SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
[ ] Definitive Proxy Statement Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
LENNAR CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LENNAR LOGO]
700 N.W. 107th Avenue, Miami, Florida 33172 -- (305) 559-4000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 8, 2003
TO THE STOCKHOLDERS OF LENNAR CORPORATION:
This is to notify you that the Annual Meeting of the stockholders of
Lennar Corporation will be held at Lennar Corporation, 700 N.W. 107th Avenue,
Second Floor, Miami, Florida on Tuesday, April 8, 2003, at 11:00 a.m. Eastern
Time, for the following purposes:
1. To elect four directors. The other directors have been elected
for terms that expire in subsequent years.
2. To vote on a proposal to increase the number of shares of
Common Stock we are authorized to issue to 300,000,000 shares,
and the number of shares of Class B Common Stock we are
authorized to issue to 90,000,000 shares.
3. To vote on a proposal to amend the provisions of our
Certificate of Incorporation relating to our Class B Common
Stock and to rename our Common Stock. If this proposal is
approved, we will distribute one share of Class B Common Stock
for each ten shares of Common Stock or Class B Common Stock
held on April 9, 2003.
4. To vote on a proposal to adopt the Lennar Corporation 2003
Stock Option and Restricted Stock Plan.
5. To transact any other business that may properly come before
the meeting.
Only stockholders of record at the close of business on February 20,
2003 will be entitled to notice of or to vote at the meeting or any adjournment
of the meeting. Our transfer books will not be closed.
If you do not intend to be present at the meeting, please sign and
return the enclosed Proxy. If you attend and vote in person, the Proxy will not
be used with regard to the matters on which you voted.
By Order of the Board of Directors
DAVID B. McCAIN
Secretary
Dated: March 7, 2003
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXY
Our management is soliciting the accompanying Proxy. The proxyholders
named in the Proxy will vote all shares represented by proxies in the manner
designated or, if no designation is made, they will vote the proxies for the
four director nominees named below and for approval of each of the proposals
described in this Proxy Statement. The proxyholders will not vote shares with
regard to matters as to which proxies instruct them to abstain or to the extent
they are marked by brokers to show that specified numbers of shares are not to
be voted. WE ARE MAILING THIS PROXY STATEMENT AND THE ACCOMPANYING FORM OF PROXY
ON OR ABOUT MARCH 7, 2003 TO ALL STOCKHOLDERS OF RECORD ON FEBRUARY 20, 2003. If
you give a proxy, you may revoke it at any time before it is voted by a written
instrument of revocation that we receive before the meeting at our office at 700
N.W. 107th Avenue, Miami, Florida 33172, or in open meeting, without, however,
affecting any vote that has already been taken. Your presence at the meeting
will not revoke a proxy, but if you attend the meeting and cast a ballot, that
will revoke a proxy as to the matter on which the ballot is cast.
COST AND METHOD OF SOLICITATION
We will bear the cost of soliciting proxies. We are soliciting proxies
by mail and, in addition, our directors, officers and employees may solicit
proxies personally or by telephone. In addition, we have retained [ ] to assist
in the solicitation of proxies. We will pay [ ] $[ ] for its services.
We will reimburse custodians, brokerage houses, nominees and other fiduciaries
for the cost of sending proxy materials to their principals.
VOTING RIGHTS AND PROXIES
Only stockholders of record at the close of business on February 20,
2003 will be entitled to vote at the meeting. Our only outstanding voting
securities on that day were ___________ shares of Common Stock and
___________shares of Class B Common Stock. Each outstanding share of Common
Stock entitles the holder to one vote. Each outstanding share of Class B Common
Stock entitles the holder to ten votes. However, the proposal discussed under
"Proposal to Increase the Authorized Shares of Common Stock and Class B Common
Stock" must be approved by the holders of the Common Stock, and the proposal
discussed under "Proposal to Change Terms of Class B Common Stock and Rename
Common Stock" must be approved by the holders of the Common Stock and the
holders of the Class B Common Stock, voting separately, as well as in each case
by the holders of a majority in voting power of the two classes of common stock
voting together.
You may vote your stock in person or by your signed, written proxy. We
will deem any message sent to us prior to the time for voting that appears to
have been transmitted by a stockholder, or any reproduction of a proxy, to be
sufficient. The death or incapacity of a person who gives a proxy will not
revoke the proxy, unless the fiduciary who has control of the shares represented
by the proxy notifies us of the death or incapacity in writing before the
meeting.
PRINCIPAL STOCKHOLDERS
On February 20, 2003, the following persons were the only persons who,
insofar as we are aware based upon the most recent filings with the Securities
and Exchange Commission, owned beneficially more than 5% of any class of our
voting securities:
1
AMOUNT AND
NATURE OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP CLASS
------------------------------------ -------------- -------------------- ----------
Stuart A. Miller Common Stock _______ ______%
700 NW 107th Avenue Class B Common Stock 9,680,961 (1) 99.8%
Miami, FL 33172
FMR Corp. Common Stock ________ _____%
82 Devonshire Street
Boston, MA 02109-3614
Capital Growth Management Common Stock ________ _____%
Limited Partnership
One International Place
Boston, MA 02110
Bank of America Corporation Common Stock ________ _____%
100 North Tryon Street
Charlotte, NC 28255
------------------------
(1) Stuart A. Miller and Steven J. Saiontz's wife are trustees and
beneficiaries of trusts that directly or indirectly hold the limited
partner interests in two partnerships that together own 9,671,961
shares of Class B Common Stock (other than minor limited partnership
interests they hold directly). Stuart A. Miller is the sole officer and
the sole director of the corporation that owns the general partner
interests in the partnerships. Because of that, Stuart A. Miller is
shown as the beneficial owner of the shares held by the partnerships,
even though he has only a limited pecuniary interest in those shares.
On February 20, 2003, The Depository Trust Company owned of record
___________shares of Common Stock, which was ______% of the outstanding Common
Stock. We understand 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.
Our voting securities which our directors and executive officers owned
on February 20, 2003 were as follows:
NATURE OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP(1) CLASS
------------------------ -------------- -------------------- -----------
Irving Bolotin Common Stock ________ (4)
Steven L. Gerard Common Stock ________ (4)
Bruce E. Gross Common Stock ________ (4)
Jonathan M. Jaffe Common Stock ________ (4)
R. Kirk Landon Common Stock ________ (4)
Sidney Lapidus Common Stock ________ (4)
Stuart A. Miller Common Stock ________ (4)
Class B Common Stock ________(2) ________%
Allan J. Pekor Common Stock ________ (4)
Herve Ripault Common Stock ________ (4)
Steven J. Saiontz Common Stock ________(2)(3) (4)
Donna E. Shalala Common Stock ________ (4)
Robert J. Strudler Common Stock ________ (4)
Directors and Officers as a
Group (17 persons) Class B Common Stock ________ ________%
Common Stock ________ ________%
2
-------------------
(1) Includes currently exercisable stock options and stock options which
become exercisable within sixty days after February 20, 2003. Those
options include options held by Irving Bolotin relating to
________shares, Steven L. Gerard relating to _______ shares, Bruce E.
Gross relating to ________shares, Jonathan M. Jaffe relating to
________shares, R. Kirk Landon relating to ________shares, Sidney
Lapidus relating to ________shares, Stuart A. Miller relating to
________shares, Allan J. Pekor relating to ________shares, Herve
Ripault relating to _________ shares, Steven J. Saiontz relating to
________shares, Robert J. Strudler relating to ________ shares, and all
directors and executive officers relating to ________shares.
(2) Stuart A. Miller and Steven J. Saiontz's wife are trustees and
beneficiaries of trusts that directly or indirectly hold the limited
partner interests in two partnerships that together own 9,671,961
shares of Class B Common Stock (other than minor limited partnership
interests they own directly). Stuart A. Miller is the sole officer and
the sole director of the corporation that owns the general partner
interests in the partnerships. Because of that, Stuart A. Miller is
shown as the beneficial owner of the shares held by the partnerships,
even though he has only a limited pecuniary interest in those shares.
(3) Does not include 9,000 shares of Class B Common Stock held by Steven J.
Saiontz's wife.
(4) Less than 1%.
Because each outstanding share of Class B Common Stock is entitled to
ten votes, Stuart A. Miller has the power to cast __________ votes, which is __%
of the combined votes that can be cast by all the holders of Common Stock and
Class B Common Stock, and all directors and officers as a group have the power
to cast ___________ votes, which is __% of the combined votes that can be cast
by all the holders of Common Stock and Class B Common Stock.
ELECTION OF DIRECTORS
Our directors are divided into three classes. The directors serve for
terms of three years, and the term of one class of directors expires each year.
Our Certificate of Incorporation and By-Laws provide that each class will have
the highest whole number of directors obtained by dividing the number of
directors constituting the whole Board by three, with any additional directors
allocated, one to a class, to the classes designated by the Board of Directors.
The persons named in the accompanying Proxy will vote for the following four
people as directors to serve until the 2006 Annual Meeting of Stockholders:
DIRECTOR TERM
NAME OF DIRECTOR AGE SINCE EXPIRES
---------------- ---- -------- -------
NOMINATED TO SERVE UNTIL THE 2006 ANNUAL MEETING OF STOCKHOLDERS
Steven L. Gerard 57 2000 2003
Jonathan M. Jaffe 43 1997 2003
Sidney Lapidus 65 1997 2003
Herve Ripault 62 2000 2003
OTHER DIRECTORS
Irving Bolotin 70 1974 2004
R. Kirk Landon 73 1999 2004
Donna E. Shalala 62 2001 2004
3
Stuart A. Miller (1) 45 1990 2005
Steven J. Saiontz (1) 44 1990 2005
Robert J. Strudler (1) 60 2000 2005
----------------------
(1) Executive Committee member.
Steven L. Gerard is the Chairman and Chief Executive Officer of Century
Business Services, Inc. From July 1997 to October 2000, Mr. Gerard was Chairman
and Chief Executive Officer of Great Point Capital, Inc. Mr. Gerard was
previously Chairman and Chief Executive Officer of Triangle Wire & Cable, Inc.,
and its successor, Ocean View Capital, Inc., from September 1992 to July 1997.
Mr. Gerard is also a director of Fairchild Corporation, Timco Aviation Services,
Inc. and Joy Global, Inc. Mr. Gerard joined our Board upon the merger of U.S.
Home Corporation into a subsidiary of ours on May 3, 2000.
Jonathan M. Jaffe has been one of our Vice Presidents since 1994. For
more than five years before that, he held executive positions with several of
our subsidiaries.
Sidney Lapidus has been a Partner of Warburg, Pincus & Co. and a
Managing Director of E.M. Warburg, Pincus & Co., LLC (and its predecessor) since
1974 and has been with Warburg Pincus since 1967. Mr. Lapidus currently serves
on the boards of directors of Information Holding, Inc., Knoll, Inc. and Radio
Unica Communications Corp., as well as a number of private companies.
Herve Ripault has been an Associate of Optigestiom S.A., a French fund
management company, since November 1991. Mr. Ripault retired in October 1991 as
Chairman of the Board of Delahaye--Ripault, S.A., Agent de Change, a member of
the Paris Stock Exchange, Paris, France. Mr. Ripault had been associated with
that firm from June 1985 until his retirement. Mr. Ripault was associated with
Societe des Maisons Phenix, a homebuilding company in France, from 1979 to 1985,
during which time he was Executive Vice President--Finance. Mr. Ripault joined
our Board upon the merger of U.S. Home Corporation into a subsidiary of ours on
May 3, 2000.
Irving Bolotin was a Senior Vice President of our Company until he
retired on December 31, 1998. He had held that position for more than five years
before his retirement. Mr. Bolotin also serves on the Board of Directors of
Rechtien International Trucks, Inc.
R. Kirk Landon is the President of The Kirk Foundation and President of
The Kirk A. and Dorothy P. Landon Foundation, Chairman of Innovative
Surveillance Technology and Chairman of Orange Clothing Company. He is also Vice
Chairman of the Board of Trustees of Barry University. From 1980 to 1999, he was
Chairman of the Board of American Bankers Insurance Group and from 1991 to 1998,
he was a Director of the Federal Reserve Bank, Atlanta/Miami Branch.
Donna E. Shalala is Professor of Political Science and President of the
University of Miami. She served as U.S. Secretary of Health and Human Services
from January 1993 to January 2001. She was Chancellor of the University of
Wisconsin-Madison from 1987 to 1993. Dr. Shalala also served as the President of
Hunter College from 1980 to 1987, and as Assistant Secretary at HUD during the
Carter administration. A distinguished political scientist, she has been a
professor at Syracuse University, Columbia University of New York, and the
University of Wisconsin. Dr. Shalala is a member of the Council on Foreign
Relations.
Stuart A. Miller has been our President and Chief Executive Officer
since April 1997. For more than five years prior to that, he was one of our Vice
Presidents. He is the Chairman of the Board of LNR Property Corporation, our
former wholly-owned subsidiary which we spun-off in October 1997. He is a
Director of Union Bank of Florida. Mr. Miller is the brother-in-law of Steven J.
Saiontz.
4
Steven J. Saiontz has been the Chairman of Union Bank of Florida since
December 2002. For more than five years before that, he was the Chief Executive
Officer of LNR Property Corporation. He is a Director of LNR Property
Corporation. Mr. Saiontz is the brother-in-law of Stuart A. Miller.
Robert J. Strudler was elected as our Vice Chairman of the Board and
Chief Operating Officer upon the merger of U.S. Home Corporation into a
subsidiary of ours on May 3, 2000. Prior to joining our Company, Mr. Strudler
had been Chairman and Co-Chief Executive Officer of U.S. Home Corporation since
May 1986. Mr. Strudler served as Chairman of the High Production Home Builders
Council of the National Association of Home Builders from 1991 to 1994. In 2000,
Mr. Strudler was inducted into the National Association of Home Builders Hall of
Fame.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the annual compensation, long-term
compensation and all other compensation for our Chief Executive Officer and for
the four additional executive officers who together were our five highest paid
executive officers for the year ended November 30, 2002:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS(1)($) COMPENSATION($)
--------------------------- ---- --------- ----------- ---------------
Stuart A. Miller 2002 600,000 8,757,100 --
President and Chief 2001 600,000 5,775,100 --
Executive Officer 2000 600,000 2,817,300 --
Robert J. Strudler 2002 800,000 3,852,800 --
Vice Chairman and 2001 800,000 2,038,300 --
Chief Operating Officer 2000(4) 475,000 1,200,000 --
Jonathan M. Jaffe 2002 500,000 3,963,900 --
Vice President 2001 500,000 1,782,900 --
2000 400,000 1,408,400 --
Bruce E. Gross 2002 450,000 640,000 --
Vice President and 2001 450,000 540,000 --
Chief Financial Officer 2000 425,000 425,000 --
Allan J. Pekor 2002 300,000 675,000 --
Vice President 2001 300,000 525,000 --
2000 300,000 457,300 --
LONG-TERM COMPENSATION
----------------------
AWARDS PAYOUTS
------- -------
RESTRICTED ALL OTHER
STOCK OPTIONS/ LTIP COMPENSATION
NAME AND PRINCIPAL POSITION AWARDS(2)($) SARs PAYOUTS($) (3)($)
--------------------------- ------------ -------- ---------- ------------
Stuart A. Miller -- -- -- 7,100
President and Chief -- -- -- 6,700
Executive Officer 1,843,750 -- -- 6,800
Robert J. Strudler -- -- -- 7,100
Vice Chairman and -- -- -- 7,500
Chief Operating Officer 921,875 -- -- 6,200
Jonathan M. Jaffe -- -- -- 7,100
Vice President -- -- -- 6,700
1,843,750 -- -- 6,800
Bruce E. Gross -- -- -- 7,100
Vice President and -- -- -- 6,700
Chief Financial Officer 1,106,250 -- -- 6,700
Allan J. Pekor -- -- -- 7,100
Vice President -- -- -- 6,700
553,125 -- -- 6,800
-------------------
(1) Annual bonus represents amount earned during the year. Cash payment
of a portion of the bonus may be deferred to subsequent years.
(2) At November 30, 2002, a total of 740,500 shares of Common Stock, with
an aggregate market value of $39,261,310 on that day, that had been
awarded to employees as restricted shares under our 2000 Stock Option
and Restricted Stock Plan were still subject to restrictions. The
shares vest (i.e., cease being subject to restrictions) over five years
from the time they were awarded. Holders of restricted shares are
entitled to the dividends on the shares and can vote the shares. The
restricted shares outstanding on November 30, 2002 included 90,000
shares for Stuart A. Miller (with a market value on that day of
$4,771,800), 45,000 shares for Robert J. Strudler (with a market value
on that day of $2,385,900), 90,000 shares for Jonathan M. Jaffe (with a
market value on that day of $4,771,800), 54,000 shares for Bruce E.
Gross (with a market value on that day of $2,863,080) and 27,000 shares
for Allan J. Pekor (with a market value on that day of $1,431,540).
5
(3) Consists of matching payments by us under the 401(k) aspect of our
Employee Stock Ownership/401(k) Plan, term life insurance premiums and
long-term disability insurance premiums paid by us as follows:
LONG-TERM
401(K) TERM LIFE DISABILITY
MATCH($) INSURANCE($) INSURANCE($)
-------- ------------ ------------
Stuart A. Miller 2002 5,500 900 700
2001 5,100 900 700
2000 5,100 1,000 700
Robert J. Strudler 2002 5,500 900 700
2001 5,100 1,900 500
2000(4) 5,100 900 200
Jonathan M. Jaffe 2002 5,500 900 700
2001 5,100 900 700
2000 5,100 1,000 700
Bruce E. Gross 2002 5,500 900 700
2001 5,100 900 700
2000 5,100 900 700
Allan J. Pekor 2002 5,500 900 700
2001 5,100 900 700
2000 5,100 1,000 700
(4) Does not include compensation from U.S. Home Corporation before we
acquired it on May 3, 2000.
Directors who are not our employees were paid annual fees of $10,000
plus $2,500 for each Board Meeting attended in person, $500 for each Board
Meeting in which they participated by conference communications equipment and
$500 for each committee meeting in which they participated as a member of such
committee. On January 23, 2003, these annual fees were changed to $30,000 per
year, payable half in cash and half with restricted shares of our stock that
vest over three years, plus $2,000 for each Board Meeting and $1,000 for each
committee meeting attended in person (but only one fee for all meetings attended
on a single day) and $500 for each quarterly Board Meeting and $250 for each
other Board or committee meeting attended by conference telephone or video
equipment. Audit Committee members receive an additional $2,500 for each meeting
attended, even if there are other meetings on the same day. Directors may elect
to defer payment of fees until their retirement, resignation or death, and may
elect to receive the deferred payments in cash or shares of our Common Stock.
Directors who are not our employees are also granted, as of the date of each
annual stockholders' meeting, options to purchase 1,000 shares of our Common
Stock at a price equal to the market value of the stock on that date. The
options become exercisable on the one year anniversary of the grant date.
Directors who are also our employees receive no additional remuneration for
services as directors.
6
The following table summarizes our equity compensation plans as of
November 30, 2002 under which we have issued stock options:
NUMBER OF SHARES
REMAINING AVAILABLE FOR
NUMBER OF SHARES TO WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
BE ISSUED UPON EXERCISE PRICE OF EQUITY COMPENSATION
EXERCISE OF OUTSTANDING PLANS (EXCLUDING
OUTSTANDING OPTIONS, OPTIONS, WARRANTS SHARES REFLECTED IN
WARRANTS AND RIGHTS AND RIGHTS COLUMN (a))
Plan Category (a) (b) (c)
----------------------- ----------------------- ------------------------- ---------------------------
Equity compensation
plans approved by
stockholders (1) 2,413,674 $ 31.96 1,697,300
Equity compensation
plans not approved
by stockholders (2) - - -
--------- -------- ---------
Total 2,413,674 $ 31.96 1,697,300
========= ======== =========
(1) Our 2000 Stock Option and Restricted Stock Plan, which was approved by our
stockholders, authorizes us to issue shares of restricted stock, as well as
options. Through November 30, 2002, we had issued a total of 805,000 shares
of restricted stock (net of shares that were forfeited) and were authorized
to issue up to an additional 195,000 shares of restricted stock.
(2) We have a deferred compensation plan, which was not required to be
submitted to our stockholders for approval, under which senior management can
defer compensation, which may include restricted shares prior to such shares'
vesting and may include shares subject to options prior to expiration.
At November 30, 2002, we were committed to issue 60,000 shares of Common
Stock at future dates as deferred compensation.
Under our Deferred Compensation Plan, senior management can
defer cash compensation, return to us restricted shares before they
vest, or deliver to us shares he or she is entitled to receive on exercise
of stock options, and receive in exchange our agreement to pay at a later
date the amount of compensation deferred, plus a return on the cash
compensation based on hypothetical investments selected by the person. The
person who defers compensation may elect to receive the deferred compensation
in cash, except that a person who returns restricted shares may only receive
the deferred compensation in the form of shares of our Common Stock.
7
The following table sets forth information about options which were
granted to our Chief Executive Officer and to our four additional highest paid
executive officers during the fiscal year ended November 30, 2002:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Potential Realizable
----------------- Value at
Percent of Assumed Annual Rates
Number of Total of Stock Price
Securities Options/ Exercise Appreciation
Underlying SARs Granted or Base for Option Term
Options/SARs to Employees Price Expiration ---------------
Name Granted(#) in Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ------------ -------------- -------- ----------- -------- -------
Stuart A. Miller 8,101 1.47% 52.64 1/25/12 268,184 679,630
1,899 0.35% 57.90 1/25/07 17,622 51,032
Robert J. Strudler 10,000 1.82% 52.64 1/25/12 331,050 838,946
Jonathan M. Jaffe 2,000 0.36% 52.64 1/25/12 66,210 167,789
Bruce E. Gross 10,000 1.82% 52.64 1/25/12 331,050 838,946
Allan J. Pekor 10,000 1.82% 52.64 1/25/12 331,050 838,946
The options reflected in the table above were granted under our 2000
Stock Option and Restricted Stock Plan. We typically grant options with a
vesting period of 4 years.
8
The following table sets forth information about option/SAR exercises
in the fiscal year ended November 30, 2002 and options/SARs held as of the end
of that year for our Chief Executive Officer and our four additional highest
paid executive officers:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARs OPTIONS/SARs
AT FISCAL AT FISCAL
YEAR-END(#) YEAR-END($)(2)
SHARES ----------- --------------
ACQUIRED ON VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
NAME EXERCISE REALIZED($)(1) UNEXERCISABLE(U) UNEXERCISABLE(U)
---- ----------- -------------- ---------------- ----------------
Stuart A. Miller 262,355 10,850,858 24,645 (E) 880,485 (E)
75,000 (U) 2,167,143 (U)
Robert J. Strudler 33,334 1,255,650 1,000 (E) 16,380 (E)
52,333 (U) 1,300,875 (U)
Jonathan M. Jaffe 40,000 1,541,200 71,750 (E) 2,653,675 (E)
123,000 (U) 4,287,380 (U)
Bruce E. Gross -- -- 30,484 (E) 1,054,094 (E)
50,000 (U) 1,241,840 (U)
Allan J. Pekor 45,605 1,920,552 1 (E) 37 (E)
63,787 (U) 1,888,236 (U)
----------------------
(1) Based upon the difference between the exercise price of the
options/SARs and the market prices of our Common Stock on the dates on
which the stock options were exercised.
(2) Based upon the difference between the exercise price of the
options/SARs and the last reported sale price of our Common Stock on
November 30, 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
directors, officers and persons who own more than 10 percent of a registered
class of our equity securities to file reports of ownership and changes in
ownership with the SEC. They are required to furnish us with copies of the forms
they file pursuant to Section 16(a). Based solely on our review of the copies of
forms we have received, we believe that our directors, officers and greater than
10% beneficial owners made all required filings, except that (i) Jonathan M.
Jaffe did not file until December 27, 2002 a Form 4 relating to a gift of 771
shares on May 30, 2001, a gift of 274 shares on June 7, 2001, a sale of 30,554
shares on October 8, 2001, a sale of 7,500 shares on January 30, 2002, a sale of
7,500 shares on February 6, 2002, and a gift of 1,140 shares on December 23,
2002, and (ii) Bruce E. Gross did not file until January 10, 2003 a Form 4
relating to a gift of 100 shares on December 23, 2002.
9
INFORMATION REGARDING THE BOARD OF DIRECTORS
Our Board has established an Audit Committee, a Compensation Committee,
a Nominating and Corporate Governance Committee, a Stock Option Committee, a
Directors and Officers Stock Option Committee and an Independent Directors
Committee.
The Audit Committee (formerly called the Audit and Nominating
Committee) consisted of Messrs. Landon and Gerard and since January 10, 2002 has
also included Mr. Bolotin. Our Board has not yet determined that any of those
persons is an audit committee financial expert, as that term is defined in rules
adopted by the SEC in January 2003. The Audit Committee met four times during
fiscal 2002. Our Board has adopted a new charter for the Audit Committee that,
among other things, complies with requirements of the Sarbanes-Oxley Act of 2002
and SEC rules adopted as required by that Act. A copy of that charter is Annex I
to this Proxy Statement. Under its new charter, the principal functions of the
Audit Committee are: (1) oversight of the integrity of our financial statements,
our compliance with legal and regulatory requirements, our independent auditors'
independence, qualifications and performance and the performance of our internal
auditors, (2) providing an open line of communication among our independent
auditors, our internal auditors, our employees and our Board and (3) preparing
the report that appears in our annual meeting proxy statement. Its
responsibilities also include direct supervision of our internal auditors,
selecting and determining the compensation of our independent auditors,
pre-approving all audit and non-audit services rendered to us by our independent
auditors, meeting regularly with our auditors, our management and our internal
auditors, reviewing any issues regarding accounting or internal controls,
including any significant deficiencies in our internal controls reported to us
by our Chief Executive Officer or our Chief Financial Officer, and receiving and
reviewing complaints regarding accounting, internal controls or auditing
matters, including anonymous submissions by employees of concerns regarding
questionable accounting or auditing matters.
The Compensation Committee consisted of Messrs. Landon and Ripault and
since January 10, 2002 has also included Mr. Bolotin. The Compensation Committee
met twice during fiscal 2002. Its principal functions are: recommending to the
full Board how our principal executive officer should be compensated, setting
compensation policies and reviewing management decisions regarding compensation
of our senior executives other than our principal executive officer. In
addition, the Committee makes recommendations to the Board regarding
incentive-compensation plans and equity-based plans that will apply to our
senior management.
The Nominating and Corporate Governance Committee is a new committee.
Its members have not yet been selected and it did not meet during fiscal 2002
(during fiscal 2002, nominations for directors were a responsibility of the
Audit and Nominating Committee, which now is the Audit Committee). Its principal
functions are to identify individuals qualified to serve on the Board, recommend
the persons the Board should nominate for election at our annual meeting of
stockholders and develop and recommend to our Board corporate governance
principles applicable to our Company.
The Stock Option Committee consisted of Messrs. Leonard Miller and
Stuart Miller until Leonard Miller's death on July 28, 2002, and of Stuart
Miller and Robert Strudler after September 19, 2002. The Stock Option Committee
met four times during fiscal 2002. Its principal functions are: granting options
under our stock option plans, setting the terms of these options and
administering the stock option plans. In some instances, Stock Option Committee
awards of stock options are subject to Board of Directors approval.
The Directors and Officers Stock Option Committee was created to
administer the issuance of stock options and stock appreciation rights and
grants of restricted stock awards to officers and directors of our Company. The
Committee consisted of Messrs. Landon and Ripault and since January 10, 2002 has
also included Mr. Bolotin. The Directors and Officers Stock Option Committee met
twice during fiscal 2002.
10
Until November 30, 2002, our by-laws required that any significant
transactions that we have with LNR Property Corporation (LNR) or its
subsidiaries, including significant decisions regarding Lennar Land Partners (a
land joint venture of which we and LNR each own 50%), be approved by an
Independent Directors Committee, which consists entirely of members of our Board
who are not directors of LNR, or officers or employees of LNR or us. The
Independent Directors Committee consisted of Messrs. Lapidus, Landon and Bolotin
until September 19, 2002, and since that date has included all of our Directors
who are not employees (which resulted in the addition of Ms. Shalala and Messrs.
Ripault and Saiontz), except that Mr. Saiontz does not attend meetings at which
transactions or conflicts with LNR are being discussed or vote with regard to
those matters. The committee met three times during fiscal 2002.
Our Board normally meets quarterly, but holds additional special
meetings when required. During fiscal 2002, the Board met five times. Each
director attended all the meetings of the Board which were held while he or she
was a director and at least 80% of the total number of meetings of each
committee of the Board on which he or she was serving.
CODE OF BUSINESS CONDUCT AND ETHICS
We have a Code of Business Conduct and Ethics that applies to all our
employees, including our Chief Executive Officer, our Chief Financial Officer
and our Chief Accounting Officer. The Code of Business Conduct and Ethics is
Annex II to this Proxy Statement. It is also available on our website at
www.lennar.com.
TRANSACTIONS WITH LNR PROPERTY CORPORATION
Stuart A. Miller, our President and Chief Executive Officer, is the
Chairman of the Board of LNR. Partnerships primarily owned by trusts of which he
is a trustee, and he and members of his family are the beneficiaries, own
approximately 30.4% of LNR's stock, and Mr. Miller owns approximately 1.4% of
LNR's stock. Through the partnerships and his direct ownership, Mr. Miller has
the power to cast approximately 81.6% of the votes that can be cast by LNR's
stockholders. LNR was a division, and then a wholly-owned subsidiary, of ours
until we distributed LNR's stock to our stockholders in 1997.
We and LNR each own 50% of Lennar Land Partners and several other
partnerships, from which we frequently purchase land we use in our homebuilding
operations. During the year ended November 30 2002, we paid $83.0 million to
purchase land from Lennar Land Partners and the other partnerships. We believe
the prices at which we have purchased land and other properties from Lennar Land
Partners and the other partnerships have approximated fair value. During the
year ended November 30, 2002, we received fees totaling $7.9 million for
managing Lennar Land Partners and the other partnerships.
Until December 2002, an agreement we entered into with LNR in 1997
prevented us from engaging in businesses of the type in which LNR was
principally engaged in 1997, and prevented LNR from engaging in businesses of
the type in which we were principally engaged in 1997. Those provisions have now
expired. However, our Board and LNR's Board are considering reinstating them
because they feel those provisions have helped LNR and us work cooperatively in
partnerships and other joint endeavors.
Steven Saiontz, one of our directors, was until December 2002, the
Chief Executive Officer of LNR. Although he no longer occupies that position, he
continues to be a director of LNR. Also, his wife (who is Stuart Miller's
sister) is a beneficiary of the trusts described above that indirectly own a
large amount of LNR stock.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (formerly the Audit and Nominating Committee)
oversees the Company's financial reporting process on behalf of the Board of
Directors. Management has the primary responsibility for the financial
11
statements and the reporting process, including the systems of internal
controls. The Audit Committee operates pursuant to an Audit Committee Charter,
which was approved and adopted by the Board of Directors. Each member of the
Audit Committee is independent in the judgment of the Company's Board of
Directors and as required by the current listing standards of the New York Stock
Exchange. In fulfilling its oversight responsibilities, the Audit Committee
reviewed the Company's audited financial statements for the year ended November
30, 2002 with management, including a discussion of the quality, not just the
acceptability, of accounting principles, the reasonableness of significant
judgments and the clarity of disclosures in the financial statements.
The Audit Committee has discussed with the Company's independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as amended. The Audit Committee has
received and reviewed the written disclosures and the letter from the
independent auditors required by the Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees, as amended, and has discussed
the auditors' independence with the auditors.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
November 30, 2002 for filing with the Securities and Exchange Commission. The
Audit Committee's recommendation was considered and approved by the Board of
Directors.
R. KIRK LANDON, Chairman
STEVEN L. GERARD
IRVING BOLOTIN
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors presents this
report to describe the compensation policies it applied with regard to our
executive officers for fiscal 2002, and the basis for the compensation of Stuart
A. Miller, who served as our President and Chief Executive Officer during fiscal
2002.
Each year, the Compensation Committee reviews the compensation of each
of our employees and each employee of our subsidiaries whose base salary for the
prior year exceeded a specified amount ($200,000 for the year 2002). This review
includes salary for the prior year, the anticipated bonus, if any, for the prior
year (the actual bonus usually has not yet been computed) and management's
recommendations as to salary and bonus formulae for the following year (except
that there is no management recommendation as to the Chief Executive Officer).
The bonus formulae for our highest paid executive officers and other employees
is based on net income, return on net assets/return on capital and other factors
that vary depending on an employee's responsibilities.
The Compensation Committee almost always accepts our management's
recommendations as to all but our highest paid executive officers. This is
because our management is more familiar than anyone on the Compensation
Committee with the individual employees, with prevailing levels of compensation
in areas in which particular employees work and with other factors affecting
compensation decisions. Additionally, our management has primary responsibility
for hiring and motivating employees, and for profitability of operations.
However, the Compensation Committee believes that its review of the compensation
of everyone who has received more than a specified amount per year has helped
ensure that management's compensation decisions have been made responsibly, and
have promoted our policy of attempting to compensate employees in the mid-range
of what is customary for comparable work in applicable geographic areas.
The Compensation Committee reviews in greater depth the recommendations
of the Chief Executive Officer regarding compensation of our most highly paid
executive officers. This review includes both proposed salaries and bonus
formulae.
12
At meetings in January and September of 2002, the Compensation
Committee reviewed the compensation of Stuart A. Miller, our Chief Executive
Officer. The Compensation Committee discussed the contributions Mr. Miller had
made as our primary executive officer, and his expected future contributions.
The Committee determined Mr. Miller's compensation with regard to fiscal 2002 to
be a base salary of $600,000, plus a bonus based on our consolidated pretax
income, the percentage of which can vary from 0.50% to 1.00% depending on our
return on net capital during the fiscal year. The Compensation Committee was
aware that Mr. Miller also received during fiscal 2002 substantial
compensation for serving as Chairman of the Board of LNR.
At its January and September 2002 meetings, the Compensation Committee
also reviewed in detail and approved the management recommendations regarding
compensation of the four most highly paid executive officers in addition to Mr.
Miller. Specifically, the committee approved the compensation of Robert J.
Strudler, Jonathan M. Jaffe, Bruce E. Gross and Allan J. Pekor.
R. KIRK LANDON, Chairman
HERVE RIPAULT
IRVING BOLOTIN
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Irving Bolotin, who was elected to the Compensation Committee in
January of 2002, was our Senior Vice President until his retirement in December
1998.
13
PROPOSALS
PROPOSAL TO INCREASE THE AUTHORIZED SHARES
OF COMMON STOCK AND CLASS B COMMON STOCK
At a meeting held on February 12, 2003, our Board of Directors adopted
a resolution declaring it advisable and in the best interests of our
stockholders to amend our Certificate of Incorporation to increase the number of
shares of common stock that we are authorized to issue from 130,000,000 shares,
of which 100,000,000 shares are Common Stock and the remaining 30,000,000 shares
are Class B Common Stock, to 390,000,000 shares, of which 300,000,000 shares
would be Common Stock and the remaining 90,000,000 shares would be Class B
Common Stock. Article IV of our Certificate of Incorporation, as it is proposed
that it be amended to increase the number of shares of common stock we are
authorized to issue, but without the proposed changes described under "Proposal
to Change Terms of Class B Common Stock and Rename Common Stock," marked to show
changes from the current Article IV, is Annex III to this Proxy Statement.
As is discussed under "Proposal to Change Terms of Class B Common Stock
and Rename Common Stock," we are asking our stockholders to approve at the
Annual Meeting amendments to our Certificate of Incorporation that would change
the terms of our Class B Common Stock and change the name of our Common Stock to
"Class A Common Stock." The proposal to increase the number of shares of common
stock we are authorized to issue is not, however, contingent upon our
stockholders approving the proposal to change the terms of the Class B Common
Stock and rename the Common Stock.
At November 30, 2002, we had 55,213,621 shares of Common Stock
outstanding and 12,558,497 additional shares of Common Stock reserved for
issuance upon exercise of outstanding stock options or conversion of outstanding
convertible debt securities. At that date, we had 9,700,462 shares of Class B
Common Stock outstanding. We were authorized to issue 100,000,000 shares of
Participating Preferred Stock and 500,000 shares of Preferred Stock, but there
was no outstanding Participating Preferred Stock or Preferred Stock.
Reasons for the Proposal
Our Board of Directors believes the number of shares of Common Stock
that are available for issuance is not sufficient. At November 30, 2002, we had
only 32,227,882 shares of authorized Common Stock that were not outstanding or
reserved for issuance. We had 20,299,538 shares of authorized Class B Common
Stock that were not outstanding, but, as is discussed under "Proposal to Change
Terms of Class B Common Stock and Rename Common Stock," if our stockholders
approve the amendments to our Certificate of Incorporation that are the subject
of that proposal, we will distribute to the holders of our outstanding Common
Stock and Class B Common Stock one share of Class B Common Stock for each ten
shares of Common Stock or Class B Common Stock held on April 9, 2003. That would
increase our outstanding Class B Common Stock to approximately 16,192,000
shares, and leave us with only approximately 13,808,000 shares we could issue.
Our Board of Directors believes we should have a greater number of
authorized shares available for us to use in acquisitions, to sell in order to
raise capital, to issue under stock option or other incentive programs, or
otherwise to issue. Further, unless the number of shares of Common Stock and
Class B Common Stock we are authorized to issue is increased, we would not be
able to carry out a meaningful split of our common stock if our Board of
Directors determined that a split of our common stock would be in the best
interests of our stockholders.
If the number of authorized shares of Common Stock is increased to
300,000,000 shares, we will have 244,786,379 shares of authorized but unissued
Common Stock or treasury stock, of which 13,786,997 shares are reserved for
issuance on exercise of stock options or conversion of convertible debt
securities (including shares subject to options granted after November 30,
2002). If the number of
14
authorized shares of Class B Common Stock is increased to 90,000,000 shares, we
will have 80,299,538 shares of authorized but unissued Class B Common Stock,
which would be reduced to approximately 73,808,000 shares if we distribute Class
B Common Stock as discussed above. Under the Delaware General Corporation Law,
our Board of Directors has the power to issue any authorized but unissued stock
or treasury stock without any further action on the part of our stockholders.
However, the rules of the New York Stock Exchange require that stockholders
approve any acquisition in which a listed company will be issuing more than
18.5% of the total outstanding shares of a class of listed stock. We are subject
to that voting requirement.
The issuance of additional shares of Common Stock or Class B Common
Stock could dilute the earnings and book value allocable to each share of Common
Stock. Also, if we were to sell or otherwise issue authorized but unissued
Common Stock at a time when a takeover is pending or threatened, the issuance of
additional Common Stock or Class B Common Stock could discourage the takeover by
making it more expensive for the person who wants to take us over to obtain
control of us. However, Stuart Miller, our President and Chief Executive
Officer, has the power to direct the voting of Class B Common Stock that
entitles the holders to cast 63.6% of the votes that can be cast by the holders
of all our currently outstanding Common Stock and Class B Common Stock taken
together and owns approximately 0.5% of our outstanding Common Stock.
Even if we distribute shares of Class B Common Stock to the holders of
our Common Stock and our Class B Common Stock as described under "Proposal to
Change Terms of Class B Common Stock and Rename Common Stock," Stuart Miller
will be able to direct the voting of Class B Common Stock that entitles the
holders to cast approximately 49% of the votes that could be cast by the holders
of our Common Stock and Class B Common Stock taken together. Therefore, it is
unlikely that anyone would attempt to take us over without Mr. Miller's consent.
Vote Required
Approval of the proposed amendment to our Certificate of Incorporation
increasing the number of authorized shares of Common Stock and Class B Common
Stock requires the affirmative vote of the holders of (i) a majority in voting
power of all the outstanding Common Stock and Class B Common Stock voting
together, and (ii) a majority of the shares of Common Stock that are voted with
regard to it. Stuart Miller, who has the power to direct the voting of more than
99.8% of the outstanding Class B Common Stock, and therefore to direct the
voting of shares entitled to more than 63.6% in voting power of all the
outstanding Common Stock and Class B Common Stock voting together, as well as
owning approximately 0.5% of the outstanding Common Stock, says he intends to
cause those shares to be voted in favor of the proposed amendment to the
Certificate of Incorporation. If he does that, the proposed amendment will
receive the required vote of the Common Stock and the Class B Common Stock
voting together, even if no other stockholders vote in favor of it. However, the
amendment also must be approved by the holders of majority of the outstanding
shares of Common Stock that are voted with regard to it. Only if that approval
is also obtained will the amendment be adopted.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL
OF THE PROPOSED AMENDMENT TO OUR CERTIFICATE OF INCORPORATION INCREASING THE
NUMBER OF SHARES OF COMMON STOCK AND CLASS B COMMON STOCK WE ARE AUTHORIZED TO
ISSUE.
PROPOSAL TO CHANGE TERMS OF CLASS B
COMMON STOCK AND RENAME COMMON STOCK
At a meeting held on February 12, 2003, our Board of Directors adopted
a resolution declaring it advisable and in the best interests of our
stockholders to amend our Certificate of Incorporation to change the provisions
relating to our Class B Common Stock, primarily to remove the restrictions on
transfer of Class B Common Stock and to make the Class B Common Stock no longer
convertible into Common Stock, to require that the per share cash dividends be
the same with regard to the Common Stock and the Class B Common Stock and to
change the name of our Common Stock to "Class A Common Stock." The specific
changes are discussed below. Article IV of our Certificate of Incorporation, as
it is proposed to be amended both to increase the number of shares of common
stock
15
we are authorized to issue, as described under "Proposal to Increase the
Authorized Shares of Common Stock and Class B Common Stock" and as proposed to
be amended to change the terms of the Class B Common Stock and rename the Common
Stock, marked to show changes from the current Article IV, is Annex IV to this
Proxy Statement.
If the proposed amendments are approved by our stockholders, on
approximately April 21, 2003, we will distribute to our stockholders of record
on April 9, 2003, one share of Class B Common Stock for each 10 shares of Common
Stock or Class B Common Stock owned of record on April 9, 2003. Our purpose in
doing this will be to increase the number of outstanding shares of Class B
Common Stock in order to increase the number of shares of Common Stock that we
can issue without causing the Class B Common Stock automatically to be converted
into Common Stock (which will happen at any time when the outstanding Class B
Common Stock is less than 10% of the outstanding Common Stock and Class B Common
Stock taken together). If our stockholders do not approve the proposed
amendments to our Certificate of Incorporation changing the terms of the Class B
Common Stock, we will not make the distribution of Class B Common Stock.
We will apply to list the Class B Common Stock on the New York Stock
Exchange, if our stockholders approve the proposed amendment to our Certificate
of Incorporation. That will provide a market in which our stockholders would be
able to trade the Class B Common Stock we distribute to them.
We are proposing to change the name of our Common Stock to "Class A
Common Stock" to be sure that, if both classes of our common stock are publicly
traded, there is no confusion about which of the two classes a person is
purchasing or selling.
Background
We have two classes of common stock - Common Stock and Class B Common
Stock. Our Common Stock is listed on the New York Stock Exchange. At November
30, 2002, there were 55,213,621 shares of Common Stock outstanding and there
were outstanding options and convertible debt securities under which we might be
required to issue as many as 12,558,497 additional shares of Common Stock. At
that date, 9,700,462 shares of Class B Common Stock were outstanding. Although
we are authorized to issue Participating Preferred Stock and Preferred Stock,
there are no outstanding shares of either of these types.
Almost 99.8% of the outstanding Class B Common Stock is held by
partnerships created by Leonard Miller, one of Lennar's two founders, who died
in July 2002. The partnership interests are now directly or indirectly held by
trusts for the benefit of members of Mr. Miller's family (except minor interests
that are owned directly by members of the Miller family). Stuart Miller,
Lennar's President and Chief Executive Officer, is the sole officer and director
of a corporation that has voting control of the Class B Common Stock held by the
Miller family partnerships, and personally owns 9,000 shares of Class B Common
Stock. The Class B Common Stock held by the Miller family partnerships and by
Stuart Miller constitutes 14.9% of the total outstanding shares of our Common
Stock and Class B Common Stock combined, but gives the Miller family
partnerships the power to cast 63.6% of the votes that can be cast with regard
to all our outstanding shares. It is unlikely that the Miller family
partnerships would approve a transaction or group of transactions that would
increase the number of outstanding shares of Common Stock to the point that the
Class B Common Stock is less than 10% of the outstanding Common Stock and Class
B Common Stock taken together, and therefore, the Class B Common Stock would
automatically be converted into Common Stock, except possibly a merger or
similar transaction that would, in effect, be an acquisition of our Company in
its entirety on terms that Stuart Miller and the other members of the Miller
family find attractive.
Currently, our Common Stock and our Class B Common Stock are identical
in all respects, except that
16
- A share of Common Stock entitles its holder to one
vote while a share of Class B Common Stock entitles
its holder to 10 votes.
- The cash dividends paid with regard to a share of
Class B Common Stock in a year cannot be more than
90% of the cash dividends paid with regard to a share
of Common Stock in that year.
- A holder cannot transfer Class B Common Stock, except
to a limited number of Permitted Transferees
(primarily close relatives of the Class B
stockholder, fiduciaries for the Class B stockholder
or for close relatives, and entities in which the
Class B stockholder or close relatives are majority
owners). There is no restriction on the
transferability of Common Stock, other than the need
to comply with securities laws and other applicable
laws.
- Class B Common Stock can at any time be converted
into Common Stock, but Common Stock cannot be
converted into Class B Common Stock.
- Amendments to our Certificate of Incorporation
altering the Common Stock or the Class B Common Stock
require the approval of a majority of the shares of
Common Stock that are voted with regard to them (as
well as a majority in voting power of all the
outstanding shares of Common Stock and Class B Common
Stock combined, and in some instances, a majority of
the outstanding Class B Common Stock).
- If there is a distribution of common stock, holders
of Common Stock receive Common Stock and holders of
Class B Common Stock receive Class B Common Stock.
- A merger or similar transaction in which the holders
of the Class B Common Stock receive per share
consideration that is different from the per share
consideration received by the holders of the Common
Stock must be approved by the holders of a majority
of the outstanding Common Stock, as well as receiving
whatever other approval may be required by law.
- Under Delaware law, certain matters effecting the
rights of holders of Class B Common Stock may require
approval of the holders of the Class B Common Stock
voting as a separate class.
Reasons for the Proposal
Based upon the shares of Common Stock and Class B Common Stock that
were outstanding on February 20, 2003, we can only issue slightly more than
19,500,000 additional shares of Common Stock, whether in connection with
acquisitions or otherwise, without creating a possibility that the Class B
Common Stock will at some time automatically be converted into Common Stock.
Therefore, it is unlikely that the Miller family partnerships would approve
transactions that would involve the issuance of more than approximately
19,000,000 shares of Common Stock, except in extraordinary circumstances. Our
Board of Directors believes it is in our best interests and the best interests
of our stockholders that the Miller family, and particularly Stuart Miller,
continue to have voting control of us. However, our Board of Directors also
feels it is important that we have the flexibility to use Common Stock in
connection with future acquisitions, that we be able to raise funds by selling
Common Stock or securities that are convertible into Common Stock and that we be
able to use stock in employee compensation plans. During the last 5 years, we
have issued 16.5 million shares of Common Stock in acquisitions and have sold
convertible debt securities that are convertible into an additional 10.1 million
shares of Common Stock (although we have also bought back 9.8 million shares of
our Common Stock).
In 1999, our stockholders authorized us to issue up to 100,000,000
shares of Participating Preferred Stock, so we could use it in acquisitions, and
make offerings of it, without creating the possibility that the Class B Common
17
Stock would automatically be converted into Common Stock. However, we have been
advised that, even though the Participating Preferred Stock would be similar in
most respects to the Common Stock, at least as the markets currently exist, the
Participating Preferred Stock would not be viewed by investors in the same way
as the Common Stock in an acquisition or other transaction. Because of that, we
have never issued Participating Preferred Stock and have no current plans to
issue any.
It may be particularly important under current market conditions that
we have shares of Common Stock we can use in connection with acquisitions. For a
number of years, the multiple of price to earnings of the shares of publicly
traded homebuilding companies has been lower than that of companies in many
industries. The average price/earnings multiple at December 31, 2002 of the [ ]
homebuilding companies that make up the ______ index was [ ] compared with an
average price/earnings multiple of [ ] for all the shares included in the
Standard & Poor's 500 Index. Because of this, publicly traded homebuilding
companies with which we have spoken have indicated that, even if they would
consider being acquired in a transaction in which their shareholders received
our stock, they would not consider being acquired for cash without a very
significant premium. This was a factor during the negotiations that led to our
acquisition of U.S. Home Corporation in 2000, and we believe it would be a
factor in any other acquisition of a publicly held homebuilding company that we
might pursue while the price/earnings multiples of homebuilding company stocks
are at or near their current level.
We are always looking at the possibility of acquiring homebuilding or
similar companies or their assets. We frequently enter into confidentiality
agreements before we begin our exploratory examinations of possible acquisition
candidates, and at the date of this Proxy Statement we are a party to
confidentiality agreements with regard to a number of homebuilding and other
companies, including several publicly held companies. At the date of this Proxy
Statement, we are not engaged in full scale due diligence, and are not
discussing transaction terms, regarding any company or companies that would
materially affect our balance sheet or our income statement. However, if the
number of shares of Common Stock we could issue without endangering the Class B
Common Stock were increased significantly (as would happen if the Class B Common
Stock were changed as proposed and we made the proposed distribution of Class B
Common Stock), we may consider attempting to enter into serious acquisition
discussions with one or more significant homebuilding companies.
In order to increase the number of shares of Common Stock we can issue
without endangering the Class B Common Stock, our Board has authorized, subject
to our stockholders approving the proposed changes to our Class B Common Stock,
a distribution to the holders of our Common Stock and of our Class B Common
Stock of one share of Class B Common Stock for each 10 shares of Common Stock or
Class B Common Stock held of record on April 9, 2003. This is discussed in more
detail under "The Proposed Distribution of Class B Common Stock." If the
distribution takes place, it will result in our issuing approximately 6,490,000
additional shares of Class B Common Stock (plus even more shares of Class B
Common Stock if options that were outstanding on April 9, 2003 are exercised).
This would, at least temporarily, increase the number of shares of Common Stock
we could issue by approximately 64,900,000 shares. However, if the Class B
Common Stock remained essentially non-transferable, the only way holders to whom
shares are distributed could sell those shares would be to convert them into
Common Stock and sell the Common Stock. Therefore, if we distributed shares of
Class B Common Stock to the holders of our Common Stock but did not remove the
restriction on transfer of Class B Common Stock, it is likely that most of the
Class B Common Stock we distribute to holders of Common Stock would rapidly be
converted into Common Stock. This would eliminate the principal reason our Board
has approved the proposed distribution of Class B Common Stock. Therefore, the
distribution will only serve its principal purpose if the Class B Common Stock
is made transferable. The proposed changes to the Class B Common Stock would do
this. Further, to avoid the possibility that shares of Class B Common Stock
would be converted into Common Stock even if the Class B Common Stock were
freely tradable, the proposed amendments to our Certificate of Incorporation
would eliminate the ability of a holder of Class B Common Stock to convert it
into Common Stock (although they would not eliminate the automatic conversion of
Class B Common Stock into Common Stock if the outstanding Class B Common Stock
were less than 10% of the outstanding Common Stock and Class B Common Stock
taken together
18
[and the holders of a majority of the Class B Common Stock would have the power
to cause the entire class to be converted into Class A Common Stock].
Making the Class B Common Stock transferable, but not convertible, will
not give holders a way of realizing the value of the Class B Common Stock unless
there is a market for it. Therefore, we will apply to list the Class B Common
Stock on the New York Stock Exchange if our stockholders approve the amendments
to our Certificate of Incorporation changing the terms of the Class B Common
Stock. Further, we believe investors will find it easier to value the Class B
Common Stock if it is as similar as possible to the Common Stock, except for the
difference in voting rights. Therefore, the proposed changes to the Class B
Common Stock would eliminate the current requirement that the dividends paid
with regard to a share of Class B Common Stock in a year not be more then 90% of
the dividends paid in that year with regard to a share of Common Stock, and
instead require that the per share dividends on the two classes be the same.
The specific changes to the Class B Common Stock that would be effected
by the proposed amendments to our Certificate of Incorporation are as follows:
CURRENT PROVISION PROVISION AS PROPOSED TO BE CHANGED
A holder cannot transfer Class B Class B Common Stock will be freely
Common Stock, except to a limited transferable (subject to the
group of Permitted Transferees. requirements of securities laws and
other laws).
Class B Common Stock may at any time Class B Common Stock may not be
be converted into Common Stock. converted into Common Stock, except as
a result of automatic conversion if
the outstanding Class B Common Stock
is less than 10% of the outstanding
shares of Class A Common Stock and
Class B Common Stock taken together,
[and except that holders of a majority
of the Class B Common Stock will have
the power to cause the entire class to
be converted into Class A Common
Stock].
If there is a distribution of common If there is a distribution of common
stock to the holders of our common stock to the holders of our common
stock, the holders of Common Stock stock, we may distribute either Class
receive additional Common Stock and A Common Stock or Class B Common Stock
the holders of Class B Common Stock to the holders of both the Class A and
receive additional Class B Common the Class B Common Stock or we may
Stock. distribute Class A Common Stock to the
holders of the Class A Common Stock
and Class B Common Stock to the
holders of the Class B Common Stock.
Cash dividends with regard to a share Cash dividends per share will be the
of Class B Common Stock in a year same with regard to the Class A Common
cannot be more than 90% of the cash Stock and the Class B Common Stock.
dividends paid with regard to a share
of Common Stock in that year.
19
The proposed changes to the Class B Common Stock would eliminate many
of the differences between the Common Stock and the Class B Common Stock. After
the proposed amendments, the only differences between the Common Stock (renamed
Class A Common Stock) and the Class B Common Stock would be as follows:
COMMON STOCK
(TO BE RENAMED CLASS A COMMON STOCK) CLASS B COMMON STOCK
Entitles holders to one vote per Entitles holders to ten votes
share. per share.
Separate approval of Class A Common No right to vote as a separate
Stock required for amendments to class with regard to amendments
our Certificate of Incorporation to our Certificate of
relating to the Class A Common Incorporation relating to the
Stock or the Class B Common Stock. Class A Common Stock.
If there is a distribution of If there is a distribution of
common stock, at the discretion of common stock, at the discretion
the Company, the holders of Class A of the Company, the holders of
Common Stock and Class B Common Class A Common Stock and Class B
Stock may be given the same class Common Stock may be given the
of common stock (which may be same class of common stock
either Class A Common Stock or (which may be either Class A
Class B Common Stock) or the Common Stock or Class B Common
holders of the Class A Common Stock Stock) or the holders of the
may be given Class A Common Stock Class A Common Stock may be
and the holders of the Class B given Class A Common Stock and
Common Stock may be given Class B the holders of the Class B
Common Stock. Common Stock may be given Class
B Common Stock.
Right to vote as a separate class No right to vote as a separate
on mergers or similar transactions class on mergers or similar
in which holders of Class B Common transactions.
Stock receive per share
consideration which is different
from that received by holders of
Class A Common Stock.
Under Delaware law, certain matters Under Delaware law, certain
affecting the rights of holders of matters affecting the rights of
Class A Common Stock may require holders of Class B Common Stock
approval of the Class A Common may require approval of the
Stock voting as a separate class. Class B Common Stock voting as a
separate class.
No automatic conversion into If the outstanding Class B
another class of stock. Common Stock is less than 10% of
the outstanding Class A Common
Stock and Class B Common Stock,
taken together, the Class B
Common Stock is automatically
converted into Class A Common
Stock. [Also, the holders of a
majority of the Class B Common
Stock will have the power to
cause the entire class to be
converted into Class A Common
Stock.]
20
Change of Name of Common Stock
As is discussed above, if the proposed changes to the Class B Common
Stock are approved, we will distribute shares of Class B Common Stock to the
holders of both our Common Stock and our Class B Common Stock, and we will seek
to have our Class B Common Stock listed on the New York Stock Exchange. We are
concerned that if one of the two classes of our publicly traded stock is called
"Common Stock," there may be confusion about whether that is a generic term for
both classes of our common stock, or whether it is the name of one of the two
classes. Therefore, to avoid any possible confusion, the proposed amendments to
our Certificate of Incorporation would change the name of what currently is
called "Common Stock" to "Class A Common Stock."
If the name of the Common Stock is changed to "Class A Common Stock,"
there will be no need to exchange certificates that state they represent our
Common Stock for certificates that state they represent our Class A Common
Stock. However, anybody who wants to exchange certificates will be able to do
so. All certificates issued after the amendments to our Certificates of
Incorporation become effective will state that they represent Class A Common
Stock.
The Proposed Distribution of Class B Common Stock.
If the proposed amendments to our Certificate of Incorporation changing
the terms of the Class B Common Stock and renaming the Common Stock are
approved, we will distribute on approximately April 21, 2003 to the holders of
record of our Common Stock and the holders of record of our Class B Common Stock
on April 9, 2003, one share of Class B Common Stock for each 10 shares of Common
Stock or Class B Common Stock owned of record on April 9, 2003. We will not
issue fractional shares of Class B Common Stock, but will pay cash in lieu of
issuing fractional shares on the basis of the average of the mean of the high
and low sale prices of the Class B Common Stock in when issued trading reported
on the New York Stock Exchange on each of the five trading days ending on, and
including, April 17, 2003.
Assuming we do not issue or repurchase a significant number of shares
between February 20, 2003 and April 9, 2003, we would be distributing
approximately 6,490,000 shares of Class B Common Stock. This would increase the
number of outstanding shares of Class B Common Stock to approximately 16,190,000
shares and would enable us to issue more than 79,000,000 additional shares of
Class A Common Stock without creating the possibility that the Class B Common
Stock might automatically be converted into Class A Common Stock. In addition,
anti-dilution provisions of options issued under our employee stock option plans
that are outstanding on April 9, 2003 would entitle the holders to receive on
exercise, in addition to the shares of Class A Common Stock as to which they are
exercised, one share of Class B Common Stock with regard to each 10 shares of
Class A Common Stock as to which they are exercised. This could result in our
issuing an additional approximately 364,000 shares of Class B Common Stock,
which would increase the number of shares of Class A Common Stock we could issue
without endangering the Class B Common Stock by 10 shares for each share of
Class B Common Stock we issue upon exercise of those options. The distribution
of shares of Class B Common Stock with regard to our Common Stock would also
change our obligations with regard to our convertible debt securities, but that
change would be to increase the number of shares of Class A Common Stock we are
required to issue on conversion of the convertible debt securities, rather than
to require us to issue additional shares of Class B Common Stock.
The distribution of the Class B Common Stock would affect the voting
power of the Miller family partnerships and of Stuart Miller. As noted above,
Stuart Miller, primarily through the Miller family partnerships, has the power
to cast approximately 63.6% of the votes that can be cast by the holders of all
our outstanding Common Stock and Class B Common Stock. After the distribution,
the shares held by the Miller family partnerships and Stuart Miller would
entitle them to cast only approximately 49.0% of the votes that can be cast by
the holders of all our outstanding Class A Common Stock and Class B Common
Stock. Despite this, Stuart Miller supports the proposed distribution of Class
B Common Stock.
21
Tax Effects of Class B Common Stock Distribution
The proposed distribution of Class B Common Stock to holders of Common
Stock and holders of Class B Common Stock would not result in taxable income or
gain to the persons to whom it is distributed. A holder's basis in the Common
Stock or Class B Common Stock with regard to which a distribution is made would
be allocated between the shares already owned and the newly distributed Class B
Common Stock on the basis of their respective market values immediately after
separate post-distribution trading in the two classes begins. Cash paid in lieu
of a fractional share will be treated as a redemption of the fractional share.
Therefore, the holder will have a taxable gain or loss equal to the difference
between the portion of the holder's basis allocable to the fractional share and
the amount the holder receives in lieu of the fractional share.
Vote Required
Approval of the proposed amendments to our Certificate of Incorporation
changing the terms of the Class B Common Stock and changing the name of the
Common Stock to Class A Common Stock requires the affirmative vote of the
holders of (i) a majority in voting power of all the outstanding Common Stock
and Class B Common Stock voting together, (ii) a majority of the shares of
Common Stock that are voted with regard to the proposal and (iii) a majority of
the outstanding shares of Class B Common Stock that are voted with regard to the
proposal. Stuart Miller, who has the power to direct the voting of more than
99.8% of the outstanding Class B Common Stock, and therefore to direct the
voting of shares entitled to more than 63.6% in voting power of all the
outstanding Common Stock and Class B Common Stock voting together, as well as
owning approximately 0.5% of the outstanding Common Stock, says he intends to
cause those shares to be voted in favor of the proposed amendments to the
Certificate of Incorporation. If he does that, the proposed amendments will
receive the required vote of the Common Stock and the Class B Common Stock
voting together, and of the Class B Common Stock voting separately, even if no
other stockholders vote in favor of them. However, the amendments also must be
approved by the holders of majority of the shares of Common Stock that are voted
with regard to them. Only if that approval is also obtained will the amendments
be adopted.
THE BOARD OF DIRECTORS URGES YOU TO VOTE FOR APPROVAL OF THE AMENDMENTS TO OUR
CERTIFICATE OF INCORPORATION CHANGING THE TERMS OF THE CLASS B COMMON STOCK AND
CHANGING THE NAME OF THE COMMON STOCK TO CLASS A COMMON STOCK.
PROPOSAL TO APPROVE NEW STOCK OPTION AND RESTRICTED STOCK PLAN
On February 12, 2003, our Board of Directors adopted, subject to
approval by our stockholders, the Lennar Corporation 2003 Stock Option and
Restricted Stock Plan (the Plan). Alternative versions of the Plan, assuming the
amendments to our Certificate of Incorporation described under "Proposal to
Change Terms of Class B Common Stock and Rename Common Stock" are, and are not,
adopted are Annexes V and VI to this Proxy Statement. Stockholders will be asked
at the meeting to vote on a proposal to approve whichever version of the Plan is
applicable in view of the results of the voting upon the proposal to change the
Class B Common Stock and rename the Common Stock.
The purpose of the Plan is to encourage and enable those of our
officers, employees and directors, and the officers, employees and directors of
our subsidiaries, upon whose judgment, initiative and efforts we and our
subsidiaries largely depend for the success of our business, to acquire
proprietary interests in us, and by doing so, to stimulate the efforts of those
officers, employees and directors on our behalf and on behalf of our
subsidiaries and strengthen their desire to remain officers, employees or
directors of us or our subsidiaries.
Under the Plan, a committee appointed by our Board of Directors (which
may be the Board itself) may grant stock options, separately or together with
stock appreciation rights, or restricted stock relating to up to 5,000,000
shares of Class A Common Stock or, if the proposal to approve the changes in the
terms of the Class B Common
22
Stock is approved, Class A Common Stock or Class B Common Stock, subject to
adjustment to take account of stock dividends, stock splits, recapitalizations
and similar corporate events. If any option (and any related stock appreciation
right) expires, terminates or is cancelled without being exercised, or any
restricted stock is forfeited, the shares subject to that option or the
forfeited restricted stock may be made the subject of new options, stock
appreciation rights or restricted stock awards granted under the Plan. Options
granted under the Plan may, or may not, be designated as Incentive Stock Options
(ISOs), which receive special tax treatment, as described under "Tax
Consequences," but must meet certain requirements, including that the recipients
be employees, that the exercise price be at least 100% of the fair market value
of the applicable class of common stock on the date of grant, and that the
exercise price of all ISOs held by a person which first become exercisable in a
year not exceed $100,000.
We had a 1997 Stock Option Plan under which we were authorized to grant
stock options and stock appreciation rights relating to a total of 3,000,000
shares of Common Stock (plus additional shares with regard to options that were
outstanding in November 1997, to take account of the distribution of the stock
of LNR Property Corporation to our stockholders), and a 2000 Stock Option and
Restricted Stock Plan, which amended and replaced the 1997 Stock Option Plan,
and under which we were able to grant options and stock appreciation rights and
make restricted stock awards, relating to a total of 4,000,000 shares of Common
Stock (including the shares which were still available for additional option
grants under the 1997 Stock Option Plan when our Board of Directors adopted the
2000 Plan). If our stockholders approve the Plan, it will replace the 2000 Plan,
and therefore, when the Plan becomes effective (which will be immediately after
it is approved by our stockholders), no further options, stock appreciation
rights or restricted stock awards may be granted under the 2000 Plan or the 1997
Plan.
Reasons for the Plan
At February 20, 2003, there were [ ] shares available under the 2000
Plan to be made the subject of stock options or restricted stock awards. Our
Board feels this is not a sufficient number of shares. During the years ended
November 30, 2001 and 2002, we issued options relating to 791,600 and 550,000
shares, respectively. We did not award any shares of restricted stock during
those years, but we had issued 860,000 restricted shares during 2000. In January
2003, we issued options relating to an additional 1,228,500 shares. We believe
it is important that we be able to make annual option awards and award
restricted stock to officers, employees and directors, and that we be able to
award stock options and restricted stock to people we are seeking to hire or are
asking to become directors, without having to delay the awards until
stockholders can approve a new option and restricted stock plan, or an increase
in the number of shares available under our existing plan, or to ask people to
take awards subject to their being invalidated if a new plan or an amendment to
an existing plan is not approved by our stockholders. The Plan would increase
the number of shares available to be made the subject of options or issued as
restricted stock to 5,000,000 shares.
In addition, if our stockholders approve the change in the terms of our
Class B Common Stock described under "Proposal to Change Terms of Class B Common
Stock and Rename Common Stock," it may be desirable to make Class B Common Stock
rather than Class A Common Stock (the current Common Stock) the subject of stock
options or restricted stock awards. The Plan would let our Stock Option
Committee, or whatever other Board committee grants options, specify that
particular awards will relate either to Class A Common Stock or to Class B
Common Stock.
Options
The Committee will determine which officers, employees and directors
will receive options under the Plan, and the terms of the options granted to
particular officers, employees or directors, including, if the changes to the
terms of the Class B Common Stock are approved, whether particular options will
entitle the holders to purchase Class A Common Stock or Class B Common Stock.
However, an option granted under the Plan must expire no more than 10 years
after the date of grant. The Committee may determine that particular options
will initially become exercisable at specified times or in specified
installments, except that no option may be exercisable until
23
at least six months after it is granted, and except that all options will become
immediately exercisable if there is a change in control of us. The exercise
price of an option will be determined by the Committee (subject to the
requirement that if the option is an ISO, the exercise price must not be less
than 100% of the fair market value of the Common Stock on the date the option is
granted), and must be paid in cash or by check, unless the Committee permits it
to be paid in whole or in part with shares of common stock of either class,
valued at their fair market value when the option is exercised. Options granted
under the Plan may be assigned or transferred only with the permission of the
Committee, given after a determination that transferability will not result in
specified negative tax effects and is otherwise appropriate.
Stock Appreciation Rights
Stock appreciation rights may only be granted with regard to specific
stock option grants. A stock appreciation right may not relate to more shares,
or shares of a different class, than those that may be issued on exercise of the
option to which the stock appreciation right relates. A stock appreciation right
gives the holder the right to receive, without payment by the holder, an amount
equal to the excess of the fair market value on the date the stock appreciation
right is exercised of the shares as to which it is exercised over the amount the
holder would have had to pay for those shares if the holder had purchased them
by exercising the related stock option. When a stock appreciation right is
exercised as to a number of shares, the holder will be deemed to surrender the
related option with regard to that number of shares. The Committee may specify
that the sum the holder will receive upon exercise of a stock appreciation right
will be paid wholly or partly in cash or wholly or partly with Class A or Class
B Common Stock valued at its fair market value on the date the stock
appreciation right is exercised.
Restricted Stock
The Committee may (i) authorize the grant of restricted stock (which,
if the proposal to change the terms of the Class B Common Stock is approved, may
be either Class A Common Stock or Class B Common Stock) to key officers,
employees or directors, (ii) fix the price an officer, employee or director must
pay for the restricted stock (which may be none), (iii) determine the
restrictions applicable to the restricted stock and (iv) impose other conditions
with regard to the restricted stock. As to any employee who may be subject to
Section 162(m) of the Internal Revenue Code (i.e., any employee whose
compensation is required by SEC rules to be reported in our annual meeting proxy
statement), grants of restricted stock must be conditioned upon our achieving
performance goals relating to earnings or EBITDA targets, or other operating
result targets, separately or together with our subsidiaries, or by particular
subsidiaries, divisions or business units. Grants of restricted stock to other
employees or directors may be (but are not required to be) conditioned upon
achievement of similar performance goals or individual performance goals. Every
grant of restricted stock must provide that all or part of the restricted stock
will be forfeited if the person to whom the restricted stock is granted ceases
to be an employee or director before one or more vesting dates established by
the Committee when the restricted stock is granted, unless the officer position,
employment or directorship terminates because of death, retirement after
reaching 65 years old, disability or under other circumstances which the
Committee deems appropriate. The vesting requirement will end if there is a
change in control of us.
Tax Consequences Regarding Stock Options and Stock Appreciation Rights
The principal Federal income tax consequences to an officer, employee
or director of the grant of options under the Plan, the exercise of options, and
the sale of shares acquired through the exercise of options, are as follows:
Recipients of options do not have taxable income because of the grant
of options to them under the Plan.
24
Unless an option is an ISO, when the option is exercised the holder will be
treated as receiving ordinary income when the option is exercised equal to the
amount by which the fair market value at that time of the stock as to which the
option is exercised exceeds the exercise price of the option, and the fair
market value of the stock when the option is exercised will be the basis of that
stock while it is held by the person who exercised the option. Therefore, when
the stock is sold, the amount by which the sale price is greater or less than
the fair market value of the shares when the option was exercised will be a
capital gain or loss, which will be long-term or short term, depending on how
long the shares are held after exercise. The holder of an ISO does not realize
any taxable income when the ISO is exercised. The price paid for the stock when
the ISO is exercised will be the basis of that stock while it is held by the
optionee. When an ISO is exercised, the amount by which the fair market value at
the time of exercise of the stock acquired through the exercise exceeds the
exercise price is an adjustment to alternative minimum taxable income unless the
stock is disposed of in the same year. If a person who exercises an ISO holds
the stock for at least one year after the date of exercise (and at least two
years after the date of grant), when the shares are sold the difference between
the exercise price and the sale price will be treated as a long-term capital
gain or loss. If the person does not hold the stock for one year after exercise
(and two years after the date of grant), the person is treated as having made a
"disqualifying disposition," and the person will be treated as receiving
ordinary income at the time of sale equal to the lesser of (i) the amount by
which the fair market value of the stock when the option was exercised exceeded
the exercise price or (ii) the gain on the sale.
When a stock appreciation right is exercised, the holder is treated as
receiving ordinary income equal to the amount paid, or the fair market value of
the Common Stock distributed, to the holder as a result of the exercise. The
holder's basis in any Common Stock received will be its fair market value when
the stock appreciation right was exercised.
When an employee is treated as receiving ordinary income as a result of
exercise of a non-ISO or a stock appreciation right, the Company is required to
withhold and pay withholding tax due with regard to that ordinary income. The
Company may do this by withholding from the employee's compensation, by
withholding from the number of shares issued on exercise of the option or stock
appreciation right or by requiring payment of the amount required to be withheld
before the Company will issue shares upon exercise of the option or stock
appreciation right.
When a non-ISO or a stock appreciation right is exercised or there is a
disqualifying disposition of shares acquired through exercise of an ISO, the
Company will, in at least most instances, be entitled to a deduction equal to
the ordinary income which the person who exercised the option is treated as
having received.
Tax Consequences Regarding Restricted Stock
When the Committee decides to grant restricted stock to a key officer,
employee or director, the Committee must fix one or more dates on which the
restricted stock, or portions of it, will vest. If a person ceases to be an
officer, employee or director (other than because of death, retirement over age
65, disability, or under other circumstances the Committee deems appropriate, or
after there has been a change in control of us), the person will forfeit all
restricted shares which have not vested by the time the person ceases to be an
officer, employee or director. Because of this, normally there will be no tax to
an officer, employee or director (and we will not receive a deduction) when
restricted stock is granted to the officer, employee or director. However, each
time shares vest (i.e., become non-forfeitable), the officer, employee or
director will be taxed on (and we will receive a deduction for) the value of the
shares when they vest, and that value will be the officer's, employee's or
director's basis in the shares. An employee may, however, elect to be taxed on
the value of restricted shares when they are granted to the employee instead of
when they vest. If the employee does that, our deduction will be for the value
of the shares when they are granted to the employee, and that value will be the
employee's basis in the shares.
25
Accounting Treatment
Currently, we do not treat either the grant of an option, or the
exercise of an option, as generating an expense that is reflected on our
consolidated income statement. However, the Financial Accounting Standards Board
is considering requiring companies to record the value of stock options as an
expense when the stock options are granted. It is not clear how stock options
would be valued under the rule being considered. We would, of course, abide by
any rule that might be adopted.
When we award restricted stock to an officer, employee or director, the
restricted stock is valued based on the market price of our common stock on the
date of grant. Unearned compensation arising from the restricted stock grants is
amortized to expense over the period of the restrictions.
Required Vote
Approval of the Plan requires the affirmative vote of the holders of a
majority of the votes which are cast with regard to the proposal to approve the
Plan. Stuart Miller, who has the power to direct the voting of shares entitled
to more than 63.6% in voting power of all the outstanding Common Stock and Class
B Common Stock voting together, has said he intends to cause those shares to be
voted in favor of approving the Plan. If he does that, if there is a quorum
present at the meeting, the Plan will be approved even if no other stockholders
vote to approve it.
The presence in person or by proxy of the holders of a majority in
voting power, but not less than one third in number, of the outstanding shares
of capital stock is required for there to be a quorum at the meeting. Shares
represented by proxies which indicate the stockholders want to abstain will be
treated as being present for the purpose of determining the presence of a
quorum, but will not be voted with regard to the Plan. If a broker indicates on
a proxy that it does not have authority to vote certain shares with regard to
any matters, those shares will not be considered as present.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THIS PROPOSAL.
26
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return of
our Common Stock, assuming the reinvestment of dividends, with the Dow Jones
U.S. Total Market Index and the Dow Jones Home Construction Index:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FISCAL YEAR ENDING NOVEMBER 30
(1997=$100)
[PERFORMANCE GRAPH]
Lennar Corporation Dow Jones U.S. Total Market Index Dow Jones Home Construction Index
1997 100 100 100
1998 107 120 97
1999 78 146 72
2000 152 139 113
2001 178 123 145
2002 254 103 171
The graph assumes $100 invested on November 30, 1997 in Lennar Common Stock, the
Dow Jones U.S. Total Market Index and the Dow Jones Home Construction Index with
the reinvestment of all dividends.
OTHER MATTERS
Our management does not know of any matters other than those described
in this Proxy Statement which will be presented for action at the meeting. If
any other matters properly come before the meeting, or any adjournments, the
person or persons voting the management proxies will vote them in accordance
with their best judgment.
27
AUDITORS
Deloitte & Touche LLP audited our financial statements for the year
ended November 30, 2002. We expect representatives of that firm to be present at
the Annual Meeting of Stockholders to answer questions. We will give them an
opportunity to make a statement if they wish to do so.
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP for professional
services and related expenses rendered for the audit of the Company's annual
financial statements for the fiscal year ended November 30, 2002 and for the
reviews of the financial statements included in the Company's Quarterly Reports
on Form 10-Q for the fiscal year were $_______________.
The fees we paid to Deloitte & Touche for various types of services
during the years ended November 30, 2002 and 2001 were as follows:
FEES DURING THE YEAR ENDED FEES DURING THE YEAR ENDED
TYPE OF SERVICES NOVEMBER 30, 2002 NOVEMBER 30, 2001
Audit services
Audit related services
Tax services
Other services
Audit related services generally include consents and comfort letters,
audits of the Company's employee benefit plans, assistance in understanding and
applying financial accounting and reporting standards and accounting assistance
with proposed transactions. Tax services are primarily tax compliance services
and tax return preparation. Other services are primarily non-consultative
services, and have included [ ]. The Audit Committee (formerly named the
Audit and Nominating Committee) has determined that our auditors' providing
those non-audit services does not impair their independence with regard to us.
Although the Audit Committee has been informed of the types of services
Deloitte & Touche has been rendering to us and has determined that Deloitte &
Touche's providing those services has been compatible with its maintaining its
independence as to us, until , 2003, the Audit Committee did not
pre-approve all services rendered by Deloitte & Touche or any other accounting
firm. Beginning May 6, 2003, our Audit Committee will select the firm that
audits our financial statements, will determine the compensation of that firm,
and will pre-approve all services of any type that firm renders to us.
Our Audit Committee has not at this time selected an accounting firm to
audit our financial statements for the year ending November 30, 2003. It will
discuss the selection at its meeting scheduled for April 2003.
28
STOCKHOLDERS' PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
We must receive any proposals that stockholders wish to be included in
next year's Proxy Statement at our principal executive offices at 700 N.W. 107th
Avenue, Miami, Florida 33172 no later than November 8, 2003.
By Order of the Board of Directors
DAVID B. McCAIN
Secretary
Dated: March 7, 2003
29
ANNEX I
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee is appointed by the Board of Directors. Its primary
functions are to:
- Assist Board oversight of (i) the integrity of the Company's
financial statements, (ii) the Company's compliance with legal
and regulatory requirements, (iii) the independent auditors'
qualifications and independence, (iv) the performance of the
people responsible for the Company's internal audit function
and (v) the performance of the Company's independent auditors,
- Prepare the report that SEC rules require be included in the
Company's annual proxy statement, and
- Provide an open avenue of communication among the Company's
independent auditors, its internal auditors, its management
and its Board of Directors.
ORGANIZATION
- The Committee will be composed of at least three directors, each of
whom is financially literate (i.e., able to read and understand
financial statements and aware of the functions of auditors for a
company) or, in the judgement of the Board, able to become financially
literate within a reasonable period of time after his or her
appointment to the Committee.
- Beginning not later than August 1, 2003, at least one member of the
Committee will be a person who has, through education and experience as
a public accountant or auditor or a principal financial officer,
comptroller or principal accounting officer of a company, or a position
of similar functions,
- an understanding of generally accepted accounting
principles and financial statements;
- experience in (A) the preparation or auditing of
financial statements of companies generally similar to the
Company, and (B) the application of generally accepted
accounting principles in connection with the accounting for
estimates, accruals and reserves;
- experience with internal accounting controls; and
- an understanding of audit committee functions.
- Beginning not later than August 1, 2003, at least one member of the
Committee must be independent. Beginning not later than August 1, 2004,
all members of the Committee must be independent.
(a) A director will not be "independent"
(i) if the director receives any
consulting, advisory, or other compensatory fee from
the Company other than fees for serving in his or her
capacity as a member of the Board and as a member of
Board committees,
30
(ii) unless the Board affirmatively
determines that the director has no material
relationship with the Company (either directly or as
a partner, shareholder or officer of an organization
that has a relationship with the Company) and is not
otherwise an affiliate of the Company,
(iii) if the director is a former
employee of the Company, until five years after the
employment ended,
(iv) if the director is, or in the past
five years has been, affiliated with or employed by a
present or former auditor of the Company or of an
affiliate, until five years after the end of either
the affiliation or employment with the auditor or the
auditing relationship,
(v) if the director is, or in the past
five years has been, part of an interlocking
directorate in which a current executive officer of
the Company serves or served on the compensation
committee of another company that employs the
director, or
(vi) if the director has an immediate
family member in any of the categories listed in (iv)
or (v), until after a five-year "cooling-off" period
or until after the family member is deceased or
becomes incapacitated.
- The Board will designate a member of the Committee to be the
chairman of the Committee.
- The Committee will create its own rules of procedure,
including rules regarding notice of meetings, quorum and
voting.
- The Committee may create subcommittees to perform particular
functions, either generally or in specific instances.
POWERS
The Committee will have the authority to engage independent counsel, accounting
and other advisors, as it determines necessary to carry out its duties. The
Company will provide appropriate funding, as determined by the Committee, in its
capacity as a committee of the Board, for payment of compensation (a) to the
public accounting firm employed by the Company to audit its financial statements
by the Company and (b) to any advisors employed by the audit committee.
The Committee may require any officer or employee of the Company or the
Company's outside counsel or independent auditors to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee. The
Audit Committee may also meet with the Company's investment bankers or with
financial analysts who follow the Company.
RESPONSIBILITIES
The Committee will from time to time adopt any policies or procedures it deems
necessary to ensure that the accounting and reporting practices of the Company
are of the highest quality.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the Committee's responsibility to certify the Company's
financial statements or to guarantee the auditors' report.
To fulfill its responsibilities, the Committee will:
31
Independent Auditors
1. Preapprove all auditing services (including providing comfort
letters in connection with securities offerings) and non-audit
services (including tax services) provided to the Company or
its subsidiaries by the Company's independent auditors, except
for non-audit services covered by the De Minimus Exception in
Section 10A of the Securities Exchange Act of 1934. The Audit
Committee may delegate to one or more of its members who is an
independent director the authority to grant preapprovals.
2. Be directly responsible for the appointment, termination,
compensation, and oversight of the work, of any public
accounting firm employed by the Company (including resolution
of disagreements between management and the auditor regarding
financial reporting) for the purpose of preparing or issuing
an audit report or related work. Each such public accounting
firm will report directly to the Audit Committee.
3. Have the sole authority to approve all audit engagement fees
and terms, as well as all significant non-audit engagements of
the Company's independent auditors.
4. In order to evaluate the independent auditors' qualifications,
performance and independence, at least annually obtain and
review a report by the independent auditors describing: the
firm's internal quality-control procedures; any material
issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or
investigation by government or professional authorities within
the preceding five years, respecting one or more independent
audits carried out by the firm, and any steps taken to deal
with any such issues; and (to assess the auditor's
independence) all relationships between the independent
auditors and the Company. This evaluation should include
review of the partner in the independent auditing firm who has
principal responsibility for its audits of the Company's
financial statements and should take into account the opinions
of management and the Company's internal auditors.
5. Present to the Board its conclusions regarding the independent
auditors' qualifications, performance and independence as a
result of the evaluation described in the preceding paragraph.
6. Meet regularly with the Company's independent auditors so that
they can report on (a) all critical accounting policies and
practices the Company uses or expects to use; and (b) all
alternative treatments of material financial information
within generally accepted accounting principles that have been
discussed with management officials of the Company,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent
auditors.
7. Review with the Company's independent auditors any audit
problems or difficulties and management's response, including
any restrictions on the scope of the independent auditors'
activities and any disagreements with management, and, if
applicable, also including any accounting adjustments that
were noted or proposed by the auditors but were "passed"
(including similar adjustments that were passed because
individually they were not material); any communications
between the audit team and the audit firm's national office
respecting auditing or accounting issues presented by the
engagement; any "management" or "internal control" letter
issued, or proposed to be issued, by the audit firm to the
Company, and all other material written communications between
the independent auditors and the management of the Company.
8. Instruct the independent auditors that the Board and the Audit
Committee are the accountants' client.
9. Ensure that the lead audit partner does not serve in that
capacity for more than five years. Consider whether the audit
firm itself should be changed periodically.
32
10. Meet separately, periodically, with management, with the
internal auditors, and with the independent auditors.
11. Report regularly to the Board.
12. Set clear hiring policies for employees or former employees of
the independent auditors
Internal Audit
1. Review the appointment and replacement of the senior internal
auditing executive.
2. Review the organization, plan and results of the activities of
the Internal Audit department.
3. Review any significant changes in the planned scope of the
internal audit function.
Accounting and Reporting Process
1. Review any major issues regarding accounting principles and
financial statement presentations, including any significant
changes in the Company's selection or application of
accounting principles.
2. Review major issues as to the adequacy of the Company's
internal controls and any special audit steps adopted in light
of material control deficiencies.
3. Review analyses prepared by management and/or the independent
auditors setting forth significant financial reporting issues
and judgments made in connection with the preparation of the
Company's financial statements, including analyses of the
effects of alternative GAAP methods on the Company's financial
statements; the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures on the
financial statements of the Company.
4. Review the audited financial statements and discuss them with
management and the independent accountants. Based on that
review, and the reviews performed by the Audit Committee as
described in paragraphs 1 through 4, make a recommendation to
the Board relative to the inclusion of the Company's audited
financial statements in the Company's annual report on Form
10-K.
5. Obtain reports from management, the Company's senior internal
auditing executive and the independent auditors, as necessary,
that the Company's subsidiary/foreign affiliated entities are
conforming to applicable legal requirements and the Company's
Code of Conduct, including disclosures of insider and
affiliated party transactions.
6. Review with management and the independent auditors any
correspondence with regulators or governmental agencies and
any employee complaints or published reports which raise
material issues regarding the Company's financial statements
or accounting policies.
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Other
1. Discuss the annual audited financial statements and quarterly
financial statements with management and the independent
auditor, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition
and Results of Operations."
2. Meet with the CEO and CFO, prior to their certification of
each annual or quarterly report filed by the Company with the
SEC, and receive those officers' disclosures of (a) all
significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial
data and identify any material weakness in internal controls,
and (b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the Company's internal controls.
3. Review generally earnings press releases issued by the Company
(paying particular attention to any use of "pro forma," or
"adjusted" non-GAAP, information), as well as financial
information and earnings guidance provided to analysts and
rating agencies.
4. Discuss and review policies with respect to risk assessment
and risk management, including guidelines and policies to
govern the process by which risk assessment and risk
management is undertaken.
5. Establish procedures for (a) the receipt, retention, and
treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters;
and (b) the confidential, anonymous submission by employees of
the Company of concerns regarding questionable accounting or
auditing matters.
6. Conduct an annual evaluation of its own performance.
7. Conduct an annual review of this Charter and recommend to the
Board any changes the Committee deems appropriate.
34
ANNEX II
CODE OF BUSINESS CONDUCT AND ETHICS
PURPOSE AND SCOPE
Since its founding, Lennar Corporation (Lennar) has required that all its
associates maintain the highest level of integrity in their dealings on behalf
of the Company (i.e., Lennar and its subsidiaries), in their dealings with the
Company, and in everything affecting the Company's relationships with its banks,
with its security holders and with others with whom the Company does business.
The Company believes the high level of integrity with which it conducts its
affairs has been a major factor in the Company's success.
This Code of Business Conduct and Ethics ("Code") is intended to document the
principles of conduct and ethics to be followed by the Company's associates,
officers, and directors, including its principal executive officer, its
principal financial officer and its principal accounting officer. Its purpose is
to:
- Promote honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between
personal and professional relationships;
- Promote avoidance of conflicts of interest, including
disclosure to an appropriate person or committee of any
material transaction or relationship that reasonably could be
expected to give rise to such a conflict;
- Promote full, fair, accurate, timely and understandable
disclosure in reports and documents that the Company files
with, or submits to, the Securities and Exchange Commission
and in other public communications made by the Company;
- Promote compliance with applicable governmental laws, rules
and regulations;
- Promote the prompt internal reporting to an appropriate person
or committee of violations of this Code;
- Promote accountability for adherence to this Code;
- Provide guidance to associates, officers, and directors to
help them recognize and deal with ethical issues;
- Provide mechanisms to report unethical conduct; and
- Help foster the Company's longstanding culture of honesty and
accountability.
The Company will expect all its associates, officers, and directors to comply at
all times with the principles in this Code. Violations of this Code by an
associate or officer or director are grounds for disciplinary action up to and
including immediate termination of employment and possible legal prosecution.
FAIR DEALING
- Each associate and officer will at all times deal fairly with the
Company's customers, subcontractors, suppliers, competitors and
associates. While we expect our associates to try hard to advance the
interests of the Company, we expect them to do so in a manner that is
consistent with the highest standards of integrity and ethical dealing.
- No associate or officer is to take unfair advantage of anyone through
manipulation, concealment, abuse of privileged information,
misrepresentation of material facts, or any other unfair-dealing
practice.
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COMPLIANCE WITH LAWS, RULES AND REGULATIONS (INCLUDING INSIDER TRADING LAWS)
- Associates, officers, and directors are expected to comply at all times
with all applicable laws, rules and regulations.
- Associates, officers, and directors are required to comply with the
Company's Policy Regarding Non-Public Information, and with all other
policies applicable to them that are adopted by the Company from time
to time.
- Associates, officers, and directors must cooperate fully with the
people responsible for preparing reports filed with the Securities and
Exchange Commission and all other materials that are made available to
the investing public to make sure those people are aware in a timely
manner of all information that might have to be disclosed in those
reports or other materials or that might affect the way in which
information is disclosed in them.
CONFLICTS OF INTEREST
- Definition: A "conflict of interest" occurs when an individual's
private interest is different from the interests of the Company as a
whole. Conflict situations include:
(1) Action or Inaction: When an associate, officer, or
director, or a member of his or her family, will benefit
personally from something the associate, officer, or
director does or fails to do that is not in the best
interests of the Company,
(2) Objectivity: When an associate, officer, or director takes
actions or has interests that may make it difficult to
perform his or her Company work objectively and
effectively,
(3) Personal Benefits: When an associate, officer or director,
or a member of his or her family, receives personal
benefits from somebody other than the Company as a result
of his or her position in the Company which are not
generally available to all the Company's associates, or at
least to all associates in the same area of work or the
same geographic area. Loans to, or guarantees of
obligations of, associates, officers, or directors by
persons with whom the Company does business are of special
concern. Loans to any officer or director require specific
approval of the Conflicts Committee, and
(4) Competing Activities: When an associate, officer, or
director engages in any activity that is competitive with
the business activities and operations conducted from time
to time by the Company. Any ownership interest, whether
active or passive, in any other homebuilder, land
developer, or mortgage lender or title company would be
considered a competitive activity, other than investments
in publicly traded securities that are listed on a
recognized securities exchange or securities quotation
system not exceeding one (1) percent of the outstanding
securities of a class or series.
- Specific Situations: The following rules apply to specific situations
that involve, or may involve, conflicts of interest:
(1) Real Estate Investments: An associate, officer,
or director may make real estate investments in
noncompetitive activities, including investments in
raw land and income producing properties, if the
involvement of the associate, officer, or director
does not require active participation in planning or
zoning changes, processing government approvals, or
other development work with
36
respect to the raw land, and as long as such
activities in general do not in any way interfere with
the associate's, officer's, or director's duties owed
to the Company.
Notwithstanding the foregoing, no associate, officer, or
director may acquire a direct or indirect interest in raw
land (except land upon which to construct a personal
residence) (a) within a twenty-five (25) mile radius of a
present or proposed community of the Company, without the
prior written consent of the applicable one of the
Conflicts Committee or the Audit Committee of Lennar's
Board. Such written notice shall include giving Lennar the
opportunity to acquire such land on the same terms and
conditions as those on which such associate, officer, or
director proposes to acquire the land. Any such offer must
be delivered in writing to the Conflicts Committee, which
will forward it to the Asset Management Committee. If the
Company does not accept an offer within ten days after the
written offer is delivered to the Conflicts Committee,
Lennar will be deemed to have waived its right to acquire
the land, and the associate, officer, or director may,
within six months after the end of the ten day period,
acquire the land on terms no more favorable to the
purchaser than those stated in the written offer delivered
to the Conflicts Committee.
(2) Transactions with the Company: No associate, officer,
or director, or member of the immediate family
(defined below) of an associate, officer, or director,
may sell, lease or buy any kind of property, facility,
equipment or service directly or indirectly from or to
the Company other than on market terms or under
policies, such as policies regarding home purchase
prices or favorable financing terms, available to all
associates at a similar employment level. Any
exceptions to this policy must have written approval
of the Conflicts Committee. All processing and
execution of sales contracts and closing statements
related to home or homesite sales to associates must
be handled by the President of the Division where the
home or homesite is located, with approval by the
appropriate Regional President. No sales commissions
or broker commissions will be paid on sales to
associates.
No associate of the Company shall act as a general
contractor for construction of his or her personal
residence or as a general contractor for any construction
other than for the Company. An unpaid leave of absence
will be considered on a case-by-case basis by the
appropriate Regional President for an associate desiring
to act as a general contractor for the construction of his
or her personal residence.
Associates, officers, or directors that utilize
subcontractors or vendors with which the Company does
business to perform maintenance and repair to their
personal residences will pay for these services at a rate
that is available to all associates in the applicable
geographic area.
(3) Other Business Activities: No full-time associate will
engage in any part-time employment, business
consulting arrangements or other business activities
without written approval from (a) the Conflicts
Committee, if such associate is an officer, (b) from
the CEO or COO if a Regional or Division President, or
(c) from the applicable Division President, corporate
officer, or comparable Lennar Financial Services
position, if not an officer, Regional or Division
President.
New home consultants may not receive commissions on any
real estate sales made outside the Company during their
employment with the Company, unless specifically approved
by the appropriate Division President.
(4) Gifts, etc.: No associate, officer, or director may accept
any gift, favor, or personal incentive, including
vacations, excursions, etc., of more than one hundred
dollars ($100.00) value, or a cash gift of any amount,
from a current or prospective vendor, supplier, contractor
or customer. Exceptions
37
such as golfing, fishing, or hunting trips, etc., of no
more than two working days' duration, which are not
unreasonable or non-customary in cost or scope, and
spectator tickets for sporting or cultural events are
permitted, but only if, in each instance, such trip or
spectator ticket is disclosed to and approved in writing
by the (a) Conflicts Committee, if such associate is an
officer, regional president, or division president, or (b)
from the appropriate division president, corporate
officer, or comparable Lennar Financial Services position,
if such associate is not an officer, regional president or
division president.
(5) Transactions with Family Members: Where an immediate
family member (parent, parent-in-law, spouse, child, or
son or daughter-in-law, or any other adult relative living
in the same household) of any associate, officer, or
director is involved in a transaction with the Company,
all payments, commissions, fees, or other remuneration to
such family member must be disclosed to and approved in
advance by the Conflicts Committee.
(6) Exchange of Benefits: No associate, officer, or director
may solicit or accept any money, gift, favor, service, or
other tangible or intangible benefit or service from any
associate of the Company or any subcontractor, vendor or
other person with which the Company does business, even if
it is otherwise permitted by this Code, in exchange for
anything involving the performance of the person's
responsibilities on behalf of the Company, or under
circumstances that might impair the associate's,
officer's, or director's independent judgement as to what
is in the best interests of the Company.
- Avoidance: Associates, officers, and directors must do everything they
reasonably can to avoid conflicts of interest or actions or
relationships that give the appearance of conflicts of interest.
- Reporting: If a situation that creates a conflict of interest or the
appearance of a conflict of interest arises, the person involved must
promptly report it (1) if the person involved is a director or the
principal executive officer of Lennar, to the Audit Committee of
Lennar's Board of Directors and (2) if the person involved is someone
other than a director or the principal executive officer of Lennar, to
the Conflicts Committee. If an associate, officer, or director becomes
aware of a situation that he or she believes involves a conflict of
interest by another associate, officer, or director, the person who
becomes aware of the situation must promptly report it to (a) the
Conflicts Committee, (b) David McCain, or his successor as general
counsel to Lennar, or (c) the Division President or Financial Services
equivalent within which the particular associate or officer works. Any
report of a situation that is made to the general counsel or to the
Division President or Lennar Financial Services equivalent will be
passed on to the applicable one of the Conflicts Committee or the Audit
Committee of Lennar's Board of Directors. When there is any question of
whether a conflict of interest is present and should be disclosed, all
associates, officers, and directors should resolve any doubt in favor
of full disclosure.
- Exceptions: The Company recognizes that the foregoing procedures may
not give due respect to the specifics of a particular situation. In the
event a situation arises in which an associate, officer, or director
believes the foregoing procedures should not be applied, the associate,
officer, or director should seek the advice, in writing, of the
Conflicts Committee.
- Remedial Actions: In any instance in which an associate, officer, or
director becomes involved in a situation that involves a conflict or
interest, or an appearance of one, he or she must work with the
applicable one of the Conflicts Committee or the Audit Committee of
Lennar's Board to devise an arrangement by which (1) that committee (or
its designee) will monitor the situation which creates, or gives the
appearance of creating, a conflict of interest, (2) the associate,
officer, or director who has a conflict of interest will, to the
fullest extent possible, be kept out of any decisions that might be
affected by the conflict of interest, (3) it is ensured that the
associate, officer, or director who has a conflict of interest will not
profit personally from the situation that causes the conflict of
interest, and (4) every reasonable effort will be made to eliminate the
conflict of interest as promptly as possible.
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CONFLICTS COMMITTEE
The Conflicts Committee shall consist of Robert Strudler, Bruce Gross, Frank
Matthews and David McCain or their duly appointed successors as Chief Operating
Officer, Chief Financial Officer, Director of Human Resources and General
Counsel of Lennar. No Conflicts Committee member may pass judgment on a possible
conflict of interest or appearance of conflict involving that member.
The Conflicts Committee shall keep written records of all findings and matters
brought before it. A quorum of at least two Conflicts Committee members is
required in order for the Conflicts Committee to take formal action.
CORPORATE OPPORTUNITIES
- No associate, officer, or director, will:
1) take for himself or herself personally any opportunity of
which he or she becomes aware, or to which he or she obtains access,
through the use of corporate property, information or position;
2) make it possible for somebody other than the Company to take
advantage of an opportunity in any of the Company's areas of
business of which the associate, officer, or director becomes aware
in the course of his or her activities on behalf of the Company,
unless the Company has expressly decided not to attempt to take
advantage of the opportunity;
3) otherwise use corporate property, information, or position for
personal gain; or
4) compete with the Company generally or with regard to specific
transactions or opportunities.
- Associates, officers, and directors owe a duty to the Company to
advance the Company's legitimate interests whenever the opportunity to
do so arises.
CONFIDENTIALITY
- Associates, officers, and directors must maintain the confidentiality
of all information entrusted to them by the Company or its customers
that is treated by the Company or its customers as confidential, except
when disclosure is authorized by the Company or legally mandated.
- Confidential information includes all information that may be of use to
the Company's competitors, or that could be harmful to the Company or
its customers, if disclosed.
- Associates, officers, and directors must comply with all
confidentiality policies adopted by the Company from time to time and
with confidentiality provisions in agreements to which they or the
Company are parties.
PROTECTION AND PROPER USE OF COMPANY ASSETS
- Associates, officers, and directors must do all reasonable things in
their power to protect the Company's assets and ensure their efficient
use by the Company.
- Associates, officers, and directors will use the Company's assets only
for the Company's legitimate business purposes.
39
CHANGE IN OR WAIVER OF THE CODE
- Any waiver of any provision of this Code must be approved:
- With regard to any director, the principal executive officer
of Lennar or a member of the Conflicts Committee, by the Board of
Directors (but without the involvement of any director who will be
personally affected by the waiver) or by a committee consisting
entirely of directors who will not be personally affected by the
waiver.
- With regard to any other associate or officer, by the
Conflicts Committee.
- No waiver of any provision of this Code with regard to a director or
officer will be effective until that waiver has been reported to the
person responsible for the preparation and filing of the Company's
reports on Form 8-K (or any successor to that form) in sufficient
detail to enable that person to prepare a report on Form 8-K containing
any required disclosure with regard to the waiver.
- Lennar will disclose any change in this Code or any waiver of this Code
in a filing with the Securities and Exchange Commission, or in another
manner that complies with applicable Securities and Exchange Commission
rules, and Lennar will make any other disclosures of changes in, or
waivers of, this Code, that are required by law or by the rules of any
securities exchange or securities quotation system on which the
Company's securities are listed or quoted.
COMPLIANCE
- Associates, officers, and directors must report promptly any violations
of this Code of which they become aware (including any violations of
the requirement of compliance with law) to the person to whom conflicts
of interest involving the person who violated this Code would be
reported as described under "Conflicts of Interest -- Reporting." In
addition, associates may report any violation of this Code to the
Chairman of the Audit Committee of Lennar's Board. Failure to report a
violation can lead to disciplinary action against the person who failed
to report the violation which may be as severe as the disciplinary
action against the person who committed the violation.
- The identity of the associate who reports a possible violation of this
Code by another associate will be kept confidential, except to the
extent the associate who reports the possible violation consents to be
identified or the identification of that associate is required by law.
- Possible violations of this Code may be reported orally or in writing
and may be reported anonymously.
- The Company will not allow retaliation for reports of possible
violations of this Code made in good faith.
TERMS USED IN THIS CODE
- Any reference in this Code to the Company or to an associate of the
Company is to Lennar Corporation and all its subsidiaries or to an
associate employed by Lennar Corporation or any of its subsidiaries.
- Any reference in this Code to a director or officer of the Company is
to a director or officer of Lennar Corporation. It does not refer to a
person who is an officer of a subsidiary unless the person is regularly
involved in setting policy for Lennar Corporation and its subsidiaries,
and therefore in fact functions as an officer of Lennar Corporation.
For the purposes of this Code, a person who is employed by the Company
and serves as an officer of a subsidiary will be treated as an
associate, but not an officer, of the Company.
40
ANNEX III
"ARTICLE IV.
STOCK
The total authorized number of shares of stock of the Corporation is
490,500,000 shares. Of these, 300,000,000 shares are classified as Common
Stock, par value $.10 per share, 90,000,000 shares are classified as Class B
Common Stock, par value $.10 per share, 100,000,000 shares are classified as
Participating Preferred Stock, par value $.10 per share, and 500,000 shares are
classified as Preferred Stock, par value $10.00 per share, except that if at any
time after shares of Class B Common Stock are issued, there no longer are any
outstanding shares of Class B Common Stock, the authorization to issue Class B
Common Stock will terminate and after that time the shares of stock the
Corporation is authorized to issue will be 390,000,000 shares of Common Stock,
par value $.10 per share, 100,000,000 shares of Participating Preferred Stock,
par value $.10 per share, and 500,000 shares of Preferred Stock, par value
$10.00 per share, and the Company will file a Certificate of Amendment to its
Certificate of Incorporation or a restated Certificate of Incorporation showing
the change in the authorized stock. As used in this Certificate of
Incorporation, the term "Common Stock" refers to Common Stock, par value $.10
per share, and does not include Class B Common Stock; the term "Class B Common
Stock" refers to Class B Common Stock, par value $.10 per share; the term
"Participating Preferred Stock" refers to Participating Preferred Stock, par
value $.10 per share; and the term "Preferred Stock" refers to Preferred Stock,
par value $10 per share, and does not include Participating Preferred Stock.
The description of the classes of stock and the relative rights, voting
power, preferences and restrictions of the shares of each class which are fixed
by the Certificate of Incorporation and the express grant of authority to the
Board of Directors of the Corporation (hereinafter referred to as the "Board of
Directors") to fix by resolution or resolutions the dividend rate, the
redemption price, the liquidation price, the conversion rights, if any, and the
sinking or purchase fund rights of shares of any class or of any series of any
class or the number of shares constituting any series of any class are as
follows:
PREFERRED STOCK
(a) The 500,000 shares of Preferred Stock may be issued from time
to time in one or more series, each of such series to have such relative rights,
voting power, preferences and restrictions as are stated herein and in the
resolution or resolutions providing for the issuance of such series adopted by
the Board of Directors as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of
Directors, subject to the provisions of this Article, to authorize from time to
time the issuance of one or more series of Preferred Stock, and with respect to
each series to fix or alter from time to time as to shares then unallotted, by
resolution or resolutions providing for the issuance of such series:
(1) The distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased (except
where otherwise provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares thereof then outstanding) from
time to time by action of the Board of Directors;
41
(2) The dividend rate or rates to which shares of such series
shall be entitled; the restrictions, conditions and limitations upon the payment
of such dividends; whether such dividends shall be cumulative and, if
cumulative, the date or dates from which such dividends shall be cumulative and
the dates on which such dividends if declared shall be payable;
(3) The manner of selecting shares for redemption, the redemption
price and the manner of redemption and the effect thereof;
(4) The amount payable on shares of such series in the event of
any liquidation, dissolution or winding up of the Corporation, which amount may
vary at different dates and may vary depending upon whether such liquidation,
dissolution or winding up is voluntary or involuntary;
(5) The obligation, if any, of the Corporation to maintain a
purchase, retirement or sinking fund for shares of such series and the
provisions with respect thereto;
(6) The terms and conditions of the rights, if any, of the holders
of such series to convert such shares into shares of Common Stock of the
Corporation;
(7) The terms and conditions of the rights, if any, of the holders
of shares of such series to vote such shares;
(8) Any other rights, preferences, powers and restrictions not
inconsistent with applicable law or the provisions hereof.
(c) All shares of any one series of Preferred Stock shall be
identical with each other in all respects, except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereon shall be cumulative. All series of Preferred Stock shall be of equal
rank and be identical in all respects, except as permitted by paragraph (b) of
this provision regarding Preferred Stock.
(d) The holders of the Preferred Stock of each series shall be
entitled to receive such dividends in cash, when and as declared by the Board of
Directors, to be paid out of earned surplus or out of paid-in surplus or out of
net earnings legally available for the payment thereof, as they may be entitled
to in accordance with the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such series, payable on such dates as
may be fixed in such resolution or resolutions. No dividends, whether in cash or
property, shall be paid or declared, nor shall any distribution be made, in any
year on the Common Stock or the Class B Common Stock unless and until the full
dividends on the Preferred Stock of all series required to be paid in that year
have been paid or declared but not paid, and if declared, a sum sufficient for
the payment thereof has been set apart. In addition so long as there shall be
outstanding any shares of Preferred Stock of any series entitled to cumulative
dividends pursuant to the resolution or resolutions providing for the issuance
of such series, no dividends, whether in cash or property shall be paid or
declared, nor shall any distribution be made on the Common Stock, nor shall any
shares of Common Stock or Class B Common Stock be purchased, redeemed or
otherwise acquired for value by the Corporation, unless and until the full
cumulative dividends on the Preferred Stock of all series entitled to cumulative
dividends for all past dividend periods and for the then current dividend period
shall have been paid or declared, and if declared but not paid, a sum sufficient
for the payment thereof has been set apart, and the Corporation shall have set
aside all amounts, if any, theretofore required to be set aside as and for a
purchase, retirement or sinking fund, if any, for the Preferred Stock of all
series for the then current year and all defaults, if any, in complying with any
such purchase, retirement or sinking fund requirements in respect of previous
years shall have been made good. The foregoing provisions of this Paragraph
shall not, however, apply to a dividend payable in Common Stock or Class B
Common Stock or to the acquisition of shares of Common Stock or Class B
42
Common Stock in exchange for, or through application of the proceeds of the sale
of, shares of Common Stock. Accruals of dividends shall not bear interest.
(e) The holders of the Preferred Stock of each series shall be
entitled in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, to be paid as a liquidating
dividend, before any distribution or payment is made to the holders of any
Participating Preferred Stock, Common Stock or Class B Common Stock, the amount
per share provided for in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such series. When such payments shall
have been made in full to the holders of the Preferred Stock, they shall have no
further rights in respect of their shares or the assets of the Corporation. If
upon any liquidation or dissolution or winding up of the Corporation the assets
available for distribution shall be insufficient to pay the holders of all
outstanding shares of Preferred Stock the full amounts to which they
respectively shall be entitled, the holders of the shares of Preferred Stock of
each series shall share ratably in any distribution of assets according to the
respective amounts which would be payable in respect of the shares held by them
upon such distribution if all amounts payable in respect of the Preferred Stock
of that series were paid in full. Neither the statutory merger nor consolidation
of the Corporation into or with any other corporation, nor the statutory merger
or consolidation of any other corporation into or with the Corporation, nor a
sale, transfer or lease of all or any part of the assets of the Corporation
shall be deemed a liquidation, dissolution or winding up of the Corporation
within the meaning of this paragraph.
(f) The Corporation at the option of the Board of Directors may at
any time redeem the whole or from time to time may redeem any part of any series
of Preferred Stock for the consideration provided in and in accordance with the
terms and conditions of the resolution or resolutions of the Board of Directors
authorizing such series.
(g) At all meetings of Stockholders of the Corporation, each
holder of record of Preferred Stock shall have such voting rights, if any, as
may be provided in resolutions adopted by the Board of Directors providing for
the issuance of each series.
PARTICIPATING PREFERRED STOCK
(a) Voting Rights and Powers
With respect to all matters upon which stockholders are entitled to
vote or to which stockholders are entitled to give consent, (1) the holders of
the outstanding shares of Participating Preferred Stock, the holders of the
outstanding shares of Common Stock and the holders of the outstanding shares of
Class B Common Stock will vote together without regard to class, and (2) each
holder of record of Participating Preferred Stock will be entitled to one vote
for each share of Participating Preferred Stock held in the holder's name,
except that (i) any amendment to this Certificate of Incorporation which would
change the number of authorized shares, the par value or the voting rights of,
the restriction on dividends upon, or any other provision of this Certificate of
Incorporation relating to, the Common Stock, the Class B Common Stock or the
Participating Preferred Stock, in addition to being adopted as required by law,
must be approved by the affirmative vote of a majority of the shares of
Participating Preferred Stock and Common Stock, voting together without regard
to class, which are voted with regard to the amendment and (ii) in addition to
any other vote required by this Certificate of Incorporation, the Corporation's
by-laws, any rule of any securities exchange or otherwise, any merger,
consolidation or other business combination involving the Corporation (x) will
require the affirmative vote of a majority of the shares of Participating
Preferred Stock which are voted with regard to the transaction, unless the type
and amount of the consideration received by the holder of a share of
Participating Preferred Stock in the transaction is the same as that received by
the holder of a share Common Stock and (y) will require the affirmative vote of
a majority of the shares of Participating Preferred Stock and Common Stock,
voting together without regard to class, which are voted with regard to the
transaction, unless the type and amount of the consideration received by the
holder of a
43
share of Participating Preferred Stock in the transaction is the same as that
received by the holder of a share of Class B Common Stock; provided however,
that if stockholders are given the right to elect among different kinds of
consideration in a business combination, the holder of a share of Participating
Preferred Stock will be deemed to receive the same type and amount of
consideration as the holder of a share of stock of another class if the holder
of a share of Participating Preferred Stock is given the same rights of election
(including without limitation proration rights) as the holder of a share of
stock of the other class.
(b) Dividends and Distributions.
(1) Cash Dividends. No cash dividends may be paid in a calendar
year with regard to a share of Common Stock or with regard to a share of Class B
Common Stock until cash dividends totaling $0.0125 per share have been paid, or
declared and set aside for payment, in that year with regard to each outstanding
share of Participating Preferred Stock. After dividends totaling $0.0125 per
share have been paid, or declared and set aside for payment, in a calendar year
with regard to each outstanding share of Participating Preferred Stock, no
further cash dividends may be paid in that year with regard to a share of
Participating Preferred Stock until dividends totaling $0.0125 per share have
been paid, or declared and set aside for payment, in that year with regard to
each outstanding share of Common Stock. Any dividends in excess of $0.0125 per
share paid in a calendar year to the holders of the Participating Preferred
Stock or the holders of the Common Stock will be paid with regard to the shares
of both those classes on an equal per share basis without regard to class.
(2) Other Dividends and Distributions. Each dividend or
distribution made to the holders of the Participating Preferred Stock, the
Common Stock or the Class B Common Stock, other than cash dividends or
distributions upon liquidation of the Corporation, will be distributable to the
holders of the Participating Preferred Stock, the Common Stock and the Class B
Common Stock without regard to class, except that in the case of dividends or
other distributions payable in stock of the Corporation, other than Preferred
Stock, the stock distributed with respect to the Participating Preferred Stock
will be additional shares of Participating Preferred Stock, the stock
distributed with regard to the Common Stock will be additional shares of Common
Stock and the stock distributed with regard to the Class B Common Stock will be
additional shares of Class B Common Stock.
(c) Stock Splits, Stock Dividends and Share Consolidations.
The Corporation may not (i) pay a dividend with regard to its
Participating Preferred Stock in additional shares of Participating Preferred
Stock, or divide or consolidate its outstanding Participating Preferred Stock
into a greater or lesser number of shares, unless it pays the same dividend with
regard to its Common Stock (but payable in additional shares of Common Stock
instead of additional shares of Participating Preferred Stock) or divides or
consolidates its outstanding Common Stock in the same manner in which it divides
or consolidates its Participating Preferred Stock or (ii) pay a dividend with
regard to its Common Stock in additional shares of Common Stock, or divide or
consolidate its outstanding Common Stock into a greater or lesser number of
shares, unless it pays the same dividend with regard to its Participating
Preferred Stock (but payable in additional shares of Participating Preferred
Stock instead of additional shares of Common Stock) or divides or consolidates
its outstanding Participating Preferred Stock in the same manner in which it
divides or consolidates its Common Stock.
(d) Liquidation.
No assets of the Corporation may be distributed upon liquidation of the
Corporation to the holders of shares of Common Stock or Class B Common Stock
until the holders of the Participating Preferred Stock have received liquidating
distributions totaling $10.00 per share. When the holders of the Participating
Preferred Stock have received liquidating distributions totaling $10.00 per
share, no further assets of the Corporation may be distributed to the holders of
the Participating Preferred Stock upon liquidation of the Corporation until the
holders
44
of the Common Stock have received liquidating distributions totaling $10.00 per
share. Any liquidating distributions in excess of $10.00 per share to the
holders of the Participating Preferred Stock or the holders of the Common Stock
will be made to the holders of both those classes on an equal per share basis
without regard to class. If assets distributed upon liquidation of the
Corporation are other than cash, the amount distributed to the holders of the
Participating Preferred Stock or the Common Stock will include the value of the
non-cash assets as determined in good faith by the Board of Directors of the
Corporation.
(e) Other Rights.
Except as otherwise provided in this Certificate of Incorporation or
provided by law, each share of Participating Preferred Stock and each share of
Common Stock will have identical rights, powers, preferences and restrictions,
and copies of all reports and other communications which are sent by the
Corporation to the holders of the Common Stock must also be sent to the holders
of the Participating Preferred Stock.
COMMON STOCK AND CLASS B COMMON STOCK
(a) Voting Rights and Powers.
With respect to all matters upon which stockholders are entitled to
vote or to which stockholders are entitled to give consent, (1) the holders of
the outstanding shares of the Common Stock, the holders of the outstanding
shares of Class B Common Stock and the holders of the outstanding shares of
Participating Preferred Stock will vote together without regard to class, (2)
each holder of record of Common Stock will be entitled to one vote for each
share of Common Stock held in the holder's name, and (3) each holder of record
of Class B Common Stock will be entitled to ten votes for each share of Class B
Common Stock held in the holder's name, except that (i) any amendment to this
Certificate of Incorporation which would change the number of authorized shares,
the par value or the voting rights of, the restriction on dividends upon, or any
other provision of this Certificate of Incorporation relating to, the Common
Stock, the Class B Common Stock or the Participating Preferred Stock, in
addition to being adopted as required by law, must be approved by holders of a
majority of the shares of Common Stock and Participating Preferred Stock, voting
together without regard to class, which are voted with regard to the amendment;
and (ii) in addition to any other vote required by this Certificate of
Incorporation, the Corporation's by-laws, by any rule of any securities exchange
or otherwise, any merger, consolidation or other business combination involving
the Corporation (x) will require the affirmative vote of a majority of the
issued and outstanding shares of Common Stock which are voted with regard to the
transaction, unless the type and amount of the consideration received by the
holder of a share of Common Stock in the transaction is the same as that
received by the holder of a share of Participating Preferred Stock, and (y) will
require the affirmative vote of a majority of the outstanding Participating
Preferred Stock and the outstanding Common Stock, voting together without regard
to class, unless the type and amount of consideration received by the holder of
a share of Common Stock in the transaction is the same as that received by the
holder of a share of Class B Common Stock; provided, however that if
stockholders are given the right to elect among different kinds of consideration
in a business combination, the holder of a share of Common Stock will be deemed
to receive the same type and amount of consideration as the holder of a share of
stock of another class if the holder of the share of Common Stock is given the
same rights of election (including without limitation proration rights) as the
holder of a share of stock of the other class.
45
(b) Dividends and Distributions.
(1) Cash Dividends. 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.
(2) Other Dividends and Distributions. Each dividend or
distribution made to the holders of the Common Stock or the Class B Common
Stock, other than cash dividends, will be distributable to the holders of the
Common Stock and Class B Common Stock without regard to class, except that in
the case of dividends or other distributions payable in stock of the Corporation
other than Preferred Stock, the stock distributed with respect to the
Participating Preferred Stock will be additional shares of Participating
Preferred Stock, the stock distributed with respect to the Common Stock will be
additional shares of Common Stock and the stock distributed with respect to the
Class B Common Stock will be additional shares of Class B Common Stock.
(c) Restrictions on Transfer of the Class B Common Stock.
(1) Permitted Transferees. No beneficial owner of shares of Class
B Common Stock (a "Class B Stockholder") may transfer shares of Class B Common
Stock, whether by sale, assignment, gift, bequest or otherwise, except to a
Permitted Transferee of that Class B Stockholder. A "Permitted Transferee" of a
Class B Stockholder is (i) the Class B Stockholder's spouse; (ii) a parent or
lineal descendant (including an adopted child) of a parent of the Class B
Stockholder, or the spouse of a lineal descendant of a parent of the Class B
Stockholder; (iii) a trustee, guardian or custodian for, or an executor,
administrator or other legal representative of the estate of, the Class B
Stockholder, or a trustee, guardian or custodian for a Permitted Transferee of
the Class B Stockholder; (iv) the trustee of a trust (including a voting trust)
for the benefit of the Class B Stockholder and (v) a corporation, partnership or
other entity of which the Class B Stockholder and Permitted Transferees of the
Class B Stockholder are the beneficial owners of a majority in voting power of
the equity. For the purpose of this Paragraph a "beneficial owner" of Class B
Common Stock is a person who, or entity which, has or shares the power to direct
the voting or disposition of the Class B Common Stock.
(2) Impermissible Transfer Void. Any purported transfer of Class B
Common Stock other than to a Permitted Transferee will be void and will not be
recognized by the Corporation. The Corporation may, as a condition to the
registration of a transfer of Class B Common Stock to a purported Permitted
Transferee, require such affidavits or other proof as the Corporation deems
necessary to establish that the transferee is a Permitted Transferee.
(3) Legend on Stock Certificates. Each certificate representing
Class B Common Stock will bear a legend referring to the restrictions on
transfer of the Class B Common Stock.
(4) Registered Owner. Each share of Class B Common Stock will be
registered in the name of the beneficial owner of the share and not in "street
name" or the name of a nominee.
(d) Issuance of Class B Common Stock.
(1) Initial Issuance. Upon the merger of Lennar Corporation ("Old
Lennar") with and into the Corporation (the "Merger") in accordance with a Plan
and Agreement of Merger dated June 10, 1997, (the "Merger Agreement") between
the Corporation (the name of which at that date was Pacific Greystone
Corporation) and Old Lennar, each share of Class B Common Stock, par value $.10
per share, of Old Lennar which is outstanding immediately before the Merger
becomes effective is being converted into and becoming one share of Class B
Common Stock of the Corporation.
46
(2) Subsequent Issuance. The Corporation may not issue any shares
of Class B Common Stock, except (i) as provided in Paragraph (d)(1) or (ii) as a
dividend or distribution as provided in Paragraph (b)(2).
(e) Conversion of Class B Common Stock into Common Stock.
A Class B Stockholder may at any time convert shares of Class B Common
Stock into a like number of shares of Common Stock by surrendering the
certificates representing the shares of Class B Common Stock to be converted (or
representing a greater number of shares of Class B Common Stock) to the Company
accompanied by a request that all or a specified number of the shares of Class B
Common Stock represented by the certificates be converted into Common Stock.
Once Class B Common Stock has been converted into Common Stock, the Common Stock
may not be reconverted into Class B Common Stock.
(f) Termination of Class Rights and Powers.
If at any time the number of outstanding shares of Class B Common Stock
is less than 10% of the outstanding shares of Common Stock and Class B Common
Stock taken together, the Class B Common Stock will automatically be converted
into, and become for all purposes, shares of Common Stock. After the Class B
Common Stock is converted into Common Stock as provided in this paragraph, the
Company may issue certificates which represent Common Stock in exchange for
certificates which represented Class B Common Stock. However, the automatic
conversion of Class B Common Stock into Common Stock will be effective whether
or not certificates are exchanged.
(g) Other Rights.
Except as otherwise provided in this Certificate of Incorporation, or
provided by law, each share of Common Stock and each share of Class B Common
Stock will have identical powers, preferences and rights, including rights in
liquidation, and copies of all reports and other communications which are sent
by the Corporation to the holders of the Common Stock must also be sent to the
holders of the Class B Common Stock."
47
ANNEX IV
"ARTICLE IV.
STOCK
The total authorized number of shares of stock of the Corporation is
490,500,000 shares. Of these, 300,000,000 shares are classified as Class A
Common Stock, par value $.10 per share, 90,000,000 shares are classified as
Class B Common Stock, par value $.10 per share, 100,000,000 shares are
classified as Participating Preferred Stock, par value $.10 per share, and
500,000 shares are classified as Preferred Stock, par value $10.00 per share.
As used in this Certificate of Incorporation, the term "Class A Common Stock"
refers to Class A Common Stock, par value $.10 per share, and includes shares
that before April 9, 2003 were referred to as "Common Stock;" the term "Class B
Common Stock" refers to Class B Common Stock, par value $.10 per share; the term
"Common Stock" without specification of a class refers to the Class A Common
Stock and the Class B Common Stock together; the term "Participating Preferred
Stock" refers to Participating Preferred Stock, par value $.10 per share; and
the term "Preferred Stock" refers to Preferred Stock, par value $10 per share,
and does not include Participating Preferred Stock.
The description of the classes of stock and the relative rights, voting
power, preferences and restrictions of the shares of each class which are fixed
by the Certificate of Incorporation and the express grant of authority to the
Board of Directors of the Corporation (hereinafter referred to as the "Board of
Directors") to fix by resolution or resolutions the dividend rate, the
redemption price, the liquidation price, the conversion rights, if any, and the
sinking or purchase fund rights of shares of any class or of any series of any
class or the number of shares constituting any series of any class are as
follows:
PREFERRED STOCK
(a) The 500,000 shares of Preferred Stock may be issued from time
to time in one or more series, each of such series to have such relative rights,
voting power, preferences and restrictions as are stated herein and in the
resolution or resolutions providing for the issuance of such series adopted by
the Board of Directors as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of
Directors, subject to the provisions of this Article, to authorize from time to
time the issuance of one or more series of Preferred Stock, and with respect to
each series to fix or alter from time to time as to shares then unallotted, by
resolution or resolutions providing for the issuance of such series:
(1) The distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased (except
where otherwise provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares thereof then outstanding) from
time to time by action of the Board of Directors;
(2) The dividend rate or rates to which shares of such series
shall be entitled; the restrictions, conditions and limitations upon the payment
of such dividends; whether such dividends shall be cumulative and, if
cumulative, the date or dates from which such dividends shall be cumulative and
the dates on which such dividends if declared shall be payable;
48
(3) The manner of selecting shares for redemption, the redemption
price and the manner of redemption and the effect thereof;
(4) The amount payable on shares of such series in the event of
any liquidation, dissolution or winding up of the Corporation, which amount may
vary at different dates and may vary depending upon whether such liquidation,
dissolution or winding up is voluntary or involuntary;
(5) The obligation, if any, of the Corporation to maintain a
purchase, retirement or sinking fund for shares of such series and the
provisions with respect thereto;
(6) The terms and conditions of the rights, if any, of the holders
of such series to convert such shares into shares of a class of Common Stock,
into Participating Preferred Stock or into another class or series of Preferred
Stock;
(7) The terms and conditions of the rights, if any, of the holders
of shares of such series to vote such shares;
(8) Any other rights, preferences, powers and restrictions not
inconsistent with applicable law or the provisions hereof.
(c) All shares of any one series of Preferred Stock shall be
identical with each other in all respects, except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereon shall be cumulative. All series of Preferred Stock shall be of equal
rank and be identical in all respects, except as permitted by paragraph (b) of
this provision regarding Preferred Stock.
(d) The holders of the Preferred Stock of each series shall be
entitled to receive such dividends in cash, when and as declared by the Board of
Directors, to be paid out of earned surplus or out of paid-in surplus or out of
net earnings legally available for the payment thereof, as they may be entitled
to in accordance with the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such series, payable on such dates as
may be fixed in such resolution or resolutions. No dividends, whether in cash or
property, shall be paid or declared, nor shall any distribution be made, in any
year on any class of Common Stock unless and until the full dividends on the
Preferred Stock of all series required to be paid in that year have been paid or
declared but not paid, and if declared but not paid, unless a sum sufficient for
the payment thereof has been set apart. In addition so long as there shall be
outstanding any shares of Preferred Stock of any series entitled to cumulative
dividends pursuant to the resolution or resolutions providing for the issuance
of such series, no dividends, whether in cash or property, shall be paid or
declared, nor shall any distribution be made on any class of Common Stock, nor
shall any shares of any class of Common Stock be purchased, redeemed or
otherwise acquired for value by the Corporation, unless and until the full
cumulative dividends on the Preferred Stock of all series entitled to cumulative
dividends for all past dividend periods and for the then current dividend period
shall have been paid or declared, and if declared but not paid, unless a sum
sufficient for the payment thereof has been set apart, and the Corporation shall
have set aside all amounts, if any, theretofore required to be set aside as and
for a purchase, retirement or sinking fund, if any, for the Preferred Stock of
all series for the then current year and all defaults, if any, in complying with
any such purchase, retirement or sinking fund requirements in respect of
previous years shall have been made good. The foregoing provisions of this
Paragraph shall not, however, apply to a dividend payable in one or more
classes of Common Stock or to the acquisition of shares of any class of Common
Stock in exchange for, or through application of the proceeds of the sale of,
shares of any class of Common Stock. Accruals of dividends shall not bear
interest.
(e) The holders of the Preferred Stock of each series shall be
entitled in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, to be paid as a liquidating
49
dividend, before any distribution or payment is made to the holders of
Participating Preferred Stock or any class of, Common Stock, the amount per
share provided for in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such series. When such payments shall
have been made in full to the holders of the Preferred Stock, they shall have no
further rights in respect of their shares or the assets of the Corporation. If
upon any liquidation or dissolution or winding up of the Corporation the assets
available for distribution shall be insufficient to pay the holders of all
outstanding shares of Preferred Stock the full amounts to which they
respectively shall be entitled, the holders of the shares of Preferred Stock of
each series shall share ratably in any distribution of assets according to the
respective amounts which would be payable in respect of the shares held by them
upon such distribution if all amounts payable in respect of the Preferred Stock
of that series were paid in full. Neither the statutory merger nor consolidation
of the Corporation into or with any other corporation, nor the statutory merger
or consolidation of any other corporation into or with the Corporation, nor a
sale, transfer or lease of all or any part of the assets of the Corporation
shall be deemed a liquidation, dissolution or winding up of the Corporation
within the meaning of this paragraph.
(f) The Corporation at the option of the Board of Directors may at
any time redeem the whole or from time to time may redeem any part of any series
of Preferred Stock for the consideration provided in and in accordance with the
terms and conditions of the resolution or resolutions of the Board of Directors
authorizing such series.
(g) At all meetings of Stockholders of the Corporation, each
holder of record of Preferred Stock shall have such voting rights, if any, as
may be provided in resolutions adopted by the Board of Directors providing for
the issuance of each series.
PARTICIPATING PREFERRED STOCK
(a) Voting Rights and Powers
With respect to all matters upon which stockholders are entitled to
vote or to which stockholders are entitled to give consent, (1) the holders of
the outstanding shares of Participating Preferred Stock, the holders of the
outstanding shares of Class A Common Stock and the holders of the outstanding
shares of Class B Common Stock will vote together without regard to class, and
(2) each holder of record of Participating Preferred Stock will be entitled to
one vote for each share of Participating Preferred Stock held in the holder's
name, except that (i) any amendment to this Certificate of Incorporation which
would change the number of authorized shares, the par value or the voting rights
of, the restriction on dividends upon, or any other provision of this
Certificate of Incorporation relating to, any class of Common Stock or the
Participating Preferred Stock, in addition to being adopted as required by law,
must be approved by the affirmative vote of a majority of the shares of
Participating Preferred Stock and Class A Common Stock, voting together without
regard to class, which are voted with regard to the amendment and (ii) in
addition to any other vote required by this Certificate of Incorporation, the
Corporation's by-laws, any rule of any securities exchange or otherwise, any
merger, consolidation or other business combination involving the Corporation
(x) will require the affirmative vote of a majority of the shares of
Participating Preferred Stock which are voted with regard to the transaction,
unless the type and amount of the consideration received by the holder of a
share of Participating Preferred Stock in the transaction is the same as that
received by the holder of a share of Class A Common Stock and (y) will require
the affirmative vote of a majority of the shares of Participating Preferred
Stock and Class A Common Stock, voting together without regard to class, which
are voted with regard to the transaction, unless the type and amount of the
consideration received by the holder of a share of Participating Preferred Stock
in the transaction is the same as that received by the holder of a share of
Class B Common Stock; provided however, that if stockholders are given the right
to elect among different kinds of consideration in a business combination, the
holder of a share of Participating Preferred Stock will be deemed to receive the
same type and amount of consideration as the holder of a share of
50
stock of another class if the holder of a share of Participating Preferred Stock
is given the same rights of election (including without limitation proration
rights) as the holder of a share of stock of the other class.
(b) Dividends and Distributions.
(1) Cash Dividends. No cash dividends may be paid in a
calendar year with regard to a share of any class of Common Stock until cash
dividends totaling $0.0125 per share have been paid, or declared and set aside
for payment, in that year with regard to each outstanding share of Participating
Preferred Stock. After dividends totaling $0.0125 per share have been paid, or
declared and set aside for payment, in a calendar year with regard to each
outstanding share of Participating Preferred Stock, no further cash dividends
may be paid in that year with regard to a share of Participating Preferred Stock
until dividends totaling $0.0125 per share have been paid, or declared and set
aside for payment, in that year with regard to each outstanding share of Class A
Common Stock. Any dividends in excess of $0.0125 per share paid in a calendar
year to the holders of the Participating Preferred Stock or the holders of the
Class A Common Stock will be paid with regard to the shares of both those
classes on an equal per share basis without regard to class.
(2) Other Dividends and Distributions. Each dividend or
distribution made to the holders of the Participating Preferred Stock or
either class of Common Stock, other than cash dividends or distributions upon
liquidation of the Corporation, will be distributable to the holders of the
Participating Preferred Stock, the Class A Common Stock and the Class B Common
Stock without regard to class, except that in the case of dividends or other
distributions payable in stock of the Corporation other than Preferred Stock,
the Board of Directors may determine that the stock distributed with respect to
the Participating Preferred Stock will be additional shares of Participating
Preferred Stock, the stock distributed with regard to the Class A Common Stock
will be additional shares of Class A Common Stock and the stock distributed with
regard to the Class B Common Stock will be additional shares of Class B Common
Stock.
(c) Stock Splits, Stock Dividends and Share Consolidations.
The Corporation may not (i) pay a dividend with regard to its
Participating Preferred Stock in additional shares of Participating Preferred
Stock, or divide or consolidate its outstanding Participating Preferred Stock
into a greater or lesser number of shares, unless it pays the same dividend with
regard to its Class A Common Stock (but payable in additional shares of Common
Stock of either class instead of additional shares of Participating Preferred
Stock) or divides or consolidates its outstanding Class A Common Stock in the
same manner in which it divides or consolidates its Participating Preferred
Stock or (ii) pay a dividend with regard to its Class A Common Stock in
additional shares of Class A Common Stock, or divide or consolidate its
outstanding Class A Common Stock into a greater or lesser number of shares,
unless it pays the same dividend with regard to its Participating Preferred
Stock (but payable in additional shares of Participating Preferred Stock instead
of additional shares of Common Stock) or divides or consolidates its outstanding
Participating Preferred Stock in the same manner in which it divides or
consolidates its Class A Common Stock.
(d) Liquidation.
No assets of the Corporation may be distributed upon liquidation of the
Corporation to the holders of shares of Class A Common Stock or Class B Common
Stock until the holders of the Participating Preferred Stock have received
liquidating distributions totaling $10.00 per share. When the holders of the
Participating Preferred Stock have received liquidating distributions totaling
$10.00 per share, no further assets of the Corporation may be distributed to the
holders of the Participating Preferred Stock upon liquidation of the Corporation
until the holders of the Class A Common Stock have received liquidating
distributions totaling $10.00 per share. Any liquidating distributions in excess
of $10.00 per share to the holders of the Participating Preferred Stock or the
holders of the Class A Common Stock will be made to the holders of both those
classes on an equal per share
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basis without regard to class. If assets distributed upon liquidation of the
Corporation are other than cash, the amount distributed to the holders of the
Participating Preferred Stock or the Class A Common Stock will include the value
of the non-cash assets as determined in good faith by the Board of Directors of
the Corporation.
(e) Other Rights.
Except as otherwise provided in this Certificate of Incorporation or
provided by law, each share of Participating Preferred Stock and each share of
Class A Common Stock will have identical rights, powers, preferences and
restrictions, and copies of all reports and other communications which are sent
by the Corporation to the holders of the Class A Common Stock must also be sent
to the holders of the Participating Preferred Stock.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
(a) Voting Rights and Powers.
With respect to all matters upon which stockholders are entitled to
vote or to which stockholders are entitled to give consent, (1) the holders of
the outstanding shares of the Class A Common Stock, the holders of the
outstanding shares of Class B Common Stock and the holders of the outstanding
shares of Participating Preferred Stock will vote together without regard to
class, (2) each holder of record of Class A Common Stock will be entitled to one
vote for each share of Class A Common Stock held in the holder's name, and (3)
each holder of record of Class B Common Stock will be entitled to ten votes for
each share of Class B Common Stock held in the holder's name, except that (i)
any amendment to this Certificate of Incorporation (except an amendment
described in paragraph (c)) which would change the number of authorized shares,
the par value or the voting rights of, the restriction on dividends upon, or any
other provision of this Certificate of Incorporation relating to, the Class A
Common Stock, the Class B Common Stock or the Participating Preferred Stock, in
addition to being adopted by the holders of a majority in voting power of the
outstanding shares of Class A Common Stock, Class B Common Stock and
Participating Preferred Stock voting together without regard to class, must be
approved by holders of a majority of the shares of Class A Common Stock and
Participating Preferred Stock, voting together without regard to class, which
are voted with regard to the amendment; and (ii) in addition to any other vote
required by this Certificate of Incorporation, the Corporation's by-laws, by any
rule of any securities exchange or otherwise, any merger, consolidation or other
business combination involving the Corporation that is submitted for approval of
the Corporation's stockholders (x) will require the affirmative vote of a
majority of the issued and outstanding shares of Class A Common Stock which are
voted with regard to the transaction, unless the type and amount of the
consideration received by the holder of a share of Class A Common Stock in the
transaction is the same as that received by the holder of a share of
Participating Preferred Stock, and (y) will require the affirmative vote of a
majority of the outstanding Participating Preferred Stock and the outstanding
Class A Common Stock, voting together without regard to class, unless the type
and amount of consideration received by the holder of a share of Class A Common
Stock in the transaction is the same as that received by the holder of a share
of Class B Common Stock; provided, however that if stockholders are given the
right to elect among different kinds of consideration in a business combination,
the holder of a share of Participating Preferred Stock or Class A Common Stock
will be deemed to receive the same type and amount of consideration as the
holder of a share of stock of another class if the holder of the share of
Participating Preferred Stock or Class A Common Stock is given the same rights
of election (including without limitation proration rights) as the holder of a
share of stock of the other class.
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(b) Dividends and Distributions.
Each dividend or distribution made to the holders of the
Class A Common Stock or the Class B Common Stock in cash or otherwise
will be distributable to the holders of the Class A Common Stock and Class B
Common Stock without regard to class, except that in th Z5 0e case of dividends
or other distributions payable in stock of the Corporation other than Preferred
Stock, the Board of Directors may determine that the stock distributed with
respect to the Class A Common Stock will be additional shares of Class A Common
Stock and the stock distributed with respect to the Class B Common Stock will be
additional shares of Class B Common Stock.
(c) Termination of Class Rights and Powers.
If at any time (i) the number of outstanding shares of Class B Common
Stock is less than 10% of the outstanding shares of Class A Common Stock and
Class B Common Stock taken together, or (ii) the holders of a majority of the
outstanding shares of Class B Common Stock vote to cause all the Class B Common
Stock to be converted into Class A Common Stock, the Class B Common Stock will
automatically be converted into, and become for all purposes, shares of Class A
Common Stock and the Corporation will no longer be authorized to issue Class B
Common Stock. After the Class B Common Stock is converted into Class A Common
Stock as provided in this paragraph, the name of the Class A Common Stock will
automatically be changed to "Common Stock," and the Corporation will file with
the Secretary of State of Delaware a Certificate of Amendment or Restated
Certificate of Incorporation reflecting that fact. After the Class B Common
53
Stock is converted into Class A Common Stock as provided in this paragraph, the
Company may issue certificates which represent Class A Common Stock (renamed
Common Stock) in exchange for certificates which represented Class B Common
Stock. However, the automatic conversion of Class B Common Stock into Common
Stock will be effective whether or not certificates are exchanged.
(e) Other Rights.
Except as otherwise provided in this Certificate of Incorporation, or
provided by law, each share of Class A Common Stock and each share of Class B
Common Stock will have identical powers, preferences and rights, including
rights in liquidation, and copies of all reports and other communications which
are sent by the Corporation to the holders of the Class A Common Stock or the
Class B Common Stock must also be sent to the holders of the other class of
Common Stock.
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ANNEX V
LENNAR CORPORATION 2003 STOCK OPTION AND RESTRICTED STOCK PLAN
(Assuming terms of Class B Common Stock not changed)
[STILL TO COME]
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ANNEX VI
LENNAR CORPORATION 2003 STOCK OPTION AND RESTRICTED STOCK PLAN
(Assuming terms of Class B Common Stock changed)
[STILL TO COME]
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