether LNR is required to
furnish such reports to its stockholders pursuant to the Exchange Act, LNR shall
cause an annual report and each quarterly or other financial report to be
delivered to the Trustee and the Trustee will mail them to the Holders at their
addresses appearing in the registration books of the Registrar.
(c) LNR shall, upon request, provide to any Holder or any
prospective transferee of any such Holder any information concerning LNR
(including financial statements) necessary in order to permit such Holder to
sell or transfer Notes in compliance with Rule 144A.
SECTION 4.9. Waiver of Stay, Extension or Usury Laws.
LNR covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive LNR from paying all or any portion of
the Obligations on the Notes as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
LNR hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
LNR shall not, and shall not cause or permit any of its Subsidiaries
to, directly or indirectly:
(a) declare or pay any dividend or make any distribution
(other than dividends or distributions made to LNR or any Subsidiary of
LNR 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
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Qualified Capital Stock of LNR) on or in respect of shares of LNR's
Capital Stock to holders of such Capital Stock;
(b) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of LNR 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 Capital Stock of LNR for Qualified Capital Stock of LNR);
or
(c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of LNR or a Subsidiary that is subordinate or
junior in right of payment to the Notes or any guarantee thereof
(each of the foregoing actions set forth in clauses (a), (b) and (c) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing or (ii) LNR is not able to incur
at least $1.00 of additional Indebtedness (other than additional Permitted
Indebtedness) in compliance with Section 4.12, or (iii) the aggregate amount of
all Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue 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 the Board of Directors of LNR) shall exceed the
sum of:
(A) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of LNR earned during the period beginning on the first
day of the fiscal quarter including the Issue 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
(B) 100% of the aggregate net cash proceeds received by LNR
from any Person (other than a Subsidiary of LNR) from the issuance
and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of LNR, including treasury
stock; plus
(C) without duplication of any amounts included in clause (B)
above, 100% of the aggregate net cash proceeds of any equity
contribution received by LNR from a holder of LNR's Capital Stock
subsequent to the
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Issue Date and on or prior to the Reference Date (excluding, in the
case of clauses (B) and (C), any net cash proceeds from a Public
Equity Offering to the extent used to redeem the Notes); plus
(D) $75,000,000.
Notwithstanding the foregoing, the provisions set forth above in
Section 4.10 shall 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 Capital Stock of
LNR, through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of LNR) of
shares of Qualified Capital Stock of LNR;
(3) if no Default or Event of Default shall have occurred and
be continuing, the acquisition of any Indebtedness of LNR that is
subordinate or junior in right of payment to the Notes either (i)
solely in exchange for shares of Qualified Capital Stock of LNR, or
(ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of LNR) of (A)
shares of Qualified Capital Stock of LNR 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, Common Stock of LNR from employees, former employees,
directors or former directors of LNR pursuant to the terms of the
agreements or plans approved by the Board of Directors of LNR 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.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of this Section
4.10, amounts expended pursuant to clauses (1), (2) and (3)(ii)(A) shall be
included in such calculation.
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Not later than three Business Days before making any Restricted
Payment, LNR shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment complies with this Indenture and setting forth in
reasonable detail the basis upon which the required calculations were computed.
SECTION 4.11. Limitation on Transactions with Affiliates.
(a) LNR shall not, and shall not cause or permit any of its
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 (x) Affiliate Transactions permitted under paragraph
(b) of this Section 4.11 and (y) Affiliate Transactions on terms that are no
less favorable to LNR 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 an Affiliate of LNR or such
Subsidiary. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $5.0 million
shall be approved by the Board of Directors of LNR or such Subsidiary, as the
case may be, such approval 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 LNR or any Subsidiary of
LNR enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) involving aggregate payments or other
property with a fair market value in excess of $7.5 million, LNR or such
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to LNR or the relevant Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the same
with the Trustee.
(b) The restrictions set forth in paragraph (a) of this Section 4.11
shall not apply to (i) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees, consultants or agents of
LNR or any Subsidiary of LNR as determined in good faith by LNR's Board of
Directors or senior management; (ii) transactions between or among LNR and any
of its Wholly Owned Subsidiaries or between or among such Wholly Owned
Subsidiaries provided such transactions are not otherwise prohibited under this
Indenture; (iii) any agreement as in effect as of the Issue 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
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agreement is not more disadvantageous to the Holders in any material respect
than the original agreement as in effect on the Issue Date; (iv) Restricted
Payments permitted by this Indenture; and (v) transactions between or among LNR
or any Subsidiaries of LNR and the Land Partnership, provided such transactions
are permitted by and are effected in accordance with the terms of the
Partnership Agreement of the Land Partnership and the By-laws of LNR, in each
case, as in effect on the Issue Date.
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
LNR shall not, and shall not cause or permit any of its 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) 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, LNR and its Subsidiaries may incur Indebtedness
(including, without limitation, Acquired Indebtedness) if on the date of the
incurrence of such Indebtedness, after giving effect to the incurrence thereof:
(i) the Consolidated Fixed Charge Coverage Ratio of LNR is greater
than 1.5 to 1.0;
(ii) the ratio of the aggregate amount of Recourse Indebtedness
outstanding on a consolidated basis to the Consolidated Net Worth of LNR
is less than 5.0 to 1.0;
(iii) the ratio of the aggregate amount of Senior Recourse
Indebtedness outstanding on a consolidated basis to the sum of (A) the
Consolidated Net Worth of LNR and (B) the aggregate amount of the
Subordinated Indebtedness outstanding on a consolidated basis is less than
3.5 to 1.0; and
(iv) the ratio of the aggregate amount of Subordinated Indebtedness
outstanding on a consolidated basis to the Consolidated Net Worth of LNR
is less than 1.0 to 1.0.
No Indebtedness incurred pursuant to the second sentence of this Section 4.12
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 second sentence of this Section
4.12 (other than an advance under a committed facility), LNR shall deliver to
the Trustee an Officers' Certificate setting forth the calculations by which
such incurrence was determined to be permitted. If, during any month, LNR incurs
Indebtedness
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pursuant to the second sentence of this Section 4.12 through advances under a
committed facility, LNR shall 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.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
LNR shall not, and shall not cause or permit any of its 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 Subsidiary
of LNR to (a) pay dividends or make any other distributions on or in respect of
its Capital Stock; (b) make loans or advances or pay any Indebtedness or other
obligation owed to LNR or any other Subsidiary of LNR; or (c) transfer any of
its property or assets to LNR or any other Subsidiary of LNR, except for such
encumbrances or restrictions existing under or by reason of:
(1) applicable law;
(2) this Indenture;
(3) the Credit Agreement;
(4) nonassignment provisions of any contract or any lease
governing a leasehold interest of any Subsidiary of LNR;
(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 Issue Date to the extent and in
the manner such agreements are in effect on the Issue Date;
(7) restrictions on the transfer of assets subject to any Lien
permitted under this Indenture to secure Non-Recourse Indebtedness imposed
by the holder of such Lien;
(8) restrictions imposed by any agreement to sell assets
permitted under this 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
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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 LNR in any material respect as
determined by the Board of Directors of LNR 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.
SECTION 4.14. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder will
have the right to require that LNR purchase all or a portion of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer"), at
a purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest to the date of purchase.
(b) Within 30 days following the date upon which a Change of Control
occurs, LNR shall send, by first class mail, a notice to each Holder at such
Holder's last registered address, with a copy to the Trustee provided at least 5
days prior to such mailing, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.14, that all Notes tendered and not withdrawn will be accepted
for payment and that the Change of Control Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by
law;
(ii) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless LNR defaults in making payment therefor, any Note
accepted for payment pursuant to the Change of Control Offer shall cease
to accrue interest after the Change of Control Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
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(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing its election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and
each new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
(c) In connection with any Change of Control, LNR shall within 30
days following any Change of Control, (i) obtain the consents under the Credit
Agreement and all other Senior Indebtedness required to permit the repurchase of
the Notes pursuant to a Change of Control Offer or (ii) repay in full all
Indebtedness, and terminate all commitments, under the Credit Agreement and all
other Senior Indebtedness the terms of which would prohibit the purchase of the
Notes pursuant to a Change of Control Offer.
(d) On or before the Change of Control Payment Date, LNR shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent in accordance with Section
2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by LNR. Upon receipt by the Paying Agent of the
monies specified in clause (ii) of the next preceding sentence and a copy of the
Officers' Certificate specified in clause (iii) of such sentence, the Paying
Agent shall promptly mail to the Holders of Notes so accepted payment in an
amount equal to the purchase price plus accrued interest, if any, and the
Trustee shall promptly authenticate and mail to such Holders new Notes equal in
principal amount to any unpurchased portion of the Notes surrendered. For
purposes of this Section 4.14, the Trustee shall act as the Paying Agent.
(e) Neither the Board of Directors of LNR nor the Trustee may waive
the provisions of this Section 4.14 relating to LNR's obligation to repurchase
Notes upon a Change of Control.
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(f) LNR will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.14, LNR shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the provisions of this Section 4.14 by virtue thereof.
(g) Notwithstanding anything herein to the contrary, LNR shall not
be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change of Control Offer in the manner, at the time and
otherwise in compliance with the requirements of this Section 4.14 applicable to
a Change of Control Offer made by LNR and purchases all Notes validly tendered
and not withdrawn under such Change of Control Offer.
SECTION 4.15. Limitation on Preferred Stock of Subsidiaries.
LNR shall not permit any of its Subsidiaries to issue any Preferred
Stock (other than to LNR or to a Wholly Owned Subsidiary of LNR) or permit any
Person (other than LNR or a Wholly Owned Subsidiary of LNR) to own any Preferred
Stock of any Subsidiary of LNR.
SECTION 4.16. Limitation on Liens and Guarantees.
LNR shall not, and shall not cause or permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or permit or suffer to exist
any Liens securing Indebtedness of LNR that is expressly subordinate or junior
in right of payment to the Notes or is pari passu in right of payment to Notes
against or upon any property or assets of LNR or any of its Subsidiaries
(whether owned on the Issue Date or acquired after the Issue Date), or any
proceeds therefrom, or assign or otherwise convey any right to receive income or
profits therefrom, or grant any guarantees of any such Indebtedness, unless (i)
in the case of Liens securing Indebtedness of LNR 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, (ii)
in case of guarantees of Indebtedness of LNR 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 (iii) in all other cases, the Notes are equally and ratably
secured.
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SECTION 4.17. Conduct of Business.
LNR shall, and shall cause its 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.
SECTION 4.18. Prohibition on Incurrence of Senior Subordinated Debt.
LNR shall not incur or suffer 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 other Indebtedness of LNR.
ARTICLE V.
SUCCESSOR CORPORATION
SECTION 5.1. Merger, Consolidation and Sale of Assets.
(a) LNR shall 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
LNR's assets (determined on a consolidated basis for LNR and its Subsidiaries)
unless: (i) either (1) LNR shall be the surviving or continuing corporation or
(2) the Person (if other than LNR) formed by such consolidation or into which
LNR is merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of LNR and its
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, this Indenture and the Registration
Rights Agreement on the part of LNR to be performed or observed, as the case may
be; (ii) immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) 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), LNR or such Surviving
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Entity, as the case may be, (1) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of LNR 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 Section
4.12; (iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) 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 (iv) LNR 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 consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
(b) 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 Subsidiaries of LNR, the Capital Stock of which constitutes all or
substantially all of the properties and assets of LNR shall be deemed to be the
transfer of all or substantially all of the properties and assets of LNR.
SECTION 5.2. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of LNR in accordance with Section 5.1, the
successor Person formed by such consolidation or into which LNR is merged or to
which such conveyance, lease or transfer is made shall (upon the required
assumption described in Section 5.1) succeed to, and be substituted for, and may
exercise every right and power of, LNR under this Indenture and the Notes with
the same effect as if such successor had been named as LNR herein and thereafter
(except in the case of a lease) the predecessor corporation will be relieved of
all further obligations and covenants under this Indenture and the Notes.
ARTICLE VI.
REMEDIES
SECTION 6.1. Events of Default.
An "Event of Default" means any of the following events:
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(i) the failure to pay interest (including Additional Interest, if
any) on any Notes when the same becomes due and payable and the default
continues for a period of 30 days, whether or not such failure shall be
due to compliance with Article X of this Indenture or agreements with
respect to any other Indebtedness or any other reason;
(ii) the failure to pay the principal on any Notes, when such
principal 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 or not such failure shall be due to compliance
with Article X of this Indenture or agreements with respect to any other
Indebtedness or any other reason;
(iii) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues
for a period of 30 days after LNR receives 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 a default with respect to Section 5.1, which
will constitute an Event of Default with such notice requirement but
without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Recourse Indebtedness of LNR or any Subsidiary of LNR, or the
acceleration of the final stated maturity of any such Recourse
Indebtedness if the aggregate principal amount of such Recourse
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;
(v) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against LNR or any of its Subsidiaries
and remain undischarged, unpaid or unstayed for a period of 60 days after
such judgment or judgments become final and nonappealable.
(vi) LNR or any of its Subsidiaries pursuant to or under or within
the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding;
(b) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
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(d) makes a general assignment for the benefit of its creditors;
or
(e) shall generally not pay its debts when such debts become due
or shall admit in writing its inability to pay its debts
generally; or
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against LNR or any Subsidiary of LNR in an
involuntary case or proceeding,
(b) appoints a Custodian of LNR or any Subsidiary of LNR for all
or substantially all of its Properties, or
(c) orders the liquidation of LNR or any Subsidiary of LNR.
and in each case the order or decree remains unstayed and in effect for 60
consecutive days.
The Events of Default described in clauses (iv), (v), (vi) and (vii)
above with respect to a Subsidiary shall not apply if such Person was not a
Subsidiary at the time such event or condition occurred unless, in the case of
clause (iv) or (v) above, LNR or another Subsidiary thereof assumes or otherwise
becomes liable for the liability referred to therein or the liabilities
generally of such Person.
SECTION 6.2. Acceleration.
(a) If an Event of Default (other than an Event of Default specified
in clause (vi) or (vii) of Section 6.1) 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 notice in writing to LNR and, if such notice is given by Holders, the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) 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 5 Business Days after
receipt by LNR 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 (vi) or (vii) of Section 6.1 occurs and is
continuing with respect to LNR, then all unpaid Obligations on all of the
outstanding Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
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(b) At any time after a declaration of acceleration with respect to
the Notes as described in the preceding paragraph, the Holders of a majority in
aggregate principal amount of the Notes may rescind and cancel such declaration
and its consequences (i) if the rescission would not conflict with any judgment
or decree, (ii) 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, (iii) 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, (iv) if LNR has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (iv) of Section 6.1, the Trustee shall have 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
right consequent thereto.
SECTION 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes
may be enforced by the Trustee even if it does not possess any of the Notes or
does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.4. Waiver of Past Defaults.
Prior to the declaration of acceleration of the Notes, the Holders
of not less than a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may, on behalf of the Holders of all the
Notes, waive any existing Default or Event of Default and its consequences under
this Indenture, except a Default or Event of Default specified in clause (i) or
(ii) of Section 6.1 or in respect of any provision hereof which cannot be
modified or amended without the consent of the Holder so affected pursuant to
Section 9.2. When a Default or Event of Default is so waived, it shall be deemed
cured and shall cease to exist. This Section 6.4 shall be in lieu of ss.
316(a)(1)(B) of the TIA and such ss. 316(a)(1)(B) of the TIA is
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hereby expressly excluded from this Indenture and the Notes, as permitted by the
TIA.
SECTION 6.5. Control by Majority.
Subject to Section 2.9, the Holders of the Notes may not enforce
this Indenture or the Notes except as provided in this Article VI and under the
TIA. The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes shall 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, provided, however that
the Trustee may refuse to follow any direction (a) that conflicts with any rule
of law or this Indenture, (b) that the Trustee determines may be unduly
prejudicial to the rights of another Holder, or (c) that may expose the Trustee
to personal liability for which reasonable indemnity provided to the Trustee
against such liability shall be inadequate; provided further, that the Trustee
may take any other action deemed proper by the Trustee that is not inconsistent
with such direction or this Indenture. This Section 6.5 shall be in lieu of ss.
316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
SECTION 6.6. Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding with respect to this Indenture or the Notes or any remedy hereunder,
unless the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as Trustee under the Notes and this
Indenture, the Trustee has failed to institute such proceeding within 25 days
after receipt of such notice, request and offer of indemnity and the Trustee,
within such 25-day period, has not received directions inconsistent with such
written request by Holders of not less than a majority in aggregate principal
amount of the outstanding Notes.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
SECTION 6.7. Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the right of
any Holder of a Note to receive payment of the
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principal of, premium, if any, and interest on such Note, on or after the
respective due dates expressed or provided for in such Note, or to bring suit
for the enforcement of any such payment on or after the respective due dates, is
absolute and unconditional and shall not be impaired or affected without the
consent of the Holder.
SECTION 6.8. Collection Suit by Trustee.
If an Event of Default specified in clause (i) or (ii) of Section
6.1 occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against LNR, or any other obligor on the
Notes for the whole amount of the principal of, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum provided for by the
Notes and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, counsel, accountants and
experts) and the Holders allowed in any judicial proceedings relative to LNR or
Subsidiaries (or any other obligor upon the Notes), their creditors or their
property and shall be entitled and empowered to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same, and any Custodian in any such judicial proceedings is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.7. LNR's payment
obligations under this Section 6.9 shall be secured in accordance with the
provisions of Section 7.7. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
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SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article VI it
shall pay out such money, subject to the provisions of Article X, in the
following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for interest accrued on the Notes, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for interest;
Third: to Holders for the principal amounts (including any premium) owing
under the Notes, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for the principal (including any
premium); and
Fourth: the balance, if any, to LNR.
The Trustee, upon prior written notice to LNR, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.7, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case LNR, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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ARTICLE VII.
TRUSTEE
SECTION 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and shall use the same degree of care and skill in its exercise
thereof as a prudent man or woman would exercise or use under the circumstances
in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no duties, covenants or obligations of the
Trustee shall be implied in this Indenture.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2, 6.4 or 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability, in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it
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shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1 and
Section 7.2.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with LNR.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
(g) The Trustee may refuse to perform any duty or exercise any right
or power hereunder unless (i) it is provided adequate funds to enable it to do
so and (ii) it receives indemnity reasonably satisfactory to it against any
loss, liability, fee or expense.
SECTION 7.2. Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not and
shall not be required to investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or an
Opinion of Counsel, or both, which shall conform to Sections 11.4 and 11.5. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled, upon reasonable notice to LNR, to examine
the books, records, and
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premises of LNR, personally or by agent or attorney and to consult with the
officers and representatives of LNR, including LNR's accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request, order
or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.8 is for informational purposes only and the Trustee's receipt
of the foregoing shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
LNR's compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with LNR, any of its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, and it shall not
be accountable for LNR's use of the proceeds from the Notes, and it shall not be
responsible for any statement of LNR in this Indenture or any document entered
into or issued in connection with the issuance and sale of the Notes or any
statement in the Notes other than the Trustee's certificate of authentication.
SECTION 7.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if
it is known to a Trust Officer, the Trustee shall mail to each Holder notice of
the uncured Default or Event of Default within 90 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, or premium, if any, or interest on, any Note,
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including an accelerated payment, a Default in payment on the Change of Control
Payment Date pursuant to a Change of Control Offer or a Default in compliance
with Article V hereof, the Trustee may withhold the notice if and so long as its
Board of Directors, the executive committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders. The foregoing sentence
of this Section 7.5 shall be in lieu of the proviso to ss. 315(b) of the TIA and
such proviso to ss. 315(b) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
SECTION 7.6. Reports by Trustee to Holders.
Within 60 days after December 31 of each year beginning with 1998,
the Trustee shall, to the extent that any of the events described in TIA ss.
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA ss.
313(a). The Trustee also shall comply with TIA ss.ss. 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to LNR and filed with the Commission and each stock exchange, if any, on
which the Notes are listed.
LNR shall promptly notify the Trustee if the Notes become listed on
any stock exchange and the Trustee shall comply with TIA ss. 313(d).
SECTION 7.7. Compensation and Indemnity.
LNR shall pay to the Trustee from time to time such compensation for
its services as has been agreed to in writing signed by LNR and the Trustee. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. LNR shall reimburse the Trustee upon request for
all reasonable out-of-pocket disbursements, advances or expenses incurred or
made by it in connection with the performance of its duties under this
Indenture. Such expenses shall include the reasonable fees and expenses of the
Trustee's agents, counsel, accountants and experts.
LNR shall indemnify each of the Trustee (or any predecessor Trustee)
and its agents, employees, stockholders, Affiliates and directors and officers
for, and hold them each harmless against, any and all loss, liability, damage,
claim or expense (including reasonable fees and expenses of counsel), including
taxes (other than taxes based on the income of the Trustee) incurred by any of
them except for such actions to the extent caused by any negligence, bad faith
or willful misconduct on their part, arising out of or in connection with the
acceptance or administration of this trust including the reasonable costs and
expenses of defending themselves against any claim or liability in connection
with the exercise or performance
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of any of their rights, powers or duties hereunder. The Trustee shall notify LNR
promptly of any claim asserted against the Trustee for which it may seek
indemnity, provided, however, that failure to so notify LNR shall not release
LNR of its obligations hereunder unless, and then only to the extent, such
failure results in the forfeiture by LNR of substantial rights and defenses. At
the Trustee's sole discretion, LNR shall defend the claim and the Trustee shall
cooperate and may participate in the defense; provided, however, that any
settlement of a claim shall be approved in writing by the Trustee if such
settlement would result in an admission of liability by the Trustee or if such
settlement would not be accompanied by a full release of the Trustee for all
liability arising out of the events giving rise to such claim. Alternatively,
the Trustee may at its option have separate counsel of its own choosing and LNR
shall pay the reasonable fees and expenses of such counsel.
To secure LNR's payment obligations in this Section 7.7, the Trustee
shall have a lien prior to the Notes on all assets or money held or collected by
the Trustee, in its capacity as Trustee, except assets or money held in trust to
pay principal of or premium, if any, or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(vi) or (vii) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.7 shall survive the termination of
this Indenture.
SECTION 7.8. Replacement of Trustee.
The Trustee may resign at any time by so notifying LNR in writing at
least 30 days in advance of such resignation; provided, however, that no such
resignation shall be effective until a successor Trustee has accepted its
appointment pursuant to this Section 7.8. The Holders of a majority in principal
amount of the outstanding Notes may remove the Trustee and appoint a successor
Trustee with LNR's consent, by so notifying LNR and the Trustee. LNR may remove
the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, LNR shall notify each Holder of such event and
shall promptly appoint a successor Trustee. Within one year after the successor
Trustee takes office, the Holders of a majority in aggregate principal amount of
the outstanding Notes may appoint a successor Trustee to replace the successor
Trustee appointed by LNR.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to LNR. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail notice of such successor Trustee's
appointment to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, LNR or the Holders
of at least 10% in aggregate principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee
pursuant to this Section 7.8, LNR's obligations under Section 7.7 shall continue
for the benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided, however, that
such corporation shall be otherwise qualified and eligible under this Article
VII.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case
of a Trustee that is a corporation included in a bank holding company system,
the related bank holding company) shall have a combined capital and surplus of
at least $100 million as set forth in its most recent published
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annual report of condition, and have a Corporate Trust Office in the City of New
York. In addition, if the Trustee is a corporation included in a bank holding
company system, the Trustee, independently of such bank holding company, shall
meet the capital requirements of TIA ss. 310(a)(2). The Trustee shall comply
with TIA ss. 310(b); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
LNR are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. The provisions of TIA ss. 310 shall apply to LNR, as obligor
of the Notes.
SECTION 7.11. Preferential Collection of Claims Against LNR.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein. The
provisions of TIA ss. 311 shall apply to LNR, as obligor of the Notes.
ARTICLE VIII.
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Termination of Company's Obligations.
This Indenture shall be discharged and shall 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 this Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by LNR and thereafter repaid to LNR or discharged
from such trust) have been delivered to the Trustee for cancellation or (b) all
Notes not theretofore delivered to the Trustee for cancellation have become due
and payable and LNR has 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 theretofore 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 LNR directing
the Trustee to apply such funds to the payment thereof; (ii) LNR has paid all
other sums payable under this Indenture by LNR; and (iii) LNR has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel stating that all
conditions precedent under this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with.
LNR may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding Notes
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("Legal Defeasance"). As a result of such Legal Defeasance, LNR shall be deemed
to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) 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, (ii) LNR's obligations with respect to the Notes
concerning issuing temporary Notes, registration, transfer and exchange of
Notes, replacement of mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and LNR's obligations in connection
therewith and (iv) the Legal Defeasance provisions of this Section 8.1. In
addition, LNR may, at its option and at any time, elect to have the obligations
of LNR released with respect to Sections 4.10 through 4.18 and Article V
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event of Covenant Defeasance, those events described under
Section 6.1 (except those events described in Section 6.1(i),(ii) (but including
matters relating to a Change of Control Offer),(vi) and (vii)) will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) LNR must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders U.S. Legal Tender, 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 independent public accountants
addressed to the Trustee, 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;
(ii) LNR shall have delivered to the Trustee an Opinion of Counsel
reasonably acceptable to the Trustee concluding that such deposit
shall not cause the Trustee to have a conflicting interest as
defined in and for purposes of the TIA;
(iii) in the case of Legal Defeasance, LNR shall have delivered to the
Trustee an Opinion of Counsel confirming that (A) LNR has received
from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this 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
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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;
(iv) in the case of Covenant Defeasance, LNR shall have delivered to the
Trustee an Opinion of Counsel 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;
(v) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default under
Section 6.1(vi) or (vii) 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);
(vi) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument to which LNR or any of its Subsidiaries is a
party or by which LNR or any of its Subsidiaries is bound;
(vii) such deposit shall not result in LNR, the Trustee or the trust
becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940, as amended;
(viii) the Holders shall have a perfected security interest under
applicable law in the U.S. Legal Tender or U.S. Government
Obligations so deposited;
(ix) LNR shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by LNR with the intent of
preferring the Holders over any other creditors of LNR or with the
intent of defeating, hindering, delaying or defrauding any other
creditors of LNR or others;
(x) LNR shall have delivered to the Trustee an Opinion of Counsel to the
effect that, after the 91st day following the deposit (assuming that
no Default or Event of Default shall have occurred and be continuing
on such 91st day insofar as Sections 6.1 (vi) or (vii) are
concerned), (A) the trust funds will not be subject to any rights of
holders of
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Indebtedness of LNR other than the Notes and (B) the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors'
rights generally; and
(xi) LNR shall have delivered 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 (including without limitation that no Default or Event of
Default described in Section 6.1 (vi) or (vii) has occurred and is
continuing at the end of the 91-day period referred to in the
Opinion of Counsel referred to in clause (x) above), as the case may
be, have been complied with.
SECTION 8.2. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Section 8.1, and shall
apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal of
and premium, if any, and interest on the Notes. The Trustee shall be under no
obligation to invest said U.S. Legal Tender or U.S. Government Obligations
except as it may agree in writing with LNR.
LNR shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.1 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
SECTION 8.3. Repayment to LNR.
Subject to Section 8.1, the Trustee and the Paying Agent shall
promptly pay to LNR upon request any excess U.S. Legal Tender or U.S. Government
Obligations held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall pay
to LNR upon request any money held by them for the payment of principal,
premium, if any, or interest that remains unclaimed for one year; provided,
however, that the Trustee or such Paying Agent, before being required to make
any payment, may at the expense of LNR cause to be published once in a newspaper
of general circulation in the City of New York or mail to each Holder entitled
to such money notice that such money remains unclaimed and that after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing any unclaimed balance of such money then remaining will
be repaid to LNR. After payment to LNR, Holders entitled to such money must
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look to LNR for payment as general creditors unless an applicable law designates
another Person.
SECTION 8.4. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.1 by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, LNR's obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to Section 8.1
until such time as the Trustee or Paying Agent is permitted to apply all such
U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.1;
provided, however, that if LNR has made any payment of interest or premium on or
principal of any Notes because of the reinstatement of their obligations, LNR
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the U.S. Legal Tender or U.S. Government Obligations held by the
Trustee or Paying Agent.
SECTION 8.5. Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.1 have been satisfied, (ii)
LNR has paid or caused to be paid all other sums payable hereunder by LNR and
(iii) LNR has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that all conditions precedent referred to in clause (i)
above relating to the satisfaction and discharge of this Indenture have been
complied with, the Trustee upon request shall acknowledge in writing the
discharge of LNR's obligations under this Indenture except for those surviving
obligations specified in Section 8.1.
ARTICLE IX.
MODIFICATION OF THE INDENTURE
SECTION 9.1. Without Consent of Holders.
Notwithstanding Section 9.2, LNR and the Trustee may amend, waive or
supplement this Indenture without notice to or consent of any Holder: (a) to
cure any ambiguity, defect or inconsistency; (b) to comply with Section 5.1 of
this Indenture; (c) to provide for uncertificated Notes in addition to
certificated Notes; (d) to comply with any requirements of the Commission in
order to effect or maintain the qualification of this Indenture under the TIA;
or (e) to make any change that would provide any additional benefit or rights to
the Holders or that does not adversely affect the rights of any Holder in any
material respect. Notwithstanding the foregoing, the Trustee and LNR may not
make any change that adversely affects the rights of any Holder in any material
respect under this Indenture without
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the consent of such Holder. 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
Certificate of LNR.
SECTION 9.2. With Consent of Holders.
All other modifications, waivers and amendments of this Indenture
may be made with the consent of the Holders of a majority in principal amount of
the then outstanding Notes, except that, without the consent of each Holder of
the Notes affected thereby, no amendment or waiver may: (i) reduce the amount of
Notes whose Holders must consent to an amendment; (ii) reduce the rate of or
change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Notes; (iii) 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; (iv) make any Notes payable
in money other than that stated in the Notes; (v) make any change in provisions
of this 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;
(vi) amend, change or modify in any material respect the obligation of LNR 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
(vii) modify or change any provision of this Indenture or the related
definitions affecting the subordination or ranking of the Notes in a manner
which adversely affects the Holders.
After an amendment, supplement or waiver under this Section 9.2
becomes effective (as provided in Section 9.4), LNR shall mail to the Holders
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of LNR to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; provided, however, that this
Section 9.3 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
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SECTION 9.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or LNR received before the date on which the Trustee
receives an Officers' Certificate certifying that the Holders of the requisite
principal amount of Notes have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver. An amendment, supplement or
waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence of consent by the Holders of the requisite percentage
in principal amount of outstanding Notes.
LNR may, but shall not be obligated to, fix a Record Date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be at least 30 days prior to the
first solicitation of such consent. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such Record Date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
Record Date. No such consent shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not revoked within
such 90 day period.
SECTION 9.5. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of such Note to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if LNR or the Trustee so
determine, LNR in exchange for the Note shall issue and the Trustee shall
authenticate a new Note that reflects the changed terms.
SECTION 9.6. Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or, waiver
authorized pursuant to this Article IX; provided, however, that the Trustee may,
but shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustees own rights, duties or immunities under this
Indenture. In executing such supplement or waiver the Trustee shall be entitled
to receive indemnity reasonably satisfactory to it, and shall be
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fully protected in relying upon an Opinion of Counsel and an Officers'
Certificate, stating that no Default or Event of Default shall occur as a result
of such amendment, supplement or waiver and that the execution of any amendment,
supplement or waiver authorized pursuant to this Article IX is authorized or
permitted by this Indenture. Such Opinion of Counsel shall not be an expense of
the Trustee.
ARTICLE X.
SUBORDINATION
SECTION 10.1. Notes Subordinated to Senior Indebtedness Upon
Effectiveness of the Merger.
LNR covenants and agrees, and each Holder of the Notes, by its
acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article X; and each Person holding any
Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Obligations on the Notes by
LNR shall, to the extent and in the manner herein set forth, be subordinated and
junior in right of payment to the prior payment in full in cash or Cash
Equivalents of all Obligations on Senior Indebtedness, including, without
limitation, LNR's obligations under the Credit Agreement; that the subordination
is for the benefit of, and shall be enforceable directly by, the holders of
Senior Indebtedness, and that each holder of Senior Indebtedness whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Indebtedness in reliance upon the covenants and
provisions contained in this Indenture and the Notes.
SECTION 10.2. Suspension of Payment When Senior Indebtedness is in
Default.
(a) 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 accruing fees with respect to, any Senior Indebtedness,
no payment of any kind or character shall be made by or on behalf of LNR or any
Subsidiary of LNR or any obligor on the Notes or any other Person on its or
their 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, as such event of default is defined in the instrument creating or
evidencing such Designated Senior Indebtedness, permitting the holders of such
Designated Senior Indebtedness then outstanding to accelerate the maturity
thereof and if the Representative for that issue of Designated
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Senior Indebtedness 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 written notice from the
Representative for 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"), neither LNR nor any other Person on
its behalf shall (x) make any payment of any kind or character with respect to
any Obligations on the Notes or (y) 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
date of the commencement of any Blockage Period with respect to the Designated
Senior Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such 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 (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such 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).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.2(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amount of Senior Indebtedness
held by such holders) or their respective Representatives, as their respective
interests may appear. The Trustee shall be entitled to rely on information
regarding amounts then due and owing on the Senior Indebtedness, if any,
received from the holders of Senior Indebtedness (or their Representatives) or,
if such information is not received from such holders or their Representatives,
from LNR and only amounts included in the information provided to the Trustee
shall be paid to the holders of Senior Indebtedness.
Nothing contained in this Article X shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.2 or to pursue any rights or remedies hereunder;
provided that all Senior Indebtedness thereafter due or declared to be due shall
first be paid in full in cash or Cash Equivalents before the
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Holders are entitled to receive any payment of any kind or character with
respect to Obligations on the Notes.
SECTION 10.3. Notes Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or
Reorganization of Company.
(a) Upon any payment or distribution of assets of LNR 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 assets of LNR or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
LNR or its property, 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 of any kind or character 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. Upon any such dissolution,
winding-up, liquidation, reorganization, receivership or similar proceeding, any
payment or distribution of assets of LNR of any kind or character, whether in
cash, property or securities, to which the Holders of the Notes or the Trustee
under this Indenture would be entitled, except for the provisions hereof, shall
be paid by LNR or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders or
by the Trustee under this Indenture if received by them, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full in
cash or Cash Equivalents after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether by or
on behalf of LNR, as proceeds of security or enforcement of any right of setoff
or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment has not occurred.
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(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of LNR of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by this Section 10.3, such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Indebtedness (pro rata to such holders on the basis of
the respective amount of Senior Indebtedness held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been paid
in full in cash or Cash Equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(d) The consolidation of LNR with, or the merger of LNR with or
into, another corporation or the liquidation or dissolution of LNR following the
conveyance or transfer of all or substantially all of its assets, to another
corporation upon the terms and conditions provided in Article V hereof and as
long as permitted under the terms of the Senior Indebtedness shall not be deemed
a dissolution, winding-up, liquidation or reorganization for the purposes of
this Section 10.3 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume LNR's obligations
hereunder in accordance with Article V hereof.
SECTION 10.4. Holders to Be Subrogated to Rights of Holders of
Senior Indebtedness.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Indebtedness, the Holders of the Notes shall be subrogated to the rights
of the holders of Senior Indebtedness to receive payments or distributions of
cash, property or securities of LNR applicable to the Senior Indebtedness until
the Notes shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness by or on
behalf of LNR or by or on behalf of the Holders by virtue of this Article X
which otherwise would have been made to the Holders shall, as between LNR and
the Holders of the Notes, be deemed to be a payment by LNR to or on account of
the Senior Indebtedness, it being understood that the provisions of this Article
X are and are intended solely for the purpose of defining the relative rights of
the Holders of the Notes, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
SECTION 10.5. Obligations of LNR Unconditional.
Nothing contained in this Article X or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as
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between LNR and the Holders, the obligation of LNR, which is absolute and
unconditional, to pay to the Holders the principal of and premium, if any, and
interest on the Notes as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of LNR other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
X of the holders of Senior Indebtedness in respect of cash, property or
securities of LNR received upon the exercise of any such remedy. Upon any
payment or distribution of assets or securities of LNR referred to in this
Article X, the Trustee, subject to the provisions of Sections 7.1 and 7.2, and
the Holders shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which any liquidation, dissolution, winding-up or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee or agent or other Person making any
payment or distribution to the Trustee or to the Holders for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other Indebtedness of LNR,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article X. Nothing in
this Article X shall apply to the claims of, or payments to, the Trustee under
or pursuant to Section 7.7. The Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a holder of any Senior Indebtedness (or a trustee on behalf of, or other
representative of, such holder) to establish that such notice has been given by
a holder of such Senior Indebtedness or a trustee or representative on behalf of
any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article X (although it is not obligated to make any such inquiry), the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article X, and if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
Whenever a distribution is to be made or a notice given to holders
or owners of Senior Indebtedness, the distribution may be made and the notice
may be given to their Representative, if any.
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SECTION 10.6. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
LNR shall give prompt written notice to the Trustee of any fact
known to LNR which would prohibit the making of any payment to or by the Trustee
in respect of the Notes pursuant to the provisions of this Article X. Regardless
of anything to the contrary contained in this Article X or elsewhere in this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Senior Indebtedness or of
any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing from
LNR, or from a holder of Senior Indebtedness or a Representative therefor,
together with proof satisfactory to the Trustee of such holding of Senior
Indebtedness or of the authority of such Representative, and, prior to the
receipt of any such written notice, the Trustee shall be entitled to assume (in
the absence of actual knowledge to the contrary) that no such facts exist.
SECTION 10.7. Application by Trustee of Assets Deposited with It.
U.S. Legal Tender or U.S. Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Sections 8.1 and 8.2 shall
be for the sole benefit of the Holders of the Notes and, to the extent allocated
for the payment of Notes, shall not be subject to the subordination provisions
of this Article X. Otherwise, any deposit of assets or securities by or on
behalf of LNR with the Trustee or any Paying Agent (whether or not in trust) for
the payment of principal of or interest on any Notes shall be subject to the
provisions of this Article X; provided, however, that if prior to the second
Business Day preceding the date on which by the terms of this Indenture any such
assets may become distributable for any purpose (including, without limitation,
the payment of either principal of or premium, if any, or interest on any Note)
the Trustee or such Paying Agent shall not have received with respect to such
assets the notice provided for in Section 10.6, then the Trustee or such Paying
Agent shall have full power and authority to receive such assets and to apply
the same to the purpose for which they were received, and shall not be affected
by any notice to the contrary received by it on or after such date. The
foregoing shall not apply to the Paying Agent if LNR or any Subsidiary or
Affiliate of LNR is acting as Paying Agent. Nothing contained in this Section
10.7 shall limit the right of the holders of Senior Indebtedness to recover
payments as contemplated by this Article X.
SECTION 10.8. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act
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or failure to act on the part of LNR or by any act or failure to act by any such
holder, or by any non-compliance by LNR with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 10.8, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article X or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place,
terms or time of payment of, or renew or alter, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection or payment of Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against LNR
and any other Person.
SECTION 10.9. Holders Authorize Trustee to Effectuate Subordination
of Notes.
Each Holder of the Notes by such Holder's acceptance thereof
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effect the subordination provisions
contained in this Article X, and appoints the Trustee such Holder's
attorney-in-fact for such purpose, including, in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of LNR tending towards liquidation or reorganization of
the business and assets of LNR, the immediate filing of a claim for the unpaid
balance of such Holder's Notes in the form required in said proceedings and
cause said claim to be approved. If the Trustee does not file a proper claim or
proof of debt in the form required in such proceeding prior to 30 days before
the expiration of the time to file such claim or claims, then any of the holders
of the Senior Indebtedness or their Representative is hereby authorized to file
an appropriate claim for and on behalf of the Holders of said Notes. Nothing
herein contained shall be deemed to authorize the Trustee or the holders of
Senior Indebtedness or their Representative to authorize or consent to or accept
or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Indebtedness or
their Representative to vote in respect of the claim of any Holder in any such
proceeding.
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SECTION 10.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee and any agent or Affiliate of the Trustee shall be
entitled to all the rights set forth in this Article X with respect to any
Senior Indebtedness which may at any time be held by it in its individual or any
other capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Indenture shall deprive the Trustee or any such agent or
Affiliate of any of its rights as such holder.
SECTION 10.11. This Article X Not to Prevent Events of Default.
The failure to make a payment on account of principal of or premium,
if any, or interest on the Notes by reason of any provision of this Article X
will not be construed as preventing the occurrence of an Event of Default.
Nothing contained in this Article X shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Article VI or to pursue any rights or remedies hereunder
or under applicable law, subject to the rights, if any, under this Article X of
the holders, from time to time, of Senior Indebtedness.
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness, and it undertakes to perform or observe such of
its covenants and obligations as are specifically set forth in this Article X,
and no implied covenants or obligations with respect to the Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
liable to any such holders (other than for its willful misconduct or gross
negligence) if it shall pay over or deliver to the Holders of Notes or LNR or
any other Person money or assets in compliance with the terms of this Indenture.
Nothing in this Section 10.12 shall affect the obligation of any Person other
than the Trustee to hold such payment for the benefit of, and to pay such
payment over to, the holders of Senior Indebtedness or their Representative.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; provided, however, that this Section
11.1 shall
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not of itself require that this Indenture or the Trustee be qualified under the
TIA or constitute any admission or acknowledgment by any party hereto that any
such qualification is required prior to the time this Indenture and the Trustee
are required by the TIA to be so qualified.
SECTION 11.2. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or overnight courier guaranteeing next-day delivery or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to LNR:
760 N.W. 107th Avenue
Miami, FL 33172
Telecopier Number: (305) 229-6488
Attn: Chief Executive Officer
if to the Trustee:
100 Wall Street
16th Floor
New York, New York 10005
Telecopier Number: (212) 809-5459
Attention: Corporate Trust Administration
Each of LNR and the Trustee by written notice to the other may
designate additional or different addresses for notices to such Person. Any
notice or communication to LNR or the Trustee shall be deemed to have been given
or made as of the date so delivered if hand delivered; when answered back, if
telexed; when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed by
first class mail, certified or registered return receipt requested, or by
overnight courier guaranteeing next day delivery to its address as it appears on
the registration books of the Registrar. Any notice or communication shall be
mailed to any Person as described in TIA ss. 313(c), to the extent required by
the TIA.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
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SECTION 11.3. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. LNR, the
Trustee, the Registrar and any other Person shall have the protection of TIA ss.
312(c).
SECTION 11.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by LNR to the Trustee to take any
action under this Indenture, LNR shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by LNR, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by LNR, if any,
provided for in this Indenture relating to the proposed action have been
complied with (which counsel, as to factual matters, may rely on an
Officers' Certificate).
SECTION 11.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.6, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
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SECTION 11.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.7. Legal Holidays.
If any payment date is due on a day other than a Business Day, such
payment may be made on the next succeeding Business Day, and no interest shall
accrue for the intervening period.
SECTION 11.8. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND TO BE PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York sitting in the County of New
York, or of the United States of America for the Southern District of New York
in any action or proceeding arising out of or relating to this Indenture.
SECTION 11.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of LNR or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Personal Liability.
No director, officer, employee or stockholder of LNR, as such, shall
have any liability for any obligations of LNR under the Notes or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
SECTION 11.11. Successors.
All agreements of LNR in this Indenture and the Notes shall bind
their successors and permitted assigns. All agreements of the Trustee in this
Indenture shall bind its successors and permitted assigns.
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SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or in
the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
LNR PROPERTY CORPORATION
By:
--------------------------------
Name:
Title:
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, as Trustee
By:
--------------------------------
Name:
Title:
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<PAGE> 89
EXHIBIT A
[FORM OF SERIES A NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE THAT IS
TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY AND THE LAST
DATE ON WHICH THE ISSUER OF THIS SECURITY OR ANY AFFILIATED PERSON OF THE ISSUER
WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR SECURITY, RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY OF THE ISSUER,
(B) INSIDE THE UNITED STATES, TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO THE TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
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<PAGE> 90
CUSIP No.:
LNR PROPERTY CORPORATION
9 3/8% SENIOR SUBORDINATED NOTE DUE 2008, SERIES A
No. $
LNR PROPERTY CORPORATION, a Delaware corporation (the "Company,"
which term includes any successor entities), for value received promises to pay
to or registered assigns the principal sum of
Dollars on March 15, 2008.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 1998
Record Dates: March 1 and September 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, LNR has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
LNR PROPERTY CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
Dated:
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<PAGE> 91
Certificate of Authentication
This is one of the 9 3/8% or Senior Subordinated Notes due 2008,
Series A, referred to in the within-mentioned Indenture.
, as Trustee
By:
--------------------------------
Authorized Signatory
Date of Authentication: March , 1998
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<PAGE> 92
(REVERSE OF SECURITY)
9 3/8% Senior Subordinated Note due 2008, Series A
Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Indenture, dated as of March 24, 1998 (the
"Indenture"), and as amended from time to time, by and between LNR Property
Corporation, a Delaware corporation (the "Company")and First Trust of New York,
National Association, as trustee (the "Trustee").
(1) Interest. LNR promises to pay interest on the principal amount
of this Note at the rate per annum above. 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 March 24, 1998. LNR will pay interest semi-annually in arrears on
each Interest Payment Date, commencing September 15, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed.
LNR shall pay interest on overdue principal and, to the extent
lawful, on overdue installments of interest (without regard to any applicable
grace periods) from time to time on demand at the rate borne by the Notes.
(2) Method of Payment. LNR shall pay interest on the Notes (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are canceled on registration of transfer or registration of
exchange (including pursuant to an Exchange Offer (as defined in the
Registration Rights Agreement) or a Change of Control Offer) after such Record
Date. Holders must surrender Notes to a Paying Agent to collect principal
payments. LNR shall pay principal and premium, if any, and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts ("U.S. Legal Tender"). However, LNR may pay principal
and premium, if any, and interest by check payable in such U.S. Legal Tender or
by wire transfer of immediately available funds. LNR may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
(3) Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. LNR may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders.
(4) Indenture. LNR issued the Notes under the Indenture. This Note
is one of a duly authorized issue of Notes of LNR designated as its 9 3/8%
Senior Subordinated Notes due 2008, Series A (the "Initial Notes"), limited
(except as
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<PAGE> 93
otherwise provided in the Indenture) in aggregate principal amount to
$350,000,000 which may be issued under the Indenture. The Notes include the
Initial Notes, the Private Exchange Notes and the Unrestricted Notes, as defined
below, issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement. The Initial Notes, the Private Exchange Notes and the
Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of such terms. The Notes are general unsecured
obligations of LNR. Each Holder, by accepting a Note, agrees to be bound by all
of the terms and provisions of the Indenture, as the same may be amended from
time to time in accordance with its terms.
(5) Redemption. The Notes are redeemable, at LNR's option, in whole
or in part from time to time, at any time after March 15, 2003, upon not less
than 30 nor more than 60 days' notice, at the following Redemption Prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on March 15 of the years set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 104.688%
2004 103.516%
2005 102.344%
2006 101.172%
2007 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time, or from time to time, on
or prior to March 15, 2001, LNR may, at its option, redeem, with the net cash
proceeds of one or more Public Equity Offerings by LNR, up to 35% of the
aggregate principal amount of the Notes issued and sold by LNR at a redemption
price equal to 109.375% of the principal amount thereof, plus accrued interest
thereon, if any, to the date of redemption, provided, that at least 65% of the
aggregate principal amount of the Notes issued and sold by LNR remain
outstanding immediately following such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, LNR shall
make such redemption not more than 60 days after the consummation of any such
Public Equity Offering.
(6) Notice of Redemption. Notice of redemption will be mailed at
least 30 but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at its
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registered address. Notes in denominations larger than $1,000 may be redeemed in
part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless LNR defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
(7) Change of Control Offer. The Indenture provides that, upon the
occurrence of a Change of Control, and subject to further limitations contained
therein, LNR will make a Change of Control Offer to purchase the Notes in
accordance with the procedures set forth in the Indenture.
(8) Registration Rights. Pursuant to the Registration Rights
Agreement among LNR and the Initial Purchasers, LNR will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for LNR's % Senior Subordinated Notes due
2008, Series B (the "Unrestricted Notes"), which will be registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as the Initial Notes. The Holders of the Initial Notes shall
be entitled to receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
(9) Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as required by law or as permitted by the Indenture. The Registrar
need not register the transfer of or exchange of any Notes or portions thereof
selected for redemption except for the unredeemed portion of any Note being
redeemed in part.
(10) Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
(11) Unclaimed Money. If money for the payment of principal,
premium, if any, or interest remains unclaimed for one year, the Trustee and the
Paying Agent will pay the money back to LNR. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
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<PAGE> 95
(12) Discharge Prior to Redemption or Maturity. If LNR at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of, premium, if any, and interest on the Notes
to redemption or maturity and complies with the other provisions of the
Indenture relating thereto, LNR will be discharged from certain provisions of
the Indenture and the Notes (excluding certain covenants, but including, under
certain circumstances, its obligation to pay the principal of and interest on
the Notes but without affecting the rights of the Holders to receive such
amounts from such deposits).
(13) Amendment; Supplement; Waiver. Subject to certain exceptions
set forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA or comply with Section
5.1 of the Indenture or make any other change that does not adversely affect the
rights of any Holder of a Note in any material respect.
(14) Restrictive Covenants. The Indenture imposes certain
limitations on the ability of LNR and its Subsidiaries to, among other things,
incur additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, create or incur liens, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, issue Preferred Stock of its Subsidiaries, and on the ability of
LNR to merge or consolidate with any other Person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of LNR's and its
Subsidiaries' assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions. Pursuant to the
Indenture, LNR must annually report to the Trustee on compliance with such
limitations.
(15) Subordination. The Notes are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Obligations on Senior Indebtedness of
LNR, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to
be bound by such provisions and authorizes and expressly directs the Trustee, on
its behalf, to take such action as may be necessary or appropriate to effectuate
A-7
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the subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
(16) Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(17) Defaults and Remedies. Except as set forth in the Indenture, if
an Event of Default occurs and is continuing, the Trustee or the Holders of not
less than 25% in principal amount of Notes then outstanding may declare all the
Notes to be due and payable in the manner, at the time and with the effect
provided in the Indenture. Holders of Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Notes unless it has received indemnity reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal, premium,
if any, or interest when due, for any reason or a Default in compliance with
Article Five of the Indenture) if it determines that withholding notice is in
their interest.
(18) Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with LNR, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
(19) No Recourse Against Others. No partner, director, officer,
employee or stockholder, as such, of LNR shall have any liability for any
obligations of LNR under the Notes or the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each Holder
of Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
(20) Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
(21) Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto and the Holders agree
to submit to the jurisdiction of the courts of the County of New York, State of
New York or of the United States of America
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for the Southern District of New York in any action or proceeding arising out of
or relating to this Note.
(22) Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(23) CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, LNR has caused CUSIP
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
LNR will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which includes the text of this Note.
Requests may be made to: LNR Property Corporation, 760 N.W. 107th Avenue, Miami,
FL 33172.
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<PAGE> 98
ASSIGNMENT FORM
If you, the Holder, want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------
- --------------------------
- --------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________________, agent to
transfer this Note on the books of LNR. The agent may substitute another to act
for him.
Dated: _________________________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934.
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the second anniversary of the Issue Date (provided, however,
that neither LNR nor any affiliate of LNR has held any beneficial interest in
such Note, or portion thereof, or any predecessor security at any time on or
prior to the second anniversary of the Issue Date), the undersigned confirms
that it has not utilized any general solicitation or general advertising in
connection with the transfer:
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<PAGE> 99
[Check One]
(1) ___ to LNR or a Subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities
Act; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) ___ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) ___ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) ___ pursuant to an effective registration statement under the Securities
Act; or
(7) ___ pursuant to another available exemption from the registration
requirements of the Securities Act.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of LNR as defined in Rule 144 under the
Securities Act (an "Affiliate"):
|_| The transferee is an Affiliate of LNR.
Unless one of the items is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided, however, that if item (3), (4), (5) or (7)
is checked, LNR or the Trustee may require, prior to registering any such
transfer of the Notes, in their sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4) and
other information as the Trustee or LNR have reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
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<PAGE> 100
If none of the foregoing items are checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated: __________________________ Signed: _______________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: ___________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding LNR as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________________ ______________________________________
NOTICE: To be executed by an
executive officer
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<PAGE> 101
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by LNR pursuant to
Section 4.14 of the Indenture, check the box below:
|_|
If you want to elect to have only part of this Note purchased by LNR
pursuant to Section 4.14 of the Indenture, state the amount you elect to have
purchased:
$____________________
Dated: ______________ __________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee: _____________________________
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<PAGE> 102
EXHIBIT B
CUSIP No.:
LNR PROPERTY CORPORATION
9 3/8% SENIOR SUBORDINATED NOTE DUE 2008, SERIES B
No. $
LNR PROPERTY CORPORATION, a Delaware corporation (the "Company,"
which term includes any successor entities), for value received promises to pay
to or registered assigns the principal sum of
Dollars on March 15, 2008.
Interest Payment Dates: March 15 and September 15 commencing
September 15, 1998
Record Dates: March 1 and September 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, LNR has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
LNR PROPERTY CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
Dated:
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<PAGE> 103
Certificate of Authentication
This is one of the 9 3/8% Senior Subordinated Notes due 2008, Series
B, referred to in the within-mentioned Indenture.
, as Trustee
By:
--------------------------------
Authorized Signatory
Date of Authentication:
B-2
<PAGE> 104
(REVERSE OF SECURITY)
9 3/8% Senior Subordinated Note due 2008, Series B
Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Indenture, dated as of March 24, 1998 (the
"Indenture"), and as amended from time to time, by and between LNR Property
Corporation, a Delaware corporation (the "Company") and First Trust of New York,
National Association, as trustee (the "Trustee").
(1) Interest. LNR promises to pay interest on the principal amount
of this Note at the rate per annum shown above. 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 March 24, 1998. LNR will pay interest semi-annually
in arrears on each Interest Payment Date, commencing September 15, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed.
LNR shall pay interest on overdue principal and, to the extent
lawful, on overdue installments of interest (without regard to any applicable
grace periods) from time to time on demand at the rate borne by the Notes.
(2) Method of Payment. LNR shall pay interest on the Notes (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are canceled on registration of transfer or registration of
exchange (including pursuant to a Change of Control Offer) after such Record
Date. Holders must surrender Notes to a Paying Agent to collect principal
payments. LNR shall pay principal and premium, if any, and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts ("U.S. Legal Tender"). However, LNR may pay principal
and premium, if any, and interest by check payable in such U.S. Legal Tender.
LNR may deliver any such interest payment to the Paying Agent or to a Holder at
the Holder's registered address.
(3) Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. LNR may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders.
(4) Indenture. LNR issued the Notes under the Indenture. This Note
is one of a duly authorized issue of Exchange Notes of LNR designated as its 9
3/8% Senior Subordinated Notes due 2008, Series B (the "Unrestricted Notes"),
limited (except as otherwise provided in the Indenture) in aggregate principal
amount to $350,000,000, which may be issued under the
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<PAGE> 105
Indenture. The Notes include the 9 3/8% Senior Subordinated Notes due 2008,
Series A (the "Initial Notes"), the Private Exchange Notes, and the Unrestricted
Notes, issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement. The Initial Notes, the Private Exchange Notes and the
Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of such terms. The Notes are general unsecured
obligations of LNR. Each Holder, by accepting a Note, agrees to be bound by all
of the terms and provisions of the Indenture, as the same may be amended from
time to time in accordance with its terms.
(5) Redemption. The Notes are redeemable, at LNR's option, in whole
or in part from time to time, at any time after March 15, 2003, upon not less
than 30 nor more than 60 days' notice, at the following Redemption Prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on March 15 of the years set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2003 104.688%
2004 103.516%
2005 102.344%
2006 101.172%
2007 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time, or from time to time, on
or prior to March 15, 2001, LNR may, at its option, redeem, with the net cash
proceeds of one or more Public Equity Offerings by LNR, up to 35% of the
aggregate principal amount of the Notes issued and sold by LNR at a redemption
price equal to 109.375% of the principal amount thereof, plus accrued interest
thereon, if any, to the date of redemption, provided, that at least 65% of the
aggregate principal amount of the Notes issued and sold by LNR remain
outstanding immediately following such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, LNR shall
make such redemption not more than 60 days after the consummation of any such
Public Equity Offering.
(6) Notice of Redemption. Notice of redemption will be mailed at
least 30 but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at its
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<PAGE> 106
registered address. Notes in denominations larger than $1,000 may be redeemed in
part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless LNR defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
(7) Change of Control Offer. The Indenture provide that, upon the
occurrence of a Change of Control, and subject to further limitations contained
therein, LNR will make a Change of Control Offer to purchase the Notes in
accordance with the procedures set forth in the Indenture.
(8) Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith required by law or as permitted by the Indenture. The Registrar need
not register the transfer of or exchange of any Notes or portions thereof
selected for redemption, except for the unredeemed portion of any Note being
redeemed in part.
(9) Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
(10) Unclaimed Money. If money for the payment of principal,
premium, if any, or interest remains unclaimed for one year, the Trustee and the
Paying Agent will pay the money back to the Company. After that, all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
(11) Discharge Prior to Redemption or Maturity. If LNR at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and premium, if any, and interest on the
Notes to redemption or maturity and complies with the other provisions of the
Indenture relating thereto, LNR will be discharged from certain provisions of
the Indenture and the Notes (including certain covenants, but including, under
certain circumstances, its obligation to pay the principal of and interest on
the Notes but without affecting the rights of the Holders to receive such
amounts from such deposit).
(12) Amendment; Supplement; Waiver. Subject to certain exceptions
set forth in the Indenture, the Indenture or the Notes
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<PAGE> 107
may be amended or supplemented with the written consent of the Holders of not
less than a majority in aggregate principal amount of the Notes then
outstanding, and any past Default or Event of Default or noncompliance with any
provision may be waived with the written consent of the Holders of not less than
a majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, comply with any requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA or comply
with Section 5.1 of the Indenture or make any other change that does not
adversely affect the rights of any Holder of a Note in any material respect.
(13) Restrictive Covenants. The Indenture imposes certain
limitations on the ability of LNR and its Subsidiaries to, among other things,
incur additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, create or incur liens, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, issue Preferred Stock of its Subsidiaries, and on the ability of
LNR to merge or consolidate with any other Person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of LNR's and its
Subsidiaries' assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions. Pursuant to the
Indenture, LNR must annually report to the Trustee on compliance with such
limitations.
(14) Subordination. The Notes are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Obligations on Senior Indebtedness of
LNR, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to
be bound by such provisions and authorizes and expressly directs the Trustee, on
its behalf, to take such action as may be necessary or appropriate to effectuate
the subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
(15) Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(16) Defaults and Remedies. Except as set forth in the Indenture, if
an Event of Default occurs and is continuing, the Trustee or the Holders of not
less than 25% in principal amount of Notes then outstanding may declare all the
Notes to be due and payable in the manner, at the time and with the effect
provided
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<PAGE> 108
in the Indenture. Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Notes unless it has received indemnity reasonably satisfactory
to it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount of the Notes then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Notes notice of any continuing Default or
Event of Default (except a Default in payment of principal, premium, if any, or
interest when due, for any reason or a Default in compliance with Article Five
of the Indenture) if it determines that withholding notice is in their interest.
(17) Trustee Dealings with LNR. The Trustee under the Indenture, in
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with LNR, its Subsidiaries or their respective Affiliates
as if it were not the Trustee.
(18) No Recourse Against Others. No partner, director, officer,
employee or stockholder, as such, of LNR shall have any liability for any
obligations of LNR under the Notes or the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each Holder
of Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
(19) Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
(20) Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto and the Holders agree
to submit to the jurisdiction of the courts of the County of New York, State of
New York or of the United States of America for the Southern District of New
York in any action or proceeding arising out of or relating to this Note.
(21) Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(22) CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, LNR has caused CUSIP
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No
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<PAGE> 109
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
LNR will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which includes the text of this Note.
Requests may be made to: LNR Property Corporation, 760 N.W. 107th Avenue, Miami,
FL 33172.
B-8
<PAGE> 110
ASSIGNMENT FORM
If you, the Holder, want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
____________________________
____________________________
____________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to transfer this Note on
the books of LNR. The agent may substitute another to act for him.
Dated: Signed:
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934.
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<PAGE> 111
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by LNR pursuant to
Section 4.14 of the Indenture, check the box below:
|_|
If you want to elect to have only part of this Note purchased by LNR
pursuant to Section 4.14 of the Indenture, state the amount you elect to have
purchased:
$_____________________
Dated:________________ __________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee: ______________________________
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<PAGE> 112
EXHIBIT C
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO LNR OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
REPRESENTATIVE OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.17 OF THE INDENTURE.
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<PAGE> 113
EXHIBIT D
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
_________________ ___, ______
New York, New York
Ladies and Gentlemen:
In connection with our proposed purchase of 9 3/8% Senior
Subordinated Notes due 2008 (the "Notes") of LNR PROPERTY CORPORATION ("LNR"),
we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the indenture
relating to the Notes (the "Indenture") and the undersigned agrees to be
bound by, and not to resell, pledge or otherwise transfer the Notes except
in compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act"), and all applicable State
securities laws.
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act or any other applicable securities
law, and that the Notes may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Notes, we will do so only (i) to LNR or any
subsidiary thereof, (ii) inside the United States in accordance with Rule
144A under the Securities Act to a person who we reasonably believe is a
"qualified institutional buyer" (as defined in Rule 144A promulgated under
the Securities Act), (iii) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
Trustee (as defined in the Indenture) a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Notes (the form of which letter can be obtained from the Trustee),
(iv) outside the United States in accordance with Rule 904 of Regulation S
promulgated under the Securities Act, (v) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available),
or (vi) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person purchasing
any
D-1
<PAGE> 114
of the Notes from us a notice advising such purchaser that resales of the
Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to the Trustee, LNR such certification, legal
opinions and other information as the Trustee and LNR may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
6. We have received a copy of LNR's Offering Memorandum dated March
19, 1998 and acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of LNR and receive answers thereto, as we
deem necessary in connection with our decision to purchase the Notes.
You, LNR, the Trustee, the Initial Purchasers and others are
entitled to rely upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
--------------------------------
Name:
Title:
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<PAGE> 115
EXHIBIT E
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_________________ ___, ______
New York, New York
Re: LNR PROPERTY CORPORATION (the "Company")
9 3/8% Senior Subordinated Notes due 2008
(the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $_______________________
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
E-1
<PAGE> 116
You, LNR and counsel for LNR are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By:
--------------------------------
Name:
Title:
E-2
<PAGE> 1
Exhibit 4.2
Execution Copy
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of March 24, 1998
Among
LNR PROPERTY CORPORATION
as Issuer
and
BT ALEX. BROWN INCORPORATED
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
as Initial Purchasers
9 3/8% Senior Subordinated Notes due 2008
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 24, 1998, among LNR PROPERTY CORPORATION, a Delaware
corporation ("LNR"), as issuer, and BT ALEX. BROWN INCORPORATED and DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION (each an "Initial Purchaser" and,
collectively, the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of March 19, 1998, among LNR and the Initial Purchasers (the
"Purchase Agreement"), which provides for the sale by LNR to the Initial
Purchasers of $200,000,000 aggregate principal amount of LNR's 9 3/8% Senior
Subordinated Notes due 2008 (the "Notes"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, LNR has agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchasers and any subsequent holder or holders of the Notes. The execution and
delivery of this Agreement is a condition to the Initial Purchasers' obligation
to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2 hereof.
Effectiveness Date: The 150th day following the Issue Date;
provided, however, that with respect to any Shelf Registration, the
Effectiveness Date shall be the 75th day following the Filing Date with respect
thereto.
Effective Period: See Section 3(a) hereof.
Event Date: See Section 4(b) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
<PAGE> 3
Exchange Offer: See Section 2 hereof
Exchange Offer Registration Statement: See Section 2 hereof
Filing Date: (A) In the case of an Exchange Offer Registration
Statement, the 45th day after the Issue Date; or (B) in the case of a Shelf
Registration Statement (which may be applicable notwithstanding the consummation
of the Exchange Offer), the 30th day after a Shelf Notice is required to be
delivered hereunder.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of March 24, 1998, by and between
LNR and, First Trust of New York, National Association, as trustee, pursuant to
which the Notes are being issued, as the same may be amended or supplemented
from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration Statement: See Section 3(a) hereof.
Inspectors: See Section 5(n) hereof.
Issue Date: March 24, 1998, the date of original issuance of the
Notes.
LNR: See the introductory paragraphs hereto.
NASD: See Section 5(r) hereof.
Offering Memorandum: The final offering memorandum of LNR dated
March 19, 1998, in respect of the offering of the Notes.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
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<PAGE> 4
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act and any term sheet filed pursuant to Rule
434 under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(m) hereof.
Registrable Notes: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been disposed of
in accordance with such effective Registration Statement, (ii) such Note has
been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange
Notes that may be resold without restriction under state and federal securities
laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may
be, ceases to be outstanding for purposes of the Indenture or (iv) such Note,
Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of LNR that
covers any of the Notes, the Exchange Notes or the Private Exchange Notes filed
with the SEC under the Securities Act, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such
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<PAGE> 5
securities being free of the registration and prospectus delivery requirements
of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration Statement: See Section 3(b) hereof.
Subsequent Shelf Registration Statement: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if any)
under any indenture governing the Exchange Notes and Private Exchange Notes.
Underwritten registration or underwritten offering: A registration
in which securities of LNR are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
(a) LNR shall file with the SEC, no later than the Filing Date, a
Registration Statement (the "Exchange Offer Registration Statement") on an
appropriate registration form with respect to a registered offer (the "Exchange
Offer") to exchange any and all of the Registrable Notes for a like aggregate
principal amount of notes of LNR that are identical in all material respects to
the Notes, except that the Exchange Notes shall contain no restrictive legend
thereon (the "Exchange Notes"), and which are entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with the TIA) and which, in either
case, has been qualified under the TIA. The Exchange Offer shall comply with all
applicable tender offer rules and regulations under the Exchange Act and other
applicable law. LNR shall use its reasonable efforts to (x) cause the Exchange
Offer Registration Statement to be declared
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<PAGE> 6
effective under the Securities Act within 150 days after the Issue Date; (y)
keep the Exchange Offer open for acceptance for not less than 20 business days
(or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 195th day following the Issue Date. If, after the Exchange Offer
Registration Statement is initially declared effective by the SEC, the Exchange
Offer or the issuance of the Exchange Notes thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, the Exchange Offer Registration Statement shall be
deemed not to have become effective for purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be
required, as a condition to its participation in the Exchange Offer, to
represent to LNR in writing (which may be contained in the applicable letter of
transmittal) that any Exchange Notes to be received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, and that such Holder is not an affiliate
of LNR within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange
Notes held by Participating Broker-Dealers (as defined), and LNR shall have no
further obligation to register Registrable Notes (other than Private Exchange
Notes and other than in respect of any Exchange Notes as to which clause
2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be included in the
Exchange Offer Registration Statement.
(b) LNR shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies represent the
prevailing views of the staff of the SEC. Such "Plan of Distribution" section
shall also expressly permit, to the extent permitted by applicable policies and
regulations of
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<PAGE> 7
the SEC, the use of the Prospectus by all Persons subject to the prospectus
delivery requirements of the Securities Act, including, to the extent permitted
by applicable policies and regulations of the SEC, all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes in compliance with
the Securities Act.
LNR shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Notes covered thereby; provided,
however, that such period shall not exceed 180 days after such Exchange Offer
Registration Statement is declared effective (or such longer period if extended
pursuant to the last paragraph of Section 5 hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, any Holder holds
any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, LNR upon the request of any such Holder shall simultaneously with the
delivery of the Exchange Notes in the Exchange Offer, issue and deliver to any
such Holder, in exchange (the "Private Exchange") for such Notes held by any
such Holder, a like principal amount of notes (the "Private Exchange Notes") of
LNR that are identical in all material respects to the Exchange Notes except for
the placement of a restrictive legend on such Private Exchange Notes. The
Private Exchange Notes shall be issued pursuant to the same indenture as the
Exchange Notes and bear the same CUSIP number as the Exchange Notes.
In connection with the Exchange Offer, LNR shall:
(i) mail, or cause to be mailed, to each Holder of record
entitled to participate in the Exchange Offer a copy of the
Prospectus forming part of the Exchange Offer Registration
Statement, together with an appropriate letter of transmittal and
related documents;
(ii) use its best efforts to keep the Exchange Offer open for
acceptance for not less than 20 business days after the date that
notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);
(iii) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York;
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<PAGE> 8
(iv) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business
day on which the Exchange Offer shall remain open; and
(v) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, LNR shall:
(i) accept for exchange all Registrable Notes validly tendered
and not validly withdrawn pursuant to the Exchange Offer and the
Private Exchange, if any;
(ii) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of Notes so accepted for exchange, Exchange Notes or
Private Exchange Notes, as the case may be, equal in principal
amount to the Notes of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class on
any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, LNR is not permitted to effect the
Exchange Offer, (ii) the Exchange Offer is not consummated within 195 days
following the Issue Date, (iii) any holder of Private Exchange Notes so requests
in writing to LNR, or (iv) in the case of any Holder that tenders Notes in
response to the Exchange Offer, such Holder does not receive Exchange Notes on
the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of LNR within the meaning of the Securities Act), then in the case
of each of clauses (i) to and including (iv) of this sentence, LNR shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"Shelf Notice") and at its sole expense and as promptly as practicable shall
file a Shelf Registration Statement pursuant to Section 3 hereof.
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<PAGE> 9
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. LNR shall file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415
covering all of the Registrable Notes not exchanged in the Exchange Offer,
Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registration Statement"). LNR shall use its best
efforts to file with the SEC the Initial Shelf Registration Statement on or
before the applicable Filing Date. The Initial Shelf Registration Statement
shall be on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). LNR
shall not permit any securities other than the Registrable Notes to be included
in the Initial Shelf Registration Statement or any Subsequent Shelf Registration
Statement (as defined below).
LNR shall use its best efforts to cause the Initial Shelf
Registration Statement to be declared effective under the Securities Act on or
prior to the Effectiveness Date and to keep the Initial Shelf Registration
Statement continuously effective under the Securities Act until the date which
is two years from the Issue Date (the "Effectiveness Period"), or such shorter
period ending when (i) all Registrable Notes covered by the Initial Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration Statement or (ii) a Subsequent
Shelf Registration Statement covering all of the Registrable Notes covered by
and not sold under the Initial Shelf Registration Statement or an earlier
Subsequent Shelf Registration Statement has been declared effective under the
Securities Act; provided, however, that the Effectiveness Period in respect of
the Initial Shelf Registration Statement shall be extended to the extent
required to permit dealers to comply with the applicable prospectus delivery
requirements of Rule 174 under the Securities Act and as otherwise provided
herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), LNR
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 30 days of
such cessation of effectiveness amend the Initial Shelf Registration Statement
in a manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Registrable Notes covered by and not
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<PAGE> 10
sold under the Initial Shelf Registration Statement or an earlier Subsequent
Shelf Registration Statement (each, a "Subsequent Shelf Registration
Statement"). If a Subsequent Shelf Registration Statement is filed, LNR shall
use its best efforts to cause the Subsequent Shelf Registration Statement to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such subsequent Shelf Registration Statement continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf Registration
Statement or any Subsequent Shelf Registration Statement was previously
continuously effective. As used herein the term "Shelf Registration Statement"
means the Initial Shelf Registration Statement and any Subsequent Shelf
Registration Statement.
(c) Supplements and Amendments. LNR shall promptly supplement and
amend any Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
4. Additional Interest
(a) LNR and the Initial Purchasers agree that the Holders will
suffer damages if LNR fails to fulfill its obligations under Section 2 or
Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, LNR agrees to pay, as liquidated
damages, additional interest on the Notes ("Additional Interest") under the
circumstances and to the extent set forth below (each of which shall be given
independent effect):
(i) if (A) the Exchange Offer Registration Statement has not
been filed with the SEC on or prior to the Filing Date or (B)
notwithstanding that LNR has consummated or will consummate the
Exchange Offer, LNR is required to file a Shelf Registration
Statement and such Shelf Registration Statement has not been filed
with the SEC on or prior to the Filing Date applicable thereto,
then, commencing on the day after any such Filing Date, Additional
Interest shall accrue on the principal amount of the Notes at a rate
of 0.50% per annum for the first 90 days immediately following each
such Filing Date, and such Additional Interest rate shall increase
by an additional 0.50% per annum at the beginning of each subsequent
90-day period; or
(ii) if (A) the Exchange Offer Registration Statement has not
declared effective by the SEC on or prior to the Effectiveness Date
or (B) notwithstanding
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<PAGE> 11
that LNR has consummated or will consummate the Exchange Offer, LNR
is required to file a Shelf Registration Statement and such Shelf
Registration Statement has not been declared effective by the SEC on
or prior to the applicable Effectiveness Date with respect to such
Shelf Registration Statement, then, commencing on the day after such
Effectiveness Date, Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days immediately following the day after such Effectiveness
Date, and such Additional Interest rate shall increase by an
additional 0.50% per annum at the beginning of each subsequent
90-day period; or
(iii) if (A) LNR has not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 195th day following the Issue Date or (B)
if applicable, a Shelf Registration Statement has been declared
effective and such Shelf Registration Statement ceases to be
effective at any time during the Effectiveness Period, then,
Additional Interest shall accrue on the principal amount of the
Notes at a rate of 0.50% per annum for the first 90 days commencing
on the (x) 196th day following the Issue Date, in the case of (A)
above, or (y) the day such Shelf Registration Statement ceases to be
effective in the case of (B) above, and such Additional Interest
rate shall increase by an additional 0.50% per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes as a result of
the provisions of clauses (i), (ii) and (iii) of this Section 4 may not exceed
in the aggregate 2.0% per annum; provided further, that (1) upon the filing of
the applicable Exchange Offer Registration Statement or the applicable Shelf
Registration Statement as required hereunder (in the case of clause (i) of this
Section 4), (2) upon the effectiveness of the Exchange Offer Registration
Statement or the applicable Shelf Registration Statement as required hereunder
(in the case of clause (ii) of this Section 4), or (3) upon the exchange of the
Exchange Notes for all Notes tendered (in the case of clause (iii)(A) of this
Section 4), or upon the effectiveness of a Subsequent Shelf Registration
Statement in the case of Shelf Registration Statement which had ceased to remain
effective (in the case of (iii)(B) of this Section 4), Additional Interest on
the Notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
(b) LNR shall notify the Trustee within three business days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"), which notice shall also be at
least three business days prior to the date of any payment to be made in
accordance
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<PAGE> 12
with the following sentence. Any amounts of Additional Interest due pursuant to
(a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash
simultaneously with, and to the same persons entitled to receive, stated
interest on the Notes, commencing with the first such payment of interest
occurring after any such Additional Interest commences to accrue. The amount of
Additional Interest payable with respect to Registrable Notes will be determined
by multiplying the applicable Additional Interest rate by the principal amount
of the Registrable Notes, multiplied by a fraction, the numerator of which is
the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed),
and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, LNR shall effect such registrations to permit the
sale of the securities covered thereby in accordance with the intended method or
methods of disposition thereof, and pursuant thereto and in connection with any
Registration Statement filed by LNR hereunder LNR shall:
(a) Prepare and file with the SEC prior to the applicable Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use its best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period relating thereto, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, LNR shall furnish to and
afford the Holders of the Registrable Notes included in such Registration
Statement or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be filed
(in each case at least five days prior to such filing, or such later date as is
reasonable under the circumstances). LNR shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto if the Holders
of a majority in aggregate principal amount of the Registrable Notes included in
such Registration Statement, or any such Participating Broker-Dealer, as the
case may be, their counsel, or the managing underwriters, if any, shall
reasonably object.
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<PAGE> 13
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to each of them with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. LNR shall be deemed not to have used its best
efforts to keep a Registration Statement effective during the Effectiveness
Period or the Applicable Period, as the case may be, relating thereto, if LNR
voluntarily takes any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking to
sell Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period unless such action is required by applicable
law or permitted by this Agreement.
(c) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period relating thereto from whom
LNR has received written notice that it will be a Participating Broker-Dealer in
the Exchange Offer, notify the selling Holders of Registrable Notes, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly (but in any event within one day), and
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective under the Securities Act (including in such notice a written statement
that any Holder may, upon request, obtain, at the sole expense of LNR, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers, the representations and warranties of LNR contained in any
agreement (including any underwriting agreement)
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<PAGE> 14
contemplated by Section 5(l) hereof cease to be true and correct in all material
respects, (iv) of the receipt by LNR of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event, the existence of any condition or
any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of LNR's determination that a post-effective
amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, use its best efforts to
prevent the issuance of any order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of the
Prospectus or suspending the qualification (or exemption from qualification) of
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use its best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If a Shelf Registration Statement is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if any), the
Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) as promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating
Broker-Dealer or counsel for any of them reasonably request to be included
therein, (ii) make all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable after LNR has received
notification of the matters to be incorporated in such prospectus
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<PAGE> 15
supplement or post-effective amendment, and (iii) supplement or make amendments
to such Registration Statement.
(f) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer who so
requests and to their respective counsel and each managing underwriter, if any,
at the sole expense of LNR, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their respective counsel, and the underwriters, if any, at the sole
expense of LNR, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, LNR hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if any, and
dealers (if any), in connection with the offering and sale of the Registrable
Notes covered by, or the sale by Participating Broker-Dealers of the Exchange
Notes pursuant to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to register or qualify, and to cooperate
with the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, the managing underwriter or underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing
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<PAGE> 16
underwriter or underwriters reasonably request in writing; provided, however,
that where Exchange Notes held by Participating Broker-Dealers or Registrable
Notes are offered other than through an underwritten offering, LNR agrees to
cause its counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h), keep each
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that LNR shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so qualified,
(B) take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction where it
is not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations permitted by the Indenture and
registered in such names as the managing underwriter or underwriters, if any, or
Holders may request.
(j) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at
the sole expense of LNR, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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<PAGE> 17
(k) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(l) In connection with any underwritten offering of Registrable
Notes pursuant to a Shelf Registration Statement, enter into an underwriting
agreement which is customary in underwritten offerings of debt securities
similar to the Notes in form and substance reasonably satisfactory to LNR and
take all such other actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or facilitate the registration
or the disposition of such Registrable Notes and, in such connection, (i) make
such representations and warranties to, and covenants with, the underwriters
with respect to the business of LNR and the subsidiaries of LNR (including any
acquired business, properties or entity, if applicable) and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities similar to
the Notes, and confirm the same in writing if and when requested in form and
substance reasonably satisfactory to LNR; (ii) obtain the written opinions of
counsel to LNR and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
reasonably requested in underwritten offerings and such other matters as may be
reasonably requested by the managing underwriter or underwriters; (iii) obtain
"cold comfort" letters and updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters from the
independent public accountants of LNR (and, if necessary, any other independent
public accountants of LNR, any subsidiary of LNR or of any business acquired by
LNR for which financial statements and financial data are, or are required to
be, included or incorporated by reference in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings of debt securities similar to the Notes
and such other matters as are reasonably requested by the managing underwriter
or underwriters as permitted by the Statement on Auditing Standards No. 72, as
amended by the Statement on Auditing Standards No. 76; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the sellers and underwriters, if
any, than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents, if any). The
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<PAGE> 18
above shall be done at each closing under such underwriting agreement, or as and
to the extent required thereunder.
(m) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or each
such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and instruments of LNR and subsidiaries of LNR (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors and
employees of LNR and any of its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement and Prospectus. Each Inspector shall agree in writing that it will
keep the Records confidential and that it will not disclose any of the Records
that LNR determines, in good faith, to be confidential and notifies the
Inspectors in writing are confidential unless (i) the disclosure of such Records
is necessary to avoid or correct a material misstatement or material omission in
such Registration Statement or Prospectus, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, or (iii) the information in such Records has been made generally
available to the public; provided, however, that prior notice shall be provided
as soon as practicable to LNR of the potential disclosure of any information by
such Inspector pursuant to clauses (i) or (ii) of this sentence to permit LNR to
obtain a protective order (or waive the provisions of this paragraph (m)) and
that such Inspector shall take such actions as are reasonably necessary to
protect the confidentiality of such information (if practicable) to the extent
such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector. If, in
the course of performing due diligence, any Inspector becomes aware of material
non public information about LNR and its subsidiaries, the Inspector will not,
and will take all steps reasonably necessary to ensure that anyone to whom the
Inspector discloses the material non public information will not trade in any
securities of LNR until the information becomes public (whether through
inclusion in the Shelf Registration Statement or Exchange Offer Registration
Statement or otherwise) or the information ceases to be material.
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<PAGE> 19
(n) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its best efforts to cause such trustee to execute,
all documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders with regard to any applicable
Registration Statement, a consolidated earnings statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any fiscal quarter (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of LNR
after the effective date of a Registration Statement, which statements shall
cover said 12-month periods.
(p) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to LNR, in a form customary for underwritten
transactions, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private Exchange,
as the case may be, that the Exchange Notes or Private Exchange Notes, as the
case may be, and the related indenture constitute legal, valid and binding
obligations of LNR, enforceable against them in accordance with their respective
terms, subject to customary exceptions and qualifications.
(q) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to LNR (or to
such other Person as directed by LNR) to be exchanged for Exchange Notes or
Private Exchange Notes, as the case may be, LNR shall mark, or cause to be
marked, on such Registrable Notes that such Registrable Notes are being canceled
in exchange for Exchange Notes or Private Exchange Notes, as the case may be; in
no event shall such Registrable Notes be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if
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<PAGE> 20
any, participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(s) Use its best efforts to take all other steps reasonably
necessary to effect the registration of the Exchange Notes and/or Registrable
Notes covered by a Registration Statement contemplated hereby.
LNR may require each seller of Registrable Notes as to which any
registration is being effected to furnish to LNR such information regarding such
seller and the distribution of such Registrable Notes as LNR may, from time to
time, reasonably request. LNR may exclude from such registration the Registrable
Notes of any seller so long as such seller fails to furnish such information
within a reasonable time after receiving such request. Each seller as to which
any Shelf Registration is being effected agrees to furnish promptly to LNR all
information required to be disclosed in order to make the information previously
furnished to LNR by such seller not materially misleading.
If any Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of LNR, then such Holder shall have
the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the securities covered thereby and that
such holding does not imply that such Holder will assist in meeting any future
financial requirements of LNR, or (ii) in the event that such reference to such
Holder by name or otherwise is not required by the Securities Act or any similar
federal statute then in force, the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or of Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, that,
upon actual receipt of any notice from LNR of the happening of any event of the
kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof, or until
it is advised in writing (an "Advice") by LNR that the use of the applicable
Prospectus may be resumed, and has received copies of any
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<PAGE> 21
amendments or supplements thereto. In the event that LNR shall give any such
notice, the Applicable Period shall be extended by the number of days from and
including the date of the giving of each such notice to and including the date
when each seller of Registrable Notes covered by such Registration Statement or
Exchange Notes to be sold by such Participating Broker-Dealer, as the case may
be, shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(j) hereof or (y) an Advice with respect to said
notice.
6. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by LNR (other than any underwriting discounts or
commissions) shall be borne by LNR whether or not the Exchange Offer
Registration Statement or any Shelf Registration Statement is filed or becomes
effective or the Exchange Offer is consummated, including, without limitation,
(i) all registration and filing fees (including, without limitation, (A) fees
with respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) reasonable fees and expenses of compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of the
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for LNR and reasonable fees and disbursements of one firm of special
counsel for the sellers of Registrable Notes, (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(l)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) Securities
Act liability insurance, if LNR desires such insurance, (vii) fees and expenses
of all other Persons retained by LNR, (viii) internal expenses of LNR
(including, without limitation, all salaries and expenses of officers and
employees of LNR performing legal or accounting duties), (ix) the expense of any
annual audit, (x) any fees and
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<PAGE> 22
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, and the obtaining of a rating of the
securities, in each case, if applicable, and (xi) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, indentures and any other documents necessary in order
to comply with this Agreement.
7. Indemnification
(a) LNR agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the affiliates, officers, directors,
representatives, employees and agents of each such Person, and each Person, if
any, who controls any such Person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from
and against any and all losses, claims, damages, judgments, liabilities and
expenses (including, without limitation, the reasonable legal fees and other
expenses actually incurred in connection with any suit, action or proceeding or
any claim asserted) caused by, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if LNR shall have made any amendments or supplements thereto) or any preliminary
prospectus, or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the case of the Prospectus in light
of the circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages or liabilities are caused by any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Participant, any
underwriter, or the manner in which securities are to be distributed, furnished
to LNR in writing by such Participant or an underwriter expressly for use
therein.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless LNR, its respective affiliates, officers, directors,
representatives, employees and agents and each Person who controls LNR within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent (but on a several, and not joint, basis) as the foregoing
indemnity from LNR to each Participant, but only with reference to information
relating to such Participant or the manner in which securities are to be
distributed by such Participant or someone acting on such Participant's behalf,
furnished to LNR in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by such Participant
from sales of
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<PAGE> 23
Registrable Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Persons against whom such indemnity may be sought (the "Indemnifying
Persons") in writing, and the Indemnifying Persons, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may reasonably designate (which may include the
Indemnifying Persons, unless representation of the Indemnifying Persons by the
same counsel would be inappropriate due to actual or potential differing
interests between them) in such proceeding and shall pay the fees and expenses
actually incurred by such counsel related to such proceeding; provided, however,
that the failure to so notify the Indemnifying Persons (i) will not relieve it
from any liability under paragraph (a) or (b) above unless and to the extent
such failure results in the forfeiture by the Indemnifying Person of substantial
rights and defenses and (ii) will not, in any event, relieve the Indemnifying
Person from any obligations to any Indemnified Person other than the
indemnification obligation provided in paragraphs (a) and (b) above. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Persons and the Indemnified
Person shall have mutually agreed to the contrary, (ii) the Indemnifying Persons
shall have failed within a reasonable period of time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both any
Indemnifying Person and the Indemnified Person or any affiliate thereof and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that,
unless there exists a conflict among the Indemnified Persons, the Indemnifying
Persons shall not, in connection with such proceeding or separate but
substantially similar related proceeding in the same jurisdiction arising out of
the same general allegations, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed promptly as
they are incurred. Any such separate firm for the Participants against whom a
suit, action, proceeding, claim or demand is brought or asserted and control
Persons of such Participants shall be designated in writing by Participants who
sold a majority in interest of Registrable Notes and Exchange Notes sold by all
such Participants, and any such separate firm for LNR, its affiliates, officers,
directors, representatives, employees and agents and
-22-
<PAGE> 24
such control Persons of LNR shall be designated in writing by LNR.
The Indemnifying Persons shall not be liable for any settlement of
any proceeding effected without their prior written consent, but if settled with
such consent or if there be a final non-appealable judgment for the plaintiff
for which any Indemnified Persons are entitled to indemnification pursuant to
this Agreement, each of the Indemnifying Persons agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Persons, effect any settlement or
compromise of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party, or indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement (A) includes
an unconditional written release of such Indemnified Person, in form and
substance reasonably satisfactory to such Indemnified Person, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the applicable
offering of Registrable or Exchanged Notes or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Indemnifying Person or
Persons on the one hand and the Indemnified Person or Persons on the other in
connection with the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by LNR on the one hand or such Participant or such other Indemnified
Person, as the case may be, on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement
-23-
<PAGE> 25
or omission, and any other equitable considerations appropriate in the
circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Person to the Indemnified Person as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of LNR set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of any Holder or any person who controls a Holder, or by LNR,
its directors, officers, employees or agents or any person controlling LNR, and
(ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
LNR covenants and agrees that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner in accordance with
the requirements of the Securities Act and the Exchange Act and, if at any time
LNR is not required to file such reports, LNR will, upon the
-24-
<PAGE> 26
request of any Holder or beneficial owner of Registrable Notes, make available
such information necessary to permit sales pursuant to Rule 144A under the
Securities Act. LNR further covenants and agrees, for so long as any Registrable
Notes remain outstanding that it will take such further action as any Holder of
Registrable Notes may reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable Notes without registration
under the Securities Act within the limitations of the exemptions provided by
(a) Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to LNR.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes in a timely manner all questionnaires, powers of
attorney, indemnities, underwriting agreements and other customary documents
required by LNR or the underwriter in connection with such underwriting
arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. LNR has not, as of the date hereof,
and LNR shall not, after the date of this Agreement, enter into any agreement
with respect to any of its securities that is inconsistent with the rights
granted to the Holders of Registrable Notes in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of LNR's other issued and outstanding securities
under any such agreements. LNR will not enter into any agreement with respect to
any of its securities which will grant to any Person piggyback registration
rights with respect to any Registration Statement.
(b) Adjustments Affecting Registrable Notes. LNR shall not, directly
or indirectly, take any action with respect to the Registrable Notes as a class
that would adversely affect the ability of the Holders of Registrable Notes to
include such Registrable Notes in a registration undertaken pursuant to this
Agreement.
-25-
<PAGE> 27
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) LNR and (II)(A) the Holders of not less than a majority in
aggregate principal amount of the then outstanding Registrable Notes and (B) if
the amendment, modification, supplement, waiver or consent would adversely
affect the Participating Broker-Dealers, the Participating Broker-Dealers
holding not less than a majority in aggregate principal amount of the Exchange
Notes held by all Participating Broker-Dealers; provided, however, that Section
7 and this Section 10(c) may not be amended, modified or supplemented without
the prior written consent of each Holder and each Participating Broker-Dealer
(including any person who was a Holder or Participating Broker-Dealer of
Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to
any Registration Statement) affected by any such amendment, modification or
supplement. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect,
impair, limit or compromise the rights of other Holders of Registrable Notes may
be given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of such
Holder or Participating Broker-Dealer, as the case may be, set forth
on the records of the registrar under the Indenture, with a copy in
like manner to the Initial Purchasers as follows:
BT Alex. Brown Incorporated
130 Liberty Street
New York, New York 10006
Facsimile No.: (212)
Attention: [ ]
Donaldson, Lufkin & Jenrette Securities
Corporation
277 Park Avenue
New York, New York 10172
Facsmile No.: (212)
Attention: [ ]
(ii) if to LNR, at the address as follows:
-26-
<PAGE> 28
760 N.W. 107th Avenue
Miami, Florida 33172
Facsimile No.: (305)226-7691
Attention: President
(iii) if to the Initial Purchasers, at the address specified
in Section 10(d)(i).
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under an
indenture at the address and in the manner specified in the indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK
COUNTY OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an
-27-
<PAGE> 29
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Securities Held by LNR or its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by LNR or its affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
(k) Third-Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third-party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Holders on the one hand
and LNR on the other, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest
with respect to the subject matter hereof and thereof are merged herein and
replaced hereby.
-28-
<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
LNR PROPERTY CORPORATION
By:
--------------------------------------
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT ALEX. BROWN INCORPORATED,
as Initial Purchaser
By:
-------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
as Initial Purchaser
By:
-------------------------------
Name:
Title:
-29-
<PAGE> 1
EXHIBIT 5.1
[ROGERS & WELLS LETTERHEAD]
April 13, 1998
LNR Property Corporation
760 N.W. 107th Avenue
Miami, Florida 33172
Ladies and Gentlemen:
We have acted as counsel for LNR Property Corporation (the "Company") in
connection with the preparation of a registration statement on Form S-4 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission relating to the proposed offer by the Company to exchange
$200,000,000 aggregate principal amount of 9 3/8% Series B Senior Notes due 2008
(the "New Notes") of the Company for a like amount of privately placed 9 3/8%
Series A Senior Notes due 2008 (the "Old Notes"). The New Notes will be issued
pursuant to an Indenture dated as of March 24, 1998 by and between the Company
and U.S. Bank Trust National Association, as trustee.
Based on the foregoing, and such examination of law as we have deemed
necessary, we are of the opinion that when New Notes are issued in exchange for
Old Notes in the manner set forth in the Registration Statement, the New Notes
will be binding obligations of the Company.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the heading "Legal Matters" in
the prospectus included in the Registration Statement.
Very truly yours,
/s/ Rogers & Wells LLP
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of LNR Property
Corporation on Form S-4 of our report dated February 3, 1998 (February 18, 1998,
as to Note 16), appearing in the Prospectus, which is part of this Registration
Statement and of our report dated February 3, 1998 relating to the financial
statement schedules appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
deloitte & touche sig
Miami, Florida
April 13, 1998
<PAGE> 1
Exhibit 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
------------
U.S. BANK TRUST NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
13-3781471
(I. R. S. EMPLOYER
IDENTIFICATION NO.)
<TABLE>
<S> <C>
100 WALL STREET, NEW YORK, NY 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
FOR INFORMATION, CONTACT:
DENNIS CALABRESE, PRESIDENT
U.S. BANK TRUST NATIONAL ASSOCIATION
100 WALL STREET, 16TH FLOOR
NEW YORK, NY 10005
TELEPHONE: (212) 361-2506
------------------------
LNR PROPERTY CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 65-0777234
(STATE OR OTHER JURISDICTION OF (I. R. S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
760 N.W. 107TH AVENUE 33172
MIAMI, FL (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
------------------------
DEBT SECURITIES
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee --
(a) Name and address of each examining or supervising authority to which it
is subject.
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Comptroller of the Currency Washington, D.C.
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1. Articles of Association of U.S. Bank Trust National
Association.
Exhibit 2. Certificate of Authority to Commence Business for First
Trust of New York, National Association now known as U.S.
Bank Trust National Association, incorporated herein by
reference to Exhibit 2 of Form T-1, Registration No.
33-83774.
Exhibit 3. Authorization of the Trustee to exercise corporate trust
powers for First Trust of New York, National Association now
known as U.S. Bank Trust National Association, incorporated
herein by reference to Exhibit 3 of Form T-1, Registration
No. 33-83774.
Exhibit 4. By-Laws of U.S. Bank Trust National Association.
Exhibit 5. Not applicable.
Exhibit 6. Consent of First Trust of New York, National Association now
known as U.S. Bank Trust National Association, required by
Section 321(b) of the Act, incorporated herein by reference
to Exhibit 6 of Form T-1, Registration No. 33-83774.
Exhibit 7. Report of Condition of First Trust of New York, National
Association now known as U.S. Bank Trust National
Association, as of the close of business on December 31,
1997, published pursuant to law or the requirements of its
supervising or examining authority.
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
</TABLE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, U.S. Bank Trust National Association, a national banking
association organized and existing under the laws of the United States, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 8th day of April, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
By: /s/ CARLOS R. LUCIANO
------------------------------------
Carlos R. Luciano
Trust Officer
<PAGE> 3
SECRETARY'S CERTIFICATE
I hereby certify that I am the Secretary of U.S. Bank Trust National
Association, formerly First Trust of New York National Association, located in
the City of New York, County of New York and State of New York, and that I have
been duly appointed and am presently serving in that capacity in accordance with
the bylaws of U.S. Bank Trust National Association. I further certify that the
attached are a true and correct copy of Articles of Association of U.S. Bank
Trust National Association.
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of March,
1998.
/s/ PATRICK J. CROWLEY
--------------------------------------
Patrick J. Crowley
Title: Secretary
1
<PAGE> 4
U.S. BANK TRUST
NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to perform any lawful
activities of national banks, the undersigned do enter into the following
Articles of Association:
FIRST. The title of this Association shall be "U.S. Bank Trust National
Association."
SECOND. The main office of this Association shall be in the City, County
and State of New York. The business of this Association will be limited to that
of a national trust bank, and to support activities incidental thereto. This
Association will not amend these Articles of Association to expand the scope of
or alter its business beyond that stated in this Article Second without the
prior approval of the Comptroller of the Currency. Prior to the transfer of any
stock of the Association, the Association will seek the prior approval of the
appropriate federal depository institution regulatory agency.
THIRD. The board of directors of the Association shall consist of not less
than five nor more than 25 persons, the exact number to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of a majority of the shareholders at any annual or special meeting
thereof. Each director shall own common or preferred stock of this Association
with an aggregate par, fair market, or equity value of not less than $1,000.00,
as of either (i) the date of purchase, (ii) the date the person became a
director, whichever is more recent. Any combination of common or preferred stock
of this Association or U.S. Bancorp may be used.
Any vacancy in the board of directors may be filled by action of a majority
of the remaining directors between meetings of shareholders. The board of
directors may not increase the number of directors between meetings of
shareholders to a number that (1) exceeds by more than two the number of
directors last elected by shareholders where the number was fifteen or less; and
(2) exceeds by more than four the number of directors last elected by
shareholders where the number was sixteen or more, but in no event shall the
number of directors exceed twenty-five.
Terms of directors, including directors selected to fill vacancies, shall
expire at the next regular meeting of shareholders at which directors are
elected, unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
Honorary or advisory members of the board of directors, without voting
power or power of final decision in matters concerning the business of this
Association, may be appointed by resolution of a majority of the full board of
directors, or by resolution of shareholders at any annual or special meeting.
Honorary or advisory directors shall not be counted for purposes of determining
the number of directors of this Association or the presence of a quorum in
connection with any board action, and shall not be required to own qualifying
shares.
FOURTH. There shall be an annual meeting of the shareholders to elect
directors and transact whatever other business may be brought before the
meeting. It shall be held at the main office or any other convenient place the
board of directors may designate, on the day of each year specified therefore in
the bylaws, or if that day falls on a legal holiday in the State in which this
Association is located, on the next following banking day. If no election is
held on the day fixed, or in event of a legal holiday, an election may be held
on any subsequent day within sixty days of the day fixed, to be designated by
the board of directors, or, if the directors fail to fix the day, by
shareholders representing two-thirds of the shares issued and outstanding. In
all cases at least ten-days advance notice of the meeting shall be given to the
shareholders by first class mail.
A director may resign at any time by delivering written or oral notice to
the board of directors, its chairperson, or to this Association, which
resignation shall be effective when the notice is delivered unless the notice
specifies a later effective date.
2
<PAGE> 5
A director may be removed by shareholders at a meeting called to remove him
or her, when notice of the meeting stating that the purpose or one of the
purposes is to remove him or her is provided, if there is a failure to fulfill
one of the affirmative requirements for qualification, or for cause; provided,
however, that a director may not be removed if the number of votes sufficient to
elect him or her under cumulative voting is voted against his or her removal.
FIFTH. The authorized amount of capital stock of this Association shall be
10,000 shares of common stock of the par value of one-hundred dollars ($100.00)
each; but said capital stock may be increased or decreased from time to time,
according to the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of this Association
shall have any preemptive or preferential right of subscription to any shares of
any class of stock of this Association, whether now or hereafter authorized, or
to any obligations convertible into stock of this Association, issued, or sold,
nor any right of subscription to any thereof other than such, if any, as the
board of directors, in its discretion may from time to time determine and at
such price as the hoard of directors may from time to time fix.
Unless otherwise specified in these Articles of Association or required by
law, (1) all matters requiring shareholder action, including amendments to the
articles of Association must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
Unless otherwise provided in the bylaws, the record date for determining
shareholders entitled to notice of and to vote at any meeting is the close of
business on the day before the first notice is mailed or otherwise sent to the
shareholders, provided that in no event may a record date be more than seventy
days before the meeting.
SIXTH. The board of directors shall appoint one of its members president
of this Association and one of its members chairperson of the board. The board
of directors shall also have the power to appoint one or more vice presidents, a
secretary who shall keep minutes of the directors' and shareholders' meetings
and be responsible for authenticating the records of this Association, and such
other officers and employees as may be required to transact the business of this
Association. A duly appointed officer may appoint one or more officers or
assistant officers if authorized by the board of directors in accordance with
the bylaws.
The board of directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of this
Association.
(2) Delegate the performance of its duties, but not the
responsibility for its duties, to the officers, employees, and agents of
this Association.
(3) Fix the compensation and enter into employment contracts with its
officers and employees upon reasonable terms and conditions, consistent
with applicable law.
(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and to fix the penalty
thereof.
(6) Ratify written policies authorized by this Association's
management or committees of the board.
(7) Regulate the manner in which any increase or decrease of the
capital of this Association shall be made; provided, however, that nothing
herein shall restrict the power of shareholders to increase or decrease the
capital of this Association in accordance with law, and nothing shall raise
or lower from two-thirds the percentage required for shareholder approval
to increase or reduce the capital.
(8) Manage and administer the business and affairs of this
Association.
(9) Adopt bylaws, not inconsistent with law or these Articles of
Association, for managing the business and regulating the affairs of this
Association.
(10) Amend or repeal bylaws, except to the extent that the articles of
Association reserve this power in whole or in part to shareholders.
3
<PAGE> 6
(11) Make contracts.
(12) Generally to perform all acts that are legal for a board of
directors to perform.
SEVENTH. The board of directors shall have the power to change the
location of the main office to any other place within the limits of the City of
New York without the approval of the shareholders, and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location permitted under applicable law, without the approval of
the shareholders, subject to approval by the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated according to the laws of the United States.
NINTH. The board of directors of this Association, or any three (3) or
more shareholders owning, in the aggregate, not less than twenty-five percent
(25%) of the stock of this Association, may call a special meeting of
shareholders at any time. Unless otherwise provided by the bylaws or the laws of
the United States, or waived by shareholders, a notice of the time, place, and
purpose of every annual and special meeting of the shareholders shall be given
by first-class mail, postage prepaid, mailed at least ten, and no more than
sixty, days prior to the date of the meeting to each shareholder of record at
his/her address as shown upon the books of this Association. Unless otherwise
provided by these Articles of Association or the bylaws, any action requiring
approval of shareholders must be effected at a duly called annual or special
meeting.
TENTH. Any action required to be taken at a meeting of the shareholders or
directors or any action that may be taken at a meeting of the shareholders or
directors may be taken without a meeting if consent in writing, setting forth
the action as taken shall be signed by all the shareholders or directors
entitled to vote with respect to the matter thereof. Such action shall be
effective on the date on which the last signature is placed on the writing, or
such earlier data as is set forth therein.
ELEVENTH. Meetings of the board of directors or shareholders, regular or
special, may be held by means of conference telephone or similar communication
equipment by means of which all persons participating in the meeting can
simultaneously hear each other, and participation in such meeting by such
aforementioned means shall constitute presence in person at such meeting.
TWELFTH. Any person, such person's heirs, executors, or administrators,
may be indemnified or reimbursed by the Association for reasonable expenses
actually incurred in connection with any action, suit or proceeding, whether
civil or criminal or administrative, to which such person or such person's
heirs, executors, or administrators shall be made a party by reason of such
person being or having been a director, advisory director, officer, employee, or
agent of the Association or of any firm, corporation, or organization which such
person served in any such capacity at the request of the Association. Provided,
however, that no person shall be so indemnified or reimbursed in relation to any
matter in such action, suit or proceeding: (1) as to which such person shall
finally be adjudged to have been guilty of or liable for gross negligence,
willful misconduct or criminal acts in the performance of such person's duties
to the Association; or which has been made the subject of a compromise
settlement except with the approval of a court of competent jurisdiction, or the
holders of record of a majority of the outstanding shares of the Association, or
the board of directors acting by vote of directors not parties to the same or
substantially the same action, suit or proceeding, constituting a majority of
the whole number of directors; or (3) against expenses, penalties, or other
payments incurred in an administrative proceeding or action instituted by an
appropriate bank regulatory agency, which proceeding or action results in a
final order assessing civil money penalties or requiring affirmative action by
such person in the form of payment to this Association. The foregoing right of
indemnification or reimbursement shall not be exclusive of other rights to which
such person, such person's heirs, executors, or administrators, may be entitled
as a matter of law.
Such expenses actually incurred by such person in connection with such
action, suit or proceeding may be paid by this Association in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such individual is not entitled to be
indemnified by the Association. Prior to the advancement of any such expenses,
the board of directors shall determine in writing that all of the following
conditions are
4
<PAGE> 7
met: (1) such person has a substantial likelihood of prevailing on the merits;
(2) in the event such person does not prevail, such person will have the
financial capability to reimburse this Association; and (3) payment of such
expenses by this Association will not adversely affect the soundness of this
Association. If at any time the board of directors believes, or should
reasonably believe, that any of the above conditions are not met, this
Association shall cease paying such person specifying the conditions under which
such person shall reimburse this Association.
The Association may, upon the affirmative vote of a majority of its board
of directors, purchase insurance for the purpose of indemnifying its directors,
advisory directors, officers, employees, or agents to the extent that such
indemnification is allowed in this Article Twelfth. Such insurance shall not
provide coverage of liability for any formal order issued by a regulatory
authority assessing civil money penalties against a director, advisory director,
officer, employee, or agent. Further, such insurance may, but need not be, for
the benefit of all such directors, advisory directors, officers, employees or
agents.
THIRTEENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. This Association's board of directors may
propose one or more amendments to these Articles of Association for submission
to the shareholders.
5
<PAGE> 8
U.S. BANK TRUST
NATIONAL ASSOCIATION
BYLAWS
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1. Annual Meeting. The annual meeting of the shareholders, for
the election of directors and the transaction of other business, shall be held
at a time and place as the Chairman or President may designate. Notice of such
meeting shall be given at least ten days prior to the date thereof, to each
shareholder of the Association. If, for any reason, an election of directors is
not made on the designated day, the election shall be held on some subsequent
day, as soon thereafter as practicable, with prior notice thereof.
Section 1.2. Special Meetings. Except as otherwise specially provided by
law, special meetings of the shareholders may be called for any purpose, at any
time by a majority of the board of directors, or by any shareholder or group of
shareholders owning at least ten percent of the outstanding stock. Every such
special meeting, unless otherwise provided by law, shall be called upon not less
than ten days prior notice stating the purpose of the meeting.
Section 1.3. Nominations for Directors. Nominations for election to the
board of directors may be made by the board of directors or by any shareholder.
Section 1.4. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing. Proxies shall be valid only
for one meeting and any adjournments of such meeting and shall be filed with the
records of the meeting.
Section 1.5. Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law. A majority of the votes cast
shall decide every question or matter submitted to the shareholders at any
meeting, unless otherwise provided by law or by the Articles of Association.
ARTICLE II
DIRECTORS
Section 2.1. Board of Directors. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business and affairs of the Association. All authorized corporate powers of the
Association shall be vested in and may be exercised by the board.
Section 2.2. Powers. In addition to the foregoing, the board of directors
shall have and may exercise all of the powers granted to or conferred upon it by
the Articles of Association, the Bylaws and by law.
Section 2.3. Number. The board shall consist of a number of members to be
fixed and determined from time to time by resolution of the board or the
shareholders at any meeting thereof, in accordance with the Articles of
Association.
Section 2.4. Organization Meeting. The newly elected board shall meet for
the purpose of organizing the new board and electing and appointing such
officers of the Association as may be appropriate. Such meeting shall be held on
the day of the election or as soon thereafter as practicable, and, in any event,
within thirty days thereafter. If, at the time fixed for such meeting, there
shall not be a quorum present, the directors present may adjourn the meeting
until a quorum is obtained.
Section 2.5. Regular Meetings. The regular meetings of the board shall be
held, without notice, as the Chairman or President may designate and deem
suitable.
Section 2.6. Special Meetings. Special meetings of the board may be
called by the Chairman or the President of the Association, or at the request of
two or more directors. Each member of the board shall be given notice stating
the time and place of each such meeting.
1
<PAGE> 9
Section 2.7. Quorum. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but fewer may
adjourn any meeting. Unless otherwise provided, once a quorum is established,
any act by a majority of those constituting the quorum shall be the act of the
board.
Section 2.8. Vacancies. When any vacancy occurs among the directors, the
remaining members of the board may appoint a director to fill such vacancy at
any regular meeting of the board, or at a special meeting called for that
purpose.
ARTICLE III
COMMITTEES
Section 3.1. Advisory Board of Directors. The board may appoint persons,
who need not be directors, to serve as advisory directors on an advisory board
of directors established with respect to the business affairs of either this
Association alone or the business affairs of a group of affiliated organizations
of which this Association is one. Advisory directors, shall have such powers and
duties as may be determined by the board, provided, that the board's
responsibility for the business and affairs of this Association shall in no
respect be delegated or diminished.
Section 3.2. Audit Committee. The board shall appoint an Audit Committee
which shall consist of at least two Directors of the Association or of an
affiliate of the Association. If legally permissible, the Board may determine to
name itself as the Audit Committee. The Audit Committee shall direct and review
audits of the Association's fiduciary activities.
The members of the Audit Committee shall be appointed each year and shall
continue to act until their successors are named. The Audit Committee shall have
power to adopt its own rules and procedures and to do those things which in the
judgment of such Committee are necessary or helpful with respect to the exercise
of its functions or the satisfaction of its responsibilities.
Section 3.3. Executive Committee. The board may appoint an Executive
Committee which shall consist of at least three directors and which shall have,
and may exercise, all the powers of the board between meetings of the board or
otherwise when the board is not meeting.
Section 3.4. Other Committees. The board may appoint, from time to time,
committees of one or more persons who need not be directors, for such purposes
and with such powers as the board may determine. In addition, either the
Chairman or the President may appoint, from time to time, committees of one or
more officers, employees, agents or other persons, for such purposes and with
such powers as either the Chairman or the President deems appropriate and
proper.
Whether appointed by the board, the Chairman, or the President, any such
Committee shall at all times be subject to the direction and control of the
board.
Section 3.5. Meetings, Minutes and Rules. An advisory board of directors
and/or committee shall meet as necessary in consideration of the purpose of the
advisory board of directors or committee, and shall maintain minutes in
sufficient detail to indicate actions taken or recommendations made; unless
required by the members, discussions, votes or other specific details need not
be reported. An advisory board of directors or a committee may, in consideration
of its purpose, adopt its own rules for the exercise of any of its functions or
authority.
ARTICLE IV
OFFICERS AND EMPLOYEES
Section 4.1. Chairman of the Board. The board may appoint one of its
members to be Chairman of the board to serve at the pleasure of the board. The
Chairman shall supervise the carrying out of the policies adopted or approved by
the board; shall have general executive powers, as well as the specific powers
conferred
2
<PAGE> 10
by these Bylaws; shall also have and may exercise such powers and duties as from
time to time may be conferred upon or assigned by the board.
Section 4.2. President. The board may appoint one of its members to be
President of the Association. In the absence of the Chairman, the President
shall preside at any meeting of the board. The President shall have general
executive powers, and shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the Office of President, or
imposed by these Bylaws. The President shall also have and may exercise such
powers and duties as from time to time may be conferred or assigned by the
Board.
Section 4.3. Vice President. The board may appoint one or more Vice
Presidents who shall have such powers and duties as may be assigned by the board
and to perform the duties of the President on those occasions when the President
is absent, including presiding at any meeting of the board in the absence of
both the Chairman and President.
Section 4.4. Secretary. The board shall appoint a Secretary, or other
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these Bylaws to be given; shall be
custodian of the corporate seal, records, document and papers of the
Association; shall provide for the keeping of proper records of all transactions
of the Association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the Secretary, or imposed
by these Bylaws; and shall also perform such other duties as may be assigned
from time to time, by the Board.
Section 4.5. Other Officers. The board may appoint, and may authorize the
Chairman or the President to appoint, any officer as from time to time may
appear to the board, the Chairman or the President to be required or desirable
to transact the business of the Association. Such officers shall exercise such
powers and perform such duties as pertain to their several offices, or as may be
conferred upon or assigned to them by these Bylaws, the board, the Chairman or
the President.
Section 4.6. Tenure of Office. The Chairman or the President and all
other officers shall hold office for the current year for which the board was
elected, unless they shall resign, become disqualified, or be removed. Any
vacancy occurring in the Office of Chairman or President shall be filled
promptly by the board.
Any officer elected by the board or appointed by the Chairman or the
President may be removed at any time, with or without cause, by the affirmative
vote of a majority of the board or, if such officer was appointed by the
Chairman or the President, by the Chairman or the President, respectively.
ARTICLE V
STOCK
Section 5.1. Shares of stock shall be transferable on the books of the
Association, and a transfer book shall be kept in which all transfers of stock
shall be recorded. Every person becoming a shareholder by such transfer shall,
in proportion to such person's shares, succeed to all rights of the prior holder
of such shares. Each certificate of stock shall recite on its face that the
stock represented thereby is transferable only upon the books of the Association
properly endorsed.
ARTICLE VI
CORPORATE SEAL
Section 6.1. The Association shall have no corporate seal; provided,
however, that if the use of a seal is required by, or is otherwise convenient or
advisable pursuant to, the laws or regulations of any jurisdiction, the
following seal may be used, and the Chairman, the President, the Secretary and
any Assistant Secretary shall have the authority to affix such seal.
3
<PAGE> 11
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Execution of Instruments. All agreements, checks, drafts,
orders, indentures, notes, mortgages, deeds, conveyances, transfers,
endorsements, assignments, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, guarantees, proxies and other instruments or
documents may be signed, countersigned, executed, acknowledged, endorsed,
verified, delivered or accepted on behalf of the Association, whether in a
fiduciary capacity or otherwise, by any officer of the Association, or such
employee or agent as may be designated from time to time by the board by
resolution, or by the Chairman or the President by written instrument, which
resolution or instrument shall be certified as in effect by the Secretary or an
Assistant Secretary of the Association. The provisions of this section are
supplementary to any other provision of the Articles of Association or Bylaws.
Section 7.2. Records. The Articles of Association, the Bylaws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for the purpose. The minutes or each meeting shall be signed by the Secretary,
or other officer appointed to act as Secretary of the meeting.
Section 7.3. Trust Files. There shall be maintained in the Association
files all fiduciary records necessary to assure that its fiduciary
responsibilities have been properly undertaken and discharged.
Section 7.4. Trust Investments. Funds held in a fiduciary capacity shall
be invested according to the instrument establishing the fiduciary relationship
and according to law. Where such instrument does not specify the character and
class of investments to be made and does not vest in the Association a
discretion in the matter, funds held pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest under law.
Section 7.5. Notice. Whenever notice is required by the Articles of
Association, the Bylaws or law, such notice shall be by mail, postage prepaid,
telegram, in person, or by any other means by which such notice can reasonably
be expected to be received, using the address of the person to receive such
notice, or such other personal data, as may appear on the records of the
Association. Prior notice shall be proper if given not more than 30 days nor
less than 10 days prior to the event for which notice is given.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. The association shall indemnify to the full extent permitted
by, and in the manner permissible under, the Articles of Association and the
laws of the United States of America, as applicable and as amended from time to
time, any person made, or threatened to be made, a party to any action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that such person is or was a director, advisory director, officer or
employee of the Association, or any predecessor of the Association, or served
any other enterprise as a director or officer at the request of the Association
or any predecessor of the Association.
Section 8.2. The board in its discretion may, on behalf of the Association,
indemnify any person, other than a director, advisory director, officer or
employee, made a party to any action, suit or proceeding by reason of the fact
that such person is or was an agent of the Association or any predecessor of the
Association serving in such capacity at the request of the Association or any
predecessor of the Association.
ARTICLE IX
BYLAWS: INTERPRETATION AND AMENDMENT
Section 9.1. These Bylaws shall be interpreted in accordance with and
subject to appropriate provisions of law, and may be amended, altered or
repealed, at any regular or special meeting of the board.
4
<PAGE> 12
Section 9.2. A copy of the Bylaws, with all amendments, shall at all times
be kept in a convenient place at the main office of the Association, and shall
be open for inspection to all shareholders during Association hours.
------------------------
I, Patrick J. Crowley, hereby certify that: (i) I am the duly constituted
secretary of U.S. Bank Trust National Association (the "Association"), and
secretary of its board of directors, and as such officer am the official
custodian of its records; and (ii) the foregoing bylaws are the bylaws of the
Association, and all of them are now lawfully in force and effect.
I have hereunto affixed my official signature, in the City of New York, on
the 30th day of March, 1998.
/s/ PATRICK J. CROWLEY
--------------------------------------
Name: Patrick J. Crowley
Title: Secretary
5
<PAGE> 13
EXHIBIT 7
U.S. BANK TRUST NATIONAL ASSOCIATION
(FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION)
STATEMENT OF FINANCIAL CONDITION
AS OF 12/31/97
<TABLE>
<CAPTION>
12/31/97
--------
($000'S)
<S> <C>
ASSETS
Cash and Due From Depository Institutions................. $ 37,537
Federal Reserve Stock..................................... 3,439
Fixed Assets.............................................. 698
Intangible Assets......................................... 74,459
Other Assets.............................................. 6,072
--------
Total Assets...................................... $122,205
========
LIABILITIES
Other Liabilities......................................... 8,020
--------
Total Liabilities................................. 8,020
EQUITY
Common and Preferred Stock................................ 1,000
Surplus................................................... 120,932
Undivided Profits......................................... (7,747)
--------
Total Equity Capital.............................. 114,185
Total Liabilities and Equity Capital.............. $122,205
========
</TABLE>
To the best of the undersigned's determination, as of this date the above
financial information is true and correct.
U.S. Bank Trust National Association
By:
------------------------------------
Trust Officer
Date: April 8, 1998
<PAGE> 14
EXHIBIT 7
U.S. BANK TRUST NATIONAL ASSOCIATION
(FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION)
STATEMENT OF FINANCIAL CONDITION
AS OF 12/31/97
<TABLE>
<CAPTION>
12/31/97
--------
($000'S)
<S> <C>
ASSETS
Cash and Due From Depository Institutions................. $ 37,537
Federal Reserve Stock..................................... 3,439
Fixed Assets.............................................. 698
Intangible Assets......................................... 74,459
Other Assets.............................................. 6,072
--------
Total Assets...................................... $122,205
========
LIABILITIES
Other Liabilities......................................... 8,020
--------
Total Liabilities................................. 8,020
EQUITY
Common and Preferred Stock................................ 1,000
Surplus................................................... 120,932
Undivided Profits......................................... (7,747)
--------
Total Equity Capital.............................. 114,185
Total Liabilities and Equity Capital.............. $122,205
========
</TABLE>
To the best of the undersigned's determination, as of this date the above
financial information is true and correct.
U.S. Bank Trust National Association
By: /s/ CARLOS R. LUCIANO
------------------------------------
Carlos R. Luciano
Trust Officer
Date: April 8, 1998
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO EXCHANGE 9 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
FOR
9 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
(REGISTERED UNDER THE SECURITIES ACT OF 1933)
OF
LNR PROPERTY CORPORATION
THE RIGHT TO EXCHANGE LNR 9 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 FOR
LNR 9 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008 WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998
U.S. BANK TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
U.S. Bank Trust N.A. U.S. Bank Trust N.A. U.S. Bank Trust N.A.
100 Wall Street 100 Wall Street 100 Wall Street
16th Floor 16th Floor 16th Floor
New York, New York 10005 New York, New York 10005 New York, New York 10005
Attn: Carlos Luciano Attn: Carlos Luciano Attn: Carlos Luciano
</TABLE>
Delivery of this instrument to an address other than as set forth above
will not constitute a valid delivery.
This Letter of Transmittal is to be used to submit Series A senior
subordinated notes ("Series A Notes") of LNR Property Corporation ("LNR") to be
exchanged for Series B senior subordinated notes ("Series B Notes") of LNR. It
must be used whether certificates representing the Series A Notes are being
delivered to U.S. Bank Trust, as exchange agent (the "Exchange Agent"), or
whether delivery of the Series A Notes is being made by book-entry transfer to
an account maintained by the Exchange Agent at The Depository Trust Company
("DTC"). This Letter of Transmittal must be delivered to the Exchange Agent.
Delivery of this Letter of Transmittal to DTC does not constitute delivery to
the Exchange Agent.
[ ] CHECK HERE IF THE SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Account Number at DTC
-----------------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
DESCRIPTION OF SERIES A NOTES SUBMITTED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) SUBMITTED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
PRINCIPAL AMOUNT OF SERIES A
CERTIFICATE AMOUNT OF NOTES SUBMITTED
NUMBER(S)* SERIES A NOTES (IF LESS THAN ALL)**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Amount of Series
A Notes
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by holders submitting by book-entry transfer.
** Series A Notes may be tendered in whole or in part in denominations of
$1,000 and integral multiples thereof. Unless otherwise indicated it will
be assumed that all Series A Notes described above are being submitted. See
Instruction 4.
================================================================================
NOTE: THIS LETTER OF TRANSMITTAL MUST BE SIGNED.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
By this document, the undersigned submits the Series A Notes listed above
(the "Series A Notes to be Exchanged") to be exchanged for Series B Notes as
described in the Prospectus dated , 1998 (the "Prospectus") under the caption
"The Exchange Offer" and in the instructions in this Letter of Transmittal.
Subject to, and effective upon, the issuance of Series B Notes in exchange
for the Series A Notes to be Exchanged, the undersigned sells, assigns and
transfers all the Series A Notes to be Exchanged to LNR and irrevocably appoints
the Exchange Agent the agent and attorney-in-fact of the undersigned, with full
power of substitution, to deliver the certificates representing the Series A
Notes to be Exchanged, or transfer ownership of the Series A Notes to be
Exchanged on the records of DTC, to LNR upon receipt by the Exchange Agent, as
the undersigned's agent, of the Series B Notes to be issued in exchange for the
Series A Notes to be Exchanged.
The undersigned represents and warrants that the undersigned has full power
and authority to exchange the Series A Notes to be Exchanged for Series B Notes
and that, when Series B Notes are issued in exchange for the Series A Notes to
be Exchanged, LNR will acquire title to the Series A Notes to be Exchanged, free
and clear of any liens, restrictions, charges, encumbrances or adverse claims.
The undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or by LNR to be necessary or desirable to complete
the transfer of the Series A Notes to be Exchanged to LNR.
The authority conferred in this Letter of Transmittal will not be affected
by, and will survive, the death or incapacity of the undersigned. The
obligations of the undersigned under this Letter of Transmittal or otherwise
resulting from the submission of the Series A Notes to be Exchanged for exchange
will be binding upon the successors, assigns, heirs, executors, administrators
and legal representatives of the undersigned. The submission of Series A Notes
to be Exchanged for exchange is irrevocable.
2
<PAGE> 3
Unless otherwise indicated in the box below captioned "Special Issuance
Instructions" or the box below captioned "Special Delivery Instructions," please
issue and deliver the certificates representing the Series B Notes being issued
in exchange for the Series A Notes to be Exchanged, and deliver certificates
representing any Series A Notes which are not being exchanged or are not
accepted for exchange, to the undersigned at the address shown below the
undersigned's signature. If one or both of the boxes captioned "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
and deliver the notes or confirmation of book-entry transfer as indicated. LNR
noteholders who deliver Series A Notes to be Exchanged by book-entry transfer
may, by making an appropriate entry under "Special Issuance Instructions,"
request that any notes which are not accepted for exchange be returned by
crediting an account at DTC. The undersigned is aware that LNR has no obligation
because of Special Issuance Instructions or otherwise to transfer any Series A
Notes which are not accepted for exchange from the name of the registered holder
of those Series A Notes to the name of another person.
------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if Series B Notes or Series A Notes which are
not exchanged are to be issued in the name of someone other than the
undersigned, or if Series A Notes delivered by book-entry transfer which
are not exchanged are to be returned by credit to an account at DTC other
than that designated above.
Issue: [ ] Series B Notes
[ ] Series A Notes not exchanged
to:
Name
----------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER.)
[ ] Credit Series A Notes which were delivered by book-entry transfer and
are not accepted for exchange to the following DTC account:
------------------------------------------------------
(ACCOUNT NUMBER)
======================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if Series B Notes or Series A Notes which are
not exchanged are to be sent to someone other than the undersigned or to
the undersigned at an address other than that shown after the
undersigned's signature below.
Mail: [ ] Series B Notes
[ ] Series A Notes not exchanged
to:
Name
----------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
3
<PAGE> 4
SIGN HERE
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
------------------------------------------------ , 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
note(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted with
this Letter of Transmittal. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity,
please provide the information described in Instruction 5.)
Name(s)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
---------------------------------------------
Tax Identification or
Social Security No.
--------------------------------------------------------------
4
<PAGE> 5
INSTRUCTIONS
FORMING PART OF THE TERMS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal if (i) this Letter of Transmittal is signed by the
registered holder of the Series A Notes to be Exchanged (which, for purposes of
this document, includes any participant in DTC whose name appears on a security
position listing as the owner of the Series A Notes to be Exchanged) unless the
holder has completed either the box entitled "Special Issuance Instructions" or
the box entitled "Special Delivery Instructions" or (ii) the Series A Notes to
be Exchanged are submitted for the account of a member firm of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or by a commercial bank or trust company which has an
office or correspondent in the United States (collectively, "Eligible
Institutions"). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by noteholders whether certificates are being
forwarded with it or whether Series A Notes are being submitted in accordance
with the procedures for delivery by book-entry transfer described in the
Exchange Instructions. The Exchange Agent must receive, at or before the
Expiration Time, certificates for the Series A Notes to be Exchanged, or
confirmation by DTC of transfer of the Series A Notes to be Exchanged to an
account of the Exchange Agent, together with a properly completed and executed
Letter of Transmittal. Guaranteed delivery of Series A Notes to be Exchanged
will not be accepted.
Submission of Series A Notes to be Exchanged will be irrevocable.
Submission may not be conditional or contingent.
The method of delivery of this Letter of Transmittal and the certificates
for Series A Notes to be Exchanged, or confirmation of delivery of Series A
Notes to be Exchanged through DTC, is at the option and risk of the exchanging
noteholder. Delivery will not be deemed made until items are actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended.
3. INADEQUATE SPACE. If the space provided in this Letter of Transmittal
is inadequate, the certificate numbers and numbers of Series A Notes being
submitted for exchange should be listed on a separate signed schedule, which
should be attached to this Letter of Transmittal.
4. PARTIAL SUBMISSIONS. (Not applicable to noteholders who submit by
book-entry transfer). If fewer than all the Series A Notes evidenced by a
certificate are to be exchanged, fill in the number of notes which are to be
exchanged in the box entitled "Principal Amount of Series A Notes Submitted." If
you do that, new certificate(s) for the remainder of the notes that were
represented by your old certificate(s) will be sent to you, or as you instruct
in the appropriate box on this Letter of Transmittal, as soon as practicable.
All Series A Notes represented by certificates delivered to the Exchange Agent
will be deemed to have been submitted for exchange unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Series A
Notes to be Exchanged, the signature(s) must correspond exactly with the name(s)
written on the face of the certificate(s).
If the Series A Notes to be Exchanged are owned of record by two or more
joint owners, all the owners must sign this Letter of Transmittal.
IF SERIES A NOTES TO BE EXCHANGED ARE REGISTERED IN DIFFERENT NAMES ON
DIFFERENT CERTIFICATES, IT WILL BE NECESSARY TO COMPLETE, SIGN AND SUBMIT AS
MANY SEPARATE LETTERS OF TRANSMITTAL AS THERE ARE DIFFERENT REGISTRATIONS ON
CERTIFICATES.
5
<PAGE> 6
If this Letter of Transmittal or any certificates or written instruments of
transfer are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, that person should so indicate when signing, and
submit evidence satisfactory to the Purchaser of the person's authority so to
act.
If this Letter of Transmittal is signed by the registered owner of the
Series A Notes to be Exchanged, no endorsements of certificates or separate
written instruments of transfer are required, unless certificates for Series B
Notes or for Series A Notes which are not exchanged are to be issued to a person
other than the registered owner, in which case, endorsements of certificates or
separate written instruments of transfer are required and signatures on those
certificates or written instruments of transfer must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner of the Series A Notes to be Exchanged, the certificates must be
endorsed or accompanied by appropriate written instruments of transfer, in
either case signed exactly as the name of the registered owner appears on the
certificates. Signatures on the certificates or stock powers must be guaranteed
by an Eligible Institution.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, LNR will
pay any transfer taxes with respect to the transfer to it of Series A Notes to
be Exchanged. If certificates for Series B Notes or for Series A Notes which are
not exchanged are to be registered in the name of any person other than the
registered holder, or if tendered certificates are registered in the name of
anyone other than the person signing this Letter of Transmittal, certificates
representing Series B Notes will not be issued until LNR or the Exchange Agent
receives satisfactory evidence of the payment of, or an exemption from the need
to pay, transfer taxes.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates submitted with this Letter
of Transmittal.
7. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If certificates for Series
B Notes or for Series A Notes which are not exchanged are to be issued in the
name of a person other than the signer of this Letter of Transmittal, or are to
be sent to someone other than the signer of this Letter of Transmittal or to an
address other than the signer's address shown above, the appropriate boxes on
this Letter of Transmittal must be completed. Noteholders who submit notes by
book-entry transfer may request that any notes which are not exchanged be
credited to an account at DTC which the noteholder designates. If no
instructions are given, notes tendered by book-entry transfer which are not
exchanged will be returned by crediting the account at DTC designated above.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to, or additional copies of the Prospectus and this Letter of
Transmittal may be obtained from, LNR Investor Relations at 760 Northwest 107th
Avenue, Miami, Florida 33172 or from your broker, dealer, commercial bank or
trust company.
9. WAIVER OF REQUIREMENTS. The requirements described above may be waived
by LNR, in whole or in part, at any time and from time to time, in LNR's sole
discretion, and may be waived as to Series A Notes submitted by particular
noteholders, even if similar requirements are not waived as to other
noteholders.
Important: This Letter of Transmittal, together with certificates or
confirmation of book-entry transfer, must be received by the Exchange Agent
before 5:00 P.M., New York City time, on , 1998.
6
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
(DO NOT WRITE IN THE SPACES BELOW)
Date Received --------------- Accepted by --------------- Checked by
---------------
------------------------------------------------------------------------------------------------------------
CERTIFICATES SERIES A NOTES SERIES A NOTES SERIES B NOTES SERIES B NOTES SERIES A NOTES SERIES A NOTES BLOCK
SURRENDERED SUBMITTED ACCEPTED ISSUED CERTIFICATE RETURNED CERTIFICATE NO.
NO.
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Delivery Prepared by --------------- Checked by --------------- Date ---------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
9 3/8% SERIES A SENIOR SUBORDINATED NOTES
DUE 2008
IN EXCHANGE FOR
9 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
OF
LNR PROPERTY CORPORATION
Registered holders of outstanding 9 3/8% Senior Subordinated Notes due 2008
(the "Series A Notes") who wish to tender their Series A Notes in exchange for a
like principal amount of new 9 3/8% Series B Senior Subordinated Notes due 2008
(the "Series B Notes") and whose Series A Notes are not immediately available or
who cannot deliver their Series A Notes and Letter of Transmittal (and any other
documents required by the Letter of Transmittal) to U.S. Bank Trust National
Association (the "Exchange Agent") prior to the Expiration Date, may use this
Notice of Guaranteed Delivery or one substantially equivalent hereto. This
Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange
Offer -- Procedures for Tendering" in the Prospectus.
THE EXCHANGE AGENT OF THE EXCHANGE OFFER IS:
U.S. BANK TRUST NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Hand: By Mail:
U.S. Bank Trust National Association U.S. Bank Trust National Association
100 Wall Street Corporate Trust Department
New York, New York 10005 100 Wall Street
Attention: Carlos Luciano 16th Floor
New York, New York 10005
Attn: Carlos Luciano
By Overnight Express: By Facsimile:
U.S. Bank Trust National Association (212) 809-5459
Corporate Trust Department Corporate Trust Department
Attn: Carlos Luciano Attn: Carlos Luciano
100 Wall Street Telephone: (212) 361-2532
16th Floor
New York, New York 10005
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Series A Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated April , 1998 of LNR Property Corporation (the "Prospectus"),
receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
REGISTERED HOLDER AS IT CERTIFICATE NUMBER(S) PRINCIPAL AMOUNT
APPEARS ON THE SERIES A NOTES OF SERIES A NOTES OF SERIES A NOTES
NAME OF TENDERING HOLDER (PLEASE PRINT) TENDERED TENDERED
<S> <C> <C> <C>
- ----------------------- -------------------------- ----------------------- -----------------------
- ----------------------- -------------------------- ----------------------- -----------------------
- ----------------------- -------------------------- ----------------------- -----------------------
- ----------------------- -------------------------- ----------------------- -----------------------
- ----------------------- -------------------------- ----------------------- -----------------------
</TABLE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, hereby guarantees to deliver to the
Exchange Agent at one of its addresses set forth above, the certificates
representing the Series A Notes (or a confirmation of book-entry transfer
of such Series A Notes into the Exchange Agent's account at the book-entry
transfer facility), together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, and any other documents required by the Letter of Transmittal
within three business days after the Expiration Date (as defined in the
Prospectus and the Letter of Transmittal).
<TABLE>
<S> <C>
Name of Firm:
- ----------------------------------------- -----------------------------------------------
(AUTHORIZED SIGNATURE)
Address: Title:
- ----------------------------------------------- -----------------------------------------------
- -----------------------------------------------
Name:
-----------------------------------------------
ZIP CODE (PLEASE TYPE OR PRINT)
Area Code and Telephone No.:
- -----------------------------------------------
Date:
-----------------------------------------------
</TABLE>
NOTE: DO NOT SEND SERIES A NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
SERIES A NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE> 1
EXHIBIT 99.3
April , 1998
EXCHANGE AGENT AGREEMENT
U.S. Bank Trust National Association
Corporate Trust Department
100 Wall Street
New York, New York 10005
Attention: Carlos Luciano
Dear Mr. Luciano:
LNR Property Corporation, a Delaware corporation (the "Company"), proposes
to make an offer (the "Exchange Offer") to exchange up to $200,000,000 aggregate
principal amount of its 9 3/8% Series B Senior Notes due 2008 (the "Exchange
Notes"), for a like principal amount of its outstanding 9 3/8% Series A Senior
Notes due 2008 (the "Private Notes"). The terms and conditions of the Exchange
Offer are set forth in a prospectus (the "Prospectus") included in the Company's
registration statement on form S-4 (File No. 333- ) (the "Registration
Statement"), filed with the Securities and Exchange Commission (the "SEC"),
proposed to be distributed to all record holders of the Private Notes. The
Private Notes and the Exchange Notes are collectively referred to herein as the
"Notes." Capitalized terms used herein and not defined shall have the respective
meanings ascribed to them in the Prospectus.
The Company hereby appoints U.S. Bank Trust National Association to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to U.S. Bank Trust National
Association.
The Exchange Offer is expected to be commenced by the Company on or about
, 1998. The Letter of Transmittal accompanying the Prospectus is to be
used by the holders of the Private Notes to accept the Exchange Offer and
contains instructions with respect to the delivery of certificates for Private
Notes tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
, 1998, or on such later date or time to which the Company may extend
the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions
set forth in the Prospectus, the Company expressly reserves the right to extend
the Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (confirmed in writing) or written notice to you before 9:00 A.M., New York
City time, on the next business day after the previously scheduled Expiration
Date.
The Company expressly reserves the right, in its sole discretion, to amend
or terminate the Exchange Offer, and not to accept for exchange any Private
Notes not theretofore accepted for exchange. The Company will give oral
(confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in accordance
with the following instructions:
1. You will perform such duties and only such duties as are specifically
set forth in the section of the Prospectus captioned "The Exchange Offer," in
the Letter of Transmittal accompanying the Prospectus or as specifically set
forth herein; provided, however, that in no way will your general duty to act in
good faith and without gross negligence or willful misconduct be limited by the
foregoing.
2. You will establish an account with respect to the Private Notes at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Private Notes by causing
the Book-Entry Transfer Facility to
<PAGE> 2
transfer such Private Notes into your account in accordance with the Book-Entry
Transfer Facility's procedures for such transfer.
3. You are to examine each of the Letters of Transmittal and certificates
for Private Notes (and confirmation of book-entry transfers of Private Notes
into your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Private Notes, to ascertain
whether: (i) the Letters of Transmittal, certificates and any such other
documents are duly executed and properly completed in accordance with
instructions set forth therein and that such book-entry confirmations are in due
and proper form and contain the information required to be set forth therein,
and (ii) the Private Notes have otherwise been properly tendered. In each case
where the Letter of Transmittal or any other document has been improperly
completed or executed, or where book-entry confirmations are not in due and
proper form or omit certain information, or any of the certificates for Private
Notes are not in proper form for transfer or some other irregularity in
connection with the acceptance of the Exchange Offer exists, you will endeavor
to inform the presenters of the need for fulfillment of all requirements and to
take any other action as may be necessary or advisable to cause such
irregularity to be corrected.
4. With the approval of the Chairman, the President and Chief Executive
Officer, any of the Executive Vice Presidents or the General Counsel (such
approval, if given orally, to be confirmed in writing) or any other person
designated by such an officer in writing, you are authorized to waive any
irregularities in connection with any tendency of Private Notes pursuant to the
Exchange Offer.
5. Tenders of Private Notes may be made only as set forth in the Letter of
Transmittal and in the section of the Prospectus captioned "The Exchange
Offer -- Procedures for Tendering," and Private Notes shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein. Notwithstanding the provisions of this paragraph 5, Private
Notes which the Chairman, the President and Chief Executive Officer, any of the
Executive Vice Presidents or the General Counsel or any other officer of the
Company designated by any such person shall approve as having been properly
tendered shall be considered to be properly tendered (such approval, if given
orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Private Notes received
subsequent to the Expiration Date and accept its instructions with respect to
disposition of such Private Notes.
7. You shall accept tenders:
(a) in cases where the Private Notes are registered in two or more
names only if signed by all named holders:
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only
when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Private Notes
provided that customary transfer requirements, including those regarding
any applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Private Notes when so indicated and as
permitted in the Letter of Transmittal and deliver certificates for Private
Notes to the transfer agent for split-up and return any untendered Private Notes
to the holder (or such other person as may be designated in the Letter of
Transmittal) as promptly as practicable after expiration or termination of the
Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be confirmed
in writing) of its acceptance, promptly after the Expiration Date, of all
Private Notes properly tendered and you, on behalf of the Company, will exchange
such Private Notes for Exchange Notes and cause such Private Notes to be
canceled. Delivery of Exchange Notes will be made on behalf of the Company by
you at the rate of $1,000 principal amount of Exchange Notes for each $1,000
principal amount of the Private Notes tendered promptly after notice (such
notice if given orally, to be confirmed in writing) of acceptance of said
Private Notes by the Company; provided, however, that in all cases, Private
Notes tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by you of certificates for such Private Notes (or confirmation of
book-entry transfer into your account at the
2
<PAGE> 3
Book-Entry Transfer Facility), a properly completed and, except as described in
the section of the prospectus captioned "The Exchange Offer -- Procedures for
Tendering," duly executed Letter of Transmittal (or facsimile thereof) with any
required signature guarantees and any other required documents. Unless otherwise
instructed by the Company, you shall issue Exchange Notes only in denominations
of $1,000 or any integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Private Notes tendered pursuant to the Exchange Offer may
be withdrawn at any time on or prior to the Expiration Date in accordance with
the terms of the Exchange Offer.
10. The Company shall not be required to exchange any Private Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Private Notes tendered
shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Private Notes tendered because of an invalid tender,
the occurrence of certain other events set forth in the Prospectus or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Private Notes (or effect
appropriate book-entry transfer), together with any related required documents
and the Letters of Transmittal relating thereto that are in your possession, to
the persons who deposited them (or effected such book-entry transfer).
12. All certificates for reissued Private Notes, unaccepted Private Notes
or for Exchange Notes (other than those effected by book-entry transfer) shall
be forwarded by (a) first-class certified mail, return receipt requested, under
a blanket surety bond obtained by you protecting you and the Company from loss
or liability arising out of the nonreceipt or nondelivery of such certificates
or (b) by registered mail insured by you separately for the replacement value of
each of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or other solicitation fees to any broker, dealer, commercial bank,
trust company or other nominee or to engage or use any person to solicit
tenders.
14. As Exchange Agent hereunder, you:
(a) shall have no duties or obligations other than those specifically
set forth in the Prospectus, the Letter of Transmittal or herein or as may
be subsequently agreed to in writing by you and the Company;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of
any of the certificates for the Private Notes deposited with you pursuant
to the Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange
Offer;
(c) will not be obligated to take any legal action hereunder which
might in your reasonable judgment involve any expense or liability, unless
you will have been furnished with reasonable indemnity;
(d) may rely on and will be protected in acting in reliance upon any
certificate, instrument, opinion, notice, letter, telegram or other
document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may act upon any tender, statement, request, comment, agreement or
other instrument whatsoever not only as to its due execution and validity
and effectiveness of its provisions, but also as to the truth and accuracy
of any information contained therein, which you shall in good faith believe
to be genuine or to have been signed or represented by a proper person or
persons;
(f) may rely on and shall be protected in acting upon written or oral
instructions from any officer of the Company;
(g) may consult with your counsel with respect to any questions
relating to your duties and responsibilities, and the written opinion of
such counsel shall be full and complete authorization and
3
<PAGE> 4
protection in respect of any action taken, suffered or omitted to be taken
by you hereunder in good faith and in accordance with the written opinion
of such counsel; and
(h) will not advise any person tendering Private Notes pursuant to the
Exchange Offer as to whether to tender or refrain from tendering all or any
portion of Private Notes or as to the market value, decline or appreciation
in market value of any Private Notes that may or may not occur as a result
of the Exchange Offer or as to the market value of the Exchange Notes;
provided, however, that in no way will your general duty to act in good faith
and without gross negligence or willful misconduct be limited by the foregoing.
15. You will take such action as may from time to time be requested by the
Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms
as may be approved from time to time by the Company, to all persons requesting
such documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for accepting (or withdrawing from) the Exchange Offer. The
Company will furnish you with copies of such documents at your request.
16. You will advise by facsimile transmission or telephone, and promptly
thereafter confirm in writing to Jeffrey P. Krasnoff of the Company (telephone
number (305) 485-2000, facsimile number (305) 226-7691, and such other person or
persons as the Company may request, daily up to and including the Expiration
Date as to the aggregate principal amount of Private Notes which have been duly
tendered pursuant to the Exchange Offer and the items received by you pursuant
to the Exchange Offer and this Agreement, separately reporting and giving
cumulative totals as to items properly received and items improperly received.
In addition, you will also inform, and cooperate in making available to, the
Company or any such other person or persons upon oral request made from time to
time prior to the Expiration Date of such other information as it or he or she
reasonably requests. Such cooperation shall include, without limitation, the
granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the Company
shall have received information in sufficient detail to enable it to decide
whether to extend the Exchange Offer. You shall prepare a final list of all
persons whose tenders were accepted, the aggregate principal amount of Private
Notes tendered, the aggregate principal amount of Private Notes accepted and the
identity of any Participating Broker-Dealers and the aggregate principal amount
of Exchange Notes delivered to each, and deliver said list to the Company.
17. Letters of Transmittal, book-entry confirmations and Notices of
Guaranteed Delivery received by you shall be preserved by you for a period of
time at least equal to the period of time you preserve other records pertaining
to the transfer of securities, or one year, whichever is longer, and thereafter
shall be delivered by you to the Company. You shall dispose of unused Letters of
Transmittal and other surplus materials as instructed by the Company.
18. You hereby expressly waive any lien, encumbrance or right of set-off
whatsoever that you may have with respect to funds deposited with you for the
payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
4
<PAGE> 5
21. The Company covenants and agrees to indemnify and hold you harmless in
your capacity as Exchange Agent hereunder against any loss, liability, cost or
expense, including attorneys' fees and expenses arising out of or in connection
with any act, omission, delay or refusal made by you in reliance upon any
signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document reasonably believed by you to be
valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Private Notes reasonably believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept any tenders or
effect any transfer of Private Notes; provided, however, that anything in this
Agreement to the contrary notwithstanding, the Company shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of your gross negligence or willful misconduct. In no case
shall the Company be liable under this indemnity with respect to any claim
against you unless the Company shall be notified by you, by letter or cable or
by facsimile which is confirmed by letter, of the written assertion of a claim
against you or of any other action commenced against you, promptly after you
shall have received any such written assertion or notice of commencement of
action. The Company shall be entitled to participate, at its own expense, in the
defense of any such claim or other action, and, if the Company so elects, the
Company may assume the defense of any pending or threatened action against you
in respect of which indemnification may be sought hereunder, in which case the
Company shall not thereafter be responsible for the subsequently-incurred fees
and disbursements of legal counsel for you under this paragraph so long as the
Company shall retain counsel reasonably satisfactory to you to defend such suit;
provided, that the Company shall not be entitled to assume the defense of any
such action if the named parties to such action include both you and the Company
and representation of both parties by the same legal counsel would, in the
written opinion of your counsel, be inappropriate due to actual or potential
conflicting interests between you and the Company. You understand and agree that
the Company shall not be liable under this paragraph for the fees and expenses
of more than one legal counsel for you.
22. You shall arrange to comply with all requirements under the tax laws
of the United States, including those relating to missing Tax Identification
Numbers, and shall file any appropriate reports with the Internal Revenue
Service. The Company understands that you are required, in certain instances, to
deduct thirty-one percent (31%) with respect to interest paid on the Exchange
Notes and proceeds from the sale, exchange, redemption or retirement of the
Exchange Notes from holders who have not supplied their correct Taxpayer
Identification Number or required certification. Such funds will be turned over
to the Internal Revenue Service in accordance with applicable regulations.
23. You shall notify the Company of the amount of any transfer taxes
payable in respect of the exchange of Private Notes and, upon receipt of a
written approval from the Company, shall deliver or cause to be delivered, in a
timely manner to each governmental authority to which any transfer taxes are
payable in respect of the exchange of Private Notes, your check in the amount of
all transfer taxes so payable, and the Company shall reimburse you for the
amount of any and all transfer taxes payable in respect of the exchange of
Private Notes; provided, however, that you shall reimburse the Company for
amounts refunded to you in respect of your payment of any such transfer taxes,
at such time as such refund is received by you.
24. This Agreement and your appointment as Exchange Agent hereunder shall
be construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such state,
and without regard to conflicts of law principles.
25. This Agreement shall be binding upon and inure solely to the benefit
of each party hereto and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement. Without
limitation of the foregoing, the parties hereto expressly agree that no holder
of Private Notes or Exchange Notes shall have any right, benefit or remedy of
any nature whatsoever under, or by reason of, this Agreement.
26. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, and all of which taken together shall
constitute one and the same agreement.
27. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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28. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part except by a written
instrument signed by a duly authorized representative of the party to be
charged.
29. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
if to the Company, to:
LNR Property Corporation
760 N.W. 107th Avenue
Miami, Florida 33172
Telephone: (305) 485-2000
Telecopy: (305) 226-7691
Attention: Jeffrey P. Krasnoff
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Telephone: (212) 878-8000
Telecopy: (212) 878-8375
Attention: David W. Bernstein, Esq.
If to the Exchange Agent, to:
Corporate Trust Department
New York, New York 10005
Telephone: (212) 361-2532
Telecopy: (212) 809-5459
Attention: Carlos Luciano
30. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days following the Expiration Date. Notwithstanding the foregoing,
paragraphs 17, 19, 21 and 23 shall survive the termination of this Agreement.
Upon any termination of this Agreement, you shall promptly deliver to the
Company any certificates for Notes, funds or property then held by you as
Exchange Agent under this Agreement.
31. This Agreement shall be binding and effective as of the date hereof.
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Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
LNR PROPERTY CORPORATION
By:
------------------------------------
Name:
Title:
Accepted as of the date first above written:
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Exchange Agent
By:
--------------------------------------------------------
Name:
Title:
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