AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER __, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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ASSET INVESTORS CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 84-1038736
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
-------------------------------
3410 SOUTH GALENA STREET TERRY CONSIDINE
SUITE 210 CHAIRMAN OF THE BOARD OF DIRECTORS
DENVER, COLORADO 80231 1873 SOUTH BELLAIRE STREET, 17TH FLOOR
(303) 614-9400 DENVER, COLORADO 80222
(Address, including zip code and (303) 757-8101
telephone number, including area (Name, address, including zip code, and
code, of registrant's principal telephone number, including
executive offices) area code, of agent for service)
-------------------------------
COPY TO:
MICHAEL V. GISSER
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
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Approximate Date of Commencement of Proposed Sale to the Public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. /_/
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If the Form is filed to register additional securities for an offering
pursuant to Rule 464(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier registration statement for the same offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /_/
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE.
=====================================================================================================
Title of Each Proposed Maximum Proposed Maximum
Class of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered per Offering Registration
(1) Unit (2) Price (1)(2) Fee (3)(5)
=====================================================================================================
<S> <C> <C> <C> <C>
Debt Securities (4)...................
Preferred Stock, par value $.01 per
share (4).............................
Common Stock, par value $.01 per
share (4).............................
Warrants (4)..........................
Sub-Total................. $200,000,000 $59,000
Common Stock, par value $.01 per $25,000,000 $7,375
share (5).............................
Total........................... $225,000,000 $66,375
====================================================================================================
</TABLE>
1. The aggregate initial offering price of the above-referenced securities
(other than the Resale Shares (as defined below), collectively, the
"Securities") registered hereby will not exceed $200,000,000. Such amount
represents the principal amount of any Debt Securities issued at their
principal amount, the issue price rather than the principal amount of any
Debt Securities issued at an original issue discount, the liquidation
preference (or, if different, the issue price) of any Preferred Stock,
and the issue price of any Common Stock (other than the Resale Shares)
or Warrants (but not the exercise price of any Securities issuable upon
the exercise of such Warrants). Any Securities registered hereunder may
be issued or sold separately, together or as units with other Securities
registered hereunder or upon exercise or conversion of any such
Securities.
2. The proposed maximum offering price per unit will be determined, from
time to time, by the Registrant in connection with the offering of the
Securities hereunder, and by the Selling Stockholders in connection with
the offering of the Resale Shares.
3. Calculated pursuant to Rule 457(o) of the rules and regulations under
the Securities Act of 1933, as amended, based on, in the case of the
Securities, the maximum aggregate offering price of all the Securities
and, in the case of the Resale Shares, the maximum aggregate offering
price of all the Resale Shares.
4. Subject to footnotes (1) and (5), there is being registered hereunder
such indeterminate principal amount of Debt Securities, such
indeterminate number of shares of Preferred Stock, such indeterminate
number of shares of Common Stock (other than the Resale Shares) and such
indeterminate number of Warrants as may be issued from time to time by
the Registrant, including Securities issued upon conversion, exchange or
exercise of Warrants or convertible or exchangeable Debt Securities or
Preferred Stock.
5. This offering will include shares of Common Stock (the "Resale Shares")
to be offered and sold from time to time by certain selling stockholders,
as described herein under "Selling Stockholders."
-------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION
8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such state.
============================================================================
PROSPECTUS
ASSET INVESTORS CORPORATION
$200,000,000
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
Assets Investors Corporation, a Maryland corporation ("AIC"), may offer
from time to time (i) senior, senior subordinated or subordinated debt
securities (the "Debt Securities") consisting of debentures, notes and/or
other unsecured evidences of indebtedness, (ii) shares of preferred stock,
par value $.01 per share (the "Preferred Stock"), (iii) shares of its
Common Stock, par value $.01 per share (the "Common Stock"), and (iv)
Warrants to purchase Debt Securities, Preferred Stock or Common Stock, as
shall be designated by AIC at the time of the offering (the "Warrants").
The Debt Securities, the Preferred Stock, the Common Stock and the Warrants
are collectively referred to as the "Securities" and will have an aggregate
initial offering price of up to $200,000,000. The Securities may be offered
separately or together (in any combination) and as separate series, in any
case, in amounts, at prices and on terms to be determined at the time of
sale.
The form in which the Securities are to be issued, and the terms of such
Securities, including without limitation, their specific designation,
aggregate principal amount or aggregate initial offering price, maturity,
if any, rate and times of payment of interest or dividends, if any,
redemption, conversion, exchange and sinking fund terms, if any, voting or
other rights, if any, exercise price and detachability, if any, and other
specific terms will be set forth in a Prospectus Supplement (the
"Prospectus Supplement"), together with the terms of offering of such
Securities. If so specified in the applicable Prospectus Supplement, Debt
Securities of a series may be issued in whole or in part in the form of one
or more temporary or permanent global securities. The Prospectus Supplement
will also contain information, as applicable, about certain material United
States Federal income tax considerations relating to the particular
Securities offered thereby. The Prospectus Supplement will also contain
information, where applicable, as to any listing on a national securities
exchange of the Securities covered by such Prospectus Supplement.
The Securities may be offered directly through agents designated from
time to time by AIC, or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Securities,
their names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable
from the information set forth, in the applicable Prospectus Supplement.
See "Plan of Distribution." No Securities may be sold without delivery of
the applicable Prospectus Supplement describing the method and terms of the
offering of such Securities.
In addition, this Prospectus relates to the offer and sale from time to
time by certain selling stockholders of up to 1,423,104 shares of Common
Stock, as described herein under "Selling Stockholders." AIC will not
receive any proceeds from the sale of such shares of Common Stock.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED
UNDER "RISK FACTORS" SET FORTH IN THE APPLICABLE PROSPECTUS SUPPLEMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
SEPTEMBER 29, 1998
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
**1.1 Form of Underwriting Agreement for Debt Securities.
**1.2 Form of Underwriting Agreement for Preferred Stock.
**1.3 Form of Underwriting Agreement for Common Stock.
**1.4 Form of Underwriting Agreement for Warrants.
**4.1 Form of Senior Debt Securities Indenture (including form of note).
**4.2 Form of Senior Subordinated Debt Securities Indenture (including
form of note).
**4.3 Form of Subordinated Debt Securities Indenture (including form
of note).
**4.4 Form of Warrant Agreement (including form of Warrant Certificate).
**4.5 Form of Preferred Stock Certificate.
***4.6 Specimen certificate for Common Stock.
**5.1 Opinion of Piper & Marbury L.L.P. regarding the validity of the
Securities offered hereby.
**8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax
matters.
**12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of Ernst & Young LLP.
**23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
their opinion filed as Exhibit 8.1).
**23.3 Consent of Piper & Marbury L.L.P. (included in their opinion
filed as Exhibit 5.1).
24 Power of Attorney (included on page II-5).
**25.1 Statement of Eligibility and Qualification of Trustee under the
Senior Debt Securities Indenture.
**25.2 Statement of Eligibility and Qualification of Trustee under the
Senior Subordinated Debt Securities Indenture.
**25.3 Statement of Eligibility and Qualification of Trustee under the
Subordinated Debt Securities Indenture.
- ----------------------------
* Filed previously.
** To be filed by amendment or incorporated by reference prior to the
offering of Securities.
*** Incorporated by reference from AIC's Annual Report on Form 10-K for
the year ended December 31, 1988.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
SECURITIES OFFERED HEREBY OR BY ANY PROSPECTUS SUPPLEMENT OR OTHER
SECURITIES OF AIC. SUCH TRANSACTIONS MAY BE EFFECTED THROUGH THE NEW YORK
STOCK EXCHANGE OR OTHERWISE. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION" INCLUDED ELSEWHERE HEREIN AND IN THE ACCOMPANYING
PROSPECTUS SUPPLEMENT.
AVAILABLE INFORMATION
AIC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by AIC with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C.
20549; 7 World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained at prescribed rates from the
Public Reference Room of the Commission at 450 Fifth Street, NW,
Washington, D.C. 20549. AIC's Common Stock is listed on the New York Stock
Exchange ("NYSE") under the symbol "AIC," and such material described above
can also be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005. The Commission also maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants, such as AIC, that
file electronically with the Commission.
AIC has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Such additional
information is available for inspection and copying at the offices of the
Commission. Statements contained in this Prospectus, in any Prospectus
Supplement or in any document incorporated by reference herein or therein
as to the contents of any contract or other document referred to herein or
therein are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to,
or incorporated by reference in, the Registration Statement, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by AIC with the Commission
pursuant to the Exchange Act (File No. 1-9360), are incorporated herein
by reference:
(i) Annual Report on Form 10-K for the year ended December
31, 1997;
(ii) Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998; and
(iii) Current Reports on Form 8-K dated January 31, 1998,
February 27, 1998 (as amended by Amendment No. 1 filed May 13, 1998),
May 29, 1998 (as amended by Amendment No. 1 filed July 29, 1998) and
July 16, 1998 (as amended by Amendment No. 1 filed September 28,
1998).
All documents filed by AIC pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities shall be deemed
to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing such documents.
Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein (or in the applicable Prospectus Supplement) or
in any other subsequently filed document that is or is deemed to be
incorporated by reference herein modifies or supersedes such previous
statement. Any statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus, except as so modified or superseded.
Copies of all documents which are incorporated herein by reference
(other than the exhibits to such documents, unless such exhibits are
specifically incorporated by reference herein), will be provided without
charge to any person to whom this Prospectus has been delivered, upon
request. Requests for such copies should be directed to Asset Investors
Corporation, 3410 South Galena Street, Suite 210, Denver, Colorado 80231,
Attention: Corporate Secretary, telephone number (303) 614-9400.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
or any Prospectus Supplement and, if given or made such information or
representation must not be relied upon as having been authorized by AIC or
any underwriter or agent. This Prospectus and any Prospectus Supplement do
not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction where, or to any person
to whom, it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus or any Prospectus Supplement nor any sale made
hereunder or thereunder shall, under any circumstances, create any
implication that the information herein or therein is correct as of any
time subsequent to their respective dates.
THE COMPANY
AIC is a Maryland corporation that was formed in 1986 and has elected
to be treated for United States federal income tax purposes as a real
estate investment trust ("REIT"). AIC's Common Stock is listed on the New
York Stock Exchange under the symbol "AIC." In May, 1997, AIC transferred
substantially all of its assets and liabilities to Asset Investors
Operating Partnership, L.P. (the "Operating Partnership") in exchange for a
general partner interest in the Operating Partnership, and AIC conducts
substantially all of its operations through the Operating Partnership and
subsidiary entities thereunder. As of September 25, 1998, AIC held a 78.1%
interest in the capital and profits of the Operating Partnership, as its
sole general partner.
AIC, through the Operating Partnership and its other direct and
indirect controlled subsidiary entities (collectively, the "Company"), is
engaged in the ownership, acquisition, development, management and
financing of manufactured home communities. The Company is
self-administered and self-managed. As of August 31, 1998, the Company held
interests, as owner, ground lessee or mortgage lender (including certain
participating mortgages), in 24 manufactured home communities and two
recreational vehicle parks consisting of a number of developed homesites,
sites ready for homes, sites available for future development and
recreational vehicle sites (together with the interest in the golf course
described below, the "Direct Properties"). In addition, AIC had an interest
in a golf course adjacent to one of the manufactured home communities, and
it managed five communities for third party owners (such managed
communities, the "Managed Properties", and, together with the Direct
Properties, the "Properties")
In addition to its direct and indirect interest in the Properties,
the Operating Partnership also owns approximately 27% of the common stock
of Commercial Assets, Inc. ("CAX"), a publicly traded Maryland corporation
that has elected to be taxed as a REIT. The Operating Partnership also owns
the non-voting stock of AIC Manufactured Housing Corp. ("AICMHC") and AIC
Management Corp. ("AICMC").
AIC's headquarters are located at 3410 Galena Street, Suite 210,
Denver, Colorado 80231 and its telephone number is (303) 614-9400.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement,
AIC intends to use the net proceeds from the sale of the Securities (other
than proceeds from the sale by any Selling Stockholder of its shares of
Common Stock) for working capital and general corporate purposes, which may
include the repayment of outstanding indebtedness, the financing of future
acquisitions (which may include real properties, interests therein or real
estate-related securities) and the improvement of certain of the Direct
Properties. Pending the use thereof, AIC intends to invest any net proceeds
in short-term, interest-bearing securities.
The Selling Stockholders will receive all of the net proceeds from
the sale of shares of Common Stock offered by such Selling Stockholders
hereby. AIC will not receive any proceeds from the sale of such shares by
the Selling Stockholders.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the six months
ended June 30, 1998 was 4.1:1 and for the years ended December 31, 1997,
December 31, 1996, December 31, 1995, December 31, 1994 and December 31,
1993 was 20.5:1, 110.9:1, 1.4:1, 1.1:1, and 0.9:1, respectively.
The ratio of earnings to fixed charges for the Company was computed
by dividing earnings by fixed charges. For this purpose, "earnings"
consists of income before minority interest plus fixed charges (other than
any interest which has been capitalized); and "fixed charges" consists of
interest expense (including amortization of loan costs) and interest which
has been capitalized.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The following description sets forth certain general terms and
provisions of the Debt Securities to which any Prospectus Supplement may
relate. The particular terms of the Debt Securities offered by any
Prospectus Supplement and the extent, if any, to which such general
provisions may apply to the Debt Securities so offered will be described in
the Prospectus Supplement relating to such Debt Securities.
The Debt Securities may be issued, from time to time, in one or more
series, and will constitute either senior Debt Securities ("Senior Debt
Securities"), senior subordinated Debt Securities ("Senior Subordinated
Debt Securities") or subordinated Debt Securities ("Subordinated Debt
Securities"). Senior Debt Securities may be issued under an Indenture (the
"Senior Debt Securities Indenture") to be entered into between AIC and a
trustee to be named in the applicable Prospectus Supplement (the "Senior
Debt Securities Trustee"). The Senior Subordinated Debt Securities may be
issued from time to time under an Indenture (the "Senior Subordinated Debt
Securities Indenture") to be entered into between AIC and a trustee to be
named in the applicable Prospectus Supplement (the "Senior Subordinated
Debt Securities Trustee"). The Subordinated Debt Securities may be issued
from time to time under an Indenture (the "Subordinated Debt Securities
Indenture") to be entered into between AIC and a trustee to be named in the
applicable Prospectus Supplement (the "Subordinated Debt Securities
Trustee").
The Senior Debt Securities Indenture, the Senior Subordinated Debt
Securities Indenture, and the Subordinated Debt Securities Indenture are
referred to herein individually as an "Indenture" and, collectively, as the
"Indentures." The Senior Debt Securities Trustee, the Senior Subordinated
Debt Securities Trustee and the Subordinated Debt Securities Trustee are
referred to herein individually as a "Trustee" and, collectively, as the
"Trustees." Forms of the Indentures will be filed as exhibits to the
Registration Statement of which this Prospectus is a part or incorporated
by reference from documents subsequently incorporated herein by reference.
The Indentures will be subject to and governed by the Trust Indenture Act
of 1939, as amended (the "TIA"). Capitalized terms used in this section
which are not otherwise defined in this Prospectus shall have the meanings
set forth in the Indenture to which they relate. The statements made under
this heading relating to the Debt Securities and the Indentures are
summaries of the anticipated provisions of the Debt Securities and the
Indentures, do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indentures and the Debt Securities, including the definitions therein of
certain terms.
The Debt Securities will be direct, unsecured obligations of AIC. The
Indentures do not limit the aggregate principal amount of Debt Securities
that may be issued thereunder and provide that Debt Securities may be
issued thereunder from time to time in one or more series. Under the
Indentures, AIC will have the ability to issue Debt Securities with terms
different from those of Debt Securities previously issued, without the
consent of the holders of previously issued series of Debt Securities, in
an aggregate principal amount determined by AIC.
The applicable Prospectus Supplement or Prospectus Supplements
relating to any Senior Subordinated Debt Securities or Subordinated Debt
Securities will set forth the aggregate amount of outstanding indebtedness,
as of the most recent practicable date, that by the terms of such Debt
Securities would be senior to such Debt Securities and any limitation on
the issuance of additional senior indebtedness.
Debt Securities may be issued and sold at a discount below their
principal amount ("Discount Securities"). Special United States Federal
income tax considerations applicable to Debt Securities issued with
original issue discount, including Discount Securities, will be described
in more detail in any applicable Prospectus Supplement. Even if Debt
Securities are not issued at a discount below their principal amount, such
Debt Securities may, for United States Federal income tax purposes, be
deemed to have been issued with "original issue discount" ("OID") because
of certain interest payment characteristics. In addition, special United
States Federal tax considerations or other restrictions or terms applicable
to any Debt Securities offered exclusively to United States Aliens or
denominated in a currency other than United States dollars will be set
forth in a Prospectus Supplement relating thereto.
The applicable Prospectus Supplement or Prospectus Supplements will
describe, among other things, the following terms of the Debt Securities
offered thereby (the "Offered Debt Securities"): (i) the title of the
Offered Debt Securities; (ii) any limit on the aggregate principal amount
of the Offered Debt Securities; (iii) whether the Offered Debt Securities
may be represented initially by a Debt Security in temporary or permanent
global form, and if so, the initial Depositary with respect to such
temporary or permanent global Debt Security and whether the circumstances
under which beneficial owners of interests in any such temporary or
permanent global Debt Security may exchange such interests for Debt
Securities of such series and of like tenor of any authorized form and
denomination; (iv) the price or prices at which the Offered Debt Securities
will be issued; (v) the date or dates on which the principal of the Offered
Debt Securities is payable or the method of determination thereof; (vi) the
place or places where and the manner in which the principal of and premium,
if any, and interest, if any, on such Offered Debt Securities will be
payable and the place or places where such Offered Debt Securities may be
presented for transfer and, if applicable, conversion or exchange; (vii)
the rate or rates at which the Offered Debt Securities will bear interest,
or the method of calculating such rate or rates, if any, and the date or
dates from which such interest, if any, will accrue; (viii) the dates (the
"Interest Payment Dates"), if any, on which any interest on the Offered
Debt Securities will be payable, and the regular record date (the "Regular
Record Date") for any interest payable on any Offered Debt Securities; (ix)
the right or obligation, if any, of AIC to redeem or purchase Debt
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a holder thereof, the conditions, if any,
giving rise to such right or obligation, and the period or periods within
which, and the price or prices at which and the terms and conditions upon
which Debt Securities of the series shall be redeemed or purchased, in
whole or part, and any provisions for the remarketing of such Debt
Securities; (x) whether such Offered Debt Securities are convertible or
exchangeable into other debt or equity securities of AIC, and, if so, the
terms and conditions upon which such conversion or exchange will be
effected including the initial conversion or exchange price or rate and any
adjustments thereto, the conversion or exchange period and other conversion
or exchange provisions; (xi) any terms applicable to such Offered Debt
Securities issued at original issue discount below their stated principal
amount, including the issue price thereof and the rate or rates at which
such original issue discount will accrue; (xii) if other than the principal
amount thereof, the portion of the principal amount of the Offered Debt
Securities which will be payable upon declaration or acceleration of the
maturity thereof pursuant to an Event of Default; (xiii) any deletions
from, modifications of or additions to the Events of Default or covenants
of AIC with respect to such Offered Debt Securities, whether or not such
Events of Default or covenants are consistent with the Events of Default or
covenants set forth herein; (xiv) any special United States Federal income
tax considerations applicable to the Offered Debt Securities; and (xv) any
other terms of the Offered Debt Securities not inconsistent with the
provisions of the Indenture. The applicable Prospectus Supplement will also
describe the following terms of any series of Senior Subordinated Debt
Securities or Subordinated Debt Securities offered hereby in respect of
which this Prospectus is being delivered: (a) the rights, if any, to defer
payments of interest on the Senior Subordinated Debt Securities or
Subordinated Debt Securities of such series by extending the interest
payment period, and the duration of such extensions, and (b) the
subordination terms of the Senior Subordinated Debt Securities or
Subordinated Debt Securities of such series. The foregoing is not intended
to be an exclusive list of the terms that may be applicable to any Offered
Debt Securities and shall not limit in any respect the ability of AIC to
issue Debt Securities with terms different from or in addition to those
described above or elsewhere in this Prospectus provided that such terms
are not inconsistent with the applicable Indenture. Any such Prospectus
Supplement will also describe any special provisions for the payment of
additional amounts with respect to the Offered Debt Securities.
Since the operations of AIC are currently conducted through the
Operating Partnership and its subsidiaries, AIC's cash flow and its
consequent ability to service debt, including the Debt Securities, are
dependent, in large part, upon the earnings of the Operating Partnership
and its subsidiaries and the distribution of those earnings to AIC, whether
by distributions or dividends, loans or otherwise. The payment of
distributions or dividends and the making of loans and advances to AIC by
its subsidiaries may be subject to statutory or contractual restrictions,
are contingent upon the earnings of those subsidiaries and are subject to
various business considerations. Any right of AIC to receive assets of any
of its subsidiaries upon their liquidation or reorganization (and the
consequent right of the holders of the Debt Securities to participate in
those assets) will be effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent
that AIC is itself recognized as a creditor of such subsidiary, in which
case the claims of AIC would still be subordinate to any security interests
in the assets of such subsidiary and any indebtedness of such subsidiary
senior to that held by AIC.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The Debt Securities of a series may be issued solely as registered
Debt Securities. Debt Securities of a series may be issuable in whole or in
part in the form of one or more global Debt Securities, as described below
under "Global Debt Securities." Unless otherwise indicated in an applicable
Prospectus Supplement, Debt Securities will be issuable in denominations of
$1,000 and integral multiples thereof. Debt Securities of any series will
be exchangeable for other Debt Securities of the same series of any
authorized denominations and of a like aggregate principal amount and
tenor.
Debt Securities may be presented for exchange as provided above and,
unless otherwise indicated in an applicable Prospectus Supplement, may be
presented for registration of transfer, at the office or agency of AIC
designated as registrar or co-registrar with respect to such series of Debt
Securities, without service charge and upon payment of any taxes,
assessments or other governmental charges as described in the Indenture.
Such transfer or exchange will be effected on the books of the registrar or
any other transfer agent appointed by AIC upon such registrar or transfer
agent, as the case may be, being satisfied with the documents of title and
identity of the person making the request. AIC intends to initially appoint
the Trustee for the Offered Debt Securities as the registrar for such
Offered Debt Securities and the name of any different or additional
registrar designated by AIC with respect to the Offered Debt Securities
will be included in the Prospectus Supplement relating thereto. If a
Prospectus Supplement refers to any transfer agents (in addition to the
registrar) designated by AIC with respect to any series of Debt Securities,
AIC may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent
acts, except that AIC will be required to maintain a transfer agent in the
Borough of Manhattan, The City of New York. AIC may at any time designate
additional transfer agents with respect to any series of Debt Securities.
In the event of any partial redemption of Debt Securities of any
series, AIC will not be required to (i) issue, register the transfer of or
exchange Debt Securities of that series during a period beginning at the
opening of business 15 days before any selection of Debt Securities of that
series to be redeemed and ending at the close of business on the day of
mailing of the relevant notice of redemption; or (ii) register the transfer
of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being
redeemed in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement,
payment of principal of, and interest, if any, on, Debt Securities will be
made at the office of such paying agent or paying agents as AIC may
designate from time to time, except that, at the option of AIC, payment of
principal or interest may be made by check or by wire transfer to an
account maintained by the payee. Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Debt Securities will be made to the person in whose name such Debt Security
is registered at the close of business on the Regular Record Date for such
interest.
Unless otherwise indicated in an applicable Prospectus Supplement,
the Trustee for the Offered Debt Securities will be designated as AIC's
sole paying agent for payments with respect to the Offered Debt Securities.
Any other paying agents initially designated by AIC for the Offered Debt
Securities will be named in an applicable Prospectus Supplement. AIC may at
any time designate additional paying agents or rescind the designation of
any paying agent or approve a change in the office through which any paying
agent acts, except that AIC will be required to maintain a paying agent in
the Borough of Manhattan, The City of New York.
All moneys paid by AIC to a paying agent for the payment of principal
of, or interest, if any, on, any Debt Security which remains unclaimed at
the end of two years after such principal or interest shall have become due
and payable will be repaid to AIC, and the holder of such Debt Security or
any coupon will thereafter look only to AIC for payment thereof.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in
global form. A Debt Security in global form will be deposited with, or on
behalf of, a depositary, which will be identified in the applicable
Prospectus Supplement. A global Debt Security may be issued only in
registered form and in either temporary or permanent form. A Debt Security
in global form may not be transferred except as a whole to the depositary
for such Debt Security or to a nominee or successor of such depositary. If
any Debt Securities of a series are issuable in global form, the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interests in any such global Debt Security may
exchange such interests for definitive Debt Securities of such series and
of like tenor and principal amount in any authorized form and denomination,
the manner of payment of principal of and interest, if any, on any such
global Debt Security and the specific terms of the depositary arrangement
with respect to any such global Debt Security.
MERGERS AND SALES OF ASSETS
AIC may not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an
entirety to another person, unless, among other things, (i) the resulting,
surviving or transferee person (if other than AIC) is organized and
existing under the laws of the United States, any state thereof or the
District of Columbia and such person expressly assumes all obligations of
AIC under the Debt Securities and the Indenture, and (ii) immediately after
giving effect to such transaction, no Default or Event of Default shall
have occurred or be continuing under the Indenture. Upon the assumption of
AIC's obligations by a person to whom such properties or assets are
conveyed, transferred or leased, subject to certain exceptions, AIC shall
be discharged from all obligations under the Debt Securities and the
Indenture.
EVENTS OF DEFAULT
Each Indenture provides that, if an Event of Default specified
therein shall have occurred and be continuing, with respect to each series
of the Debt Securities outstanding thereunder individually, the Trustee or
the holders of not less than 25% in aggregate principal amount of the
outstanding Debt Securities of such series may declare the principal amount
(or, if any of the Debt Securities of such series are Discount Securities,
such portion of the principal amount of such Debt Securities as may be
specified by the terms thereof) of the Debt Securities of such series to be
immediately due and payable. Under certain circumstances, the holders of a
majority in aggregate principal amount of the outstanding Debt Securities
of such series may rescind such a declaration.
Under each Indenture, an Event of Default is defined as, with respect
to each series of Debt Securities outstanding thereunder individually, any
of the following: (i) default in payment of the principal of any Debt
Securities of such series; (ii) default in payment of any interest on any
Debt Securities of such series when due, continuing for 30 days (or 60
days, in the case of Senior Subordinated Debt Securities or Subordinated
Debt Securities); (iii) default by AIC in compliance with its other
agreements in the Debt Securities of such series or the Indenture relating
to the Debt Securities of such series upon the receipt by AIC of notice of
such default given by the Trustee for such Debt Securities or the holders
of at least 25% in aggregate principal amount of the outstanding Debt
Securities of such series and AIC's failure to cure such default within 60
days after receipt by AIC of such notice; (iv) certain events of bankruptcy
or insolvency; and (v) any other Event of Default set forth in an
applicable Prospectus Supplement with respect to the Debt Securities of
such series.
The Trustee shall give notice to holders of the Debt Securities of
any continuing default known to the Trustee within 90 days after the
occurrence thereof; provided, that the Trustee may withhold such notice, as
to any default other than a payment default, if it determines in good faith
that withholding the notice is in the interests of the holders.
The holders of a majority in principal amount of the outstanding Debt
Securities of any series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Debt Securities of such series; provided that such direction shall not be
in conflict with any law or the Indenture and subject to certain other
limitations. Before proceeding to exercise any right or power under the
Indenture at the direction of such holders, the Trustee shall be entitled
to receive from such holders reasonable security or indemnity satisfactory
to it against the costs, expenses and liabilities which might be incurred
by it in complying with any such direction. With respect to each series of
Debt Securities, no holder will have any right to pursue any remedy with
respect to the Indenture or such Debt Securities, unless (i) such holder
shall have previously given the Trustee written notice of a continuing
Event of Default with respect to the Debt Securities of such series; (ii)
the holders of at least 25% in aggregate principal amount of the
outstanding Debt Securities of such series shall have made a written
request to the Trustee to pursue such remedy; (iii) such holder or holders
have offered to the Trustee reasonable indemnity satisfactory to the
Trustee; (iv) the holders of a majority in aggregate principal amount of
the outstanding Debt Securities of such series have not given the Trustee a
direction inconsistent with such request within 60 days after receipt of
such request; and (v) the Trustee shall have failed to comply with the
request within such 60-day period.
Notwithstanding the foregoing, the right of any holder of any Debt
Securities to receive payment of the principal of and interest in respect
of such Debt Securities on the date specified in such Debt Securities as
the fixed date on which an amount equal to the principal of such Debt
Securities or an installment of principal thereof or interest thereon is
due and payable (the "Stated Maturity" or "Stated Maturities") or to
institute suit for the enforcement of any such payments shall not be
impaired or adversely affected without such holder's consent. The holders
of at least a majority in aggregate principal amount of the outstanding
Debt Securities of any series may waive an existing default with respect to
such series and its consequences, other than (i) any default in any payment
of the principal of, or interest on, any Debt Securities of such series or
(ii) any default in respect of certain covenants or provisions in the
Indenture which may not be modified without the consent of the holder of
each of the outstanding Debt Securities of such series affected as
described in "Modification and Waiver" below.
Each Indenture provides that AIC shall deliver to the Trustee within
120 days after the end of each fiscal year of AIC an officers' certificate
stating whether or not the signers know of any default that occurred during
such period.
MODIFICATION AND WAIVER
AIC and the Trustee may execute a supplemental indenture without the
consent of the holders of the Debt Securities (i) to add to the covenants,
agreements and obligations of AIC for the benefit of the holders of all the
Debt Securities of any series or to surrender any right or power conferred
in the Indenture upon AIC; (ii) to evidence the succession of another
corporation, partnership or other Person to AIC and the assumption by it of
the obligations of AIC under the Indenture and the Debt Securities; (iii)
to establish the form or terms of Debt Securities of any series as
permitted by the Indenture; (iv) to provide for the acceptance of
appointment under the Indenture of a successor Trustee with respect to the
Debt Securities of one or more series and to add to or change any
provisions of the Indenture as shall be necessary to provide for or
facilitate the administration of the trusts by more than one Trustee; (v)
to cure any ambiguity, defect or inconsistency; (vi) to add to, change or
eliminate any provisions (which addition, change or elimination may apply
to one or more series of Debt Securities), provided that any such addition,
change or elimination does not (a) apply to any Debt Securities of any
series created prior to the execution of such supplemental indenture that
is entitled to the benefit of such provision or (b) modify the rights of
the holder of any such Debt Securities with respect to such provision;
(vii) to secure the Debt Securities; or (viii) to make any other change
that does not adversely affect the rights of any holder of Debt Securities.
Each Indenture provides that, with the consent of the holders of not
less than a majority in aggregate principal amount of the outstanding Debt
Securities of the series affected by such supplemental indenture, AIC
and the Trustee may also execute a supplemental indenture to add provisions
to, or change in any manner or eliminate any provisions of the Indenture
with respect to such series of Debt Securities or modify in any manner the
rights of the holders of the Debt Securities of such series; provided that
no such supplemental indenture will, without the consent of the holder of
each such outstanding Debt Security affected thereby (i) change the stated
maturity of the principal of, or any installment of principal or interest
on, any such Debt Security or any premium payable upon redemption or
repurchase thereof, or reduce the amount of principal of any Debt Security
that is a Discount Security and that would be due and payable upon
declaration of acceleration of maturity thereof; (ii) reduce the principal
amount of, or the rate of interest on, any such Debt Security; (iii) change
the place or currency of payment of principal or interest, if any, on any
such Debt Security; (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to any such Debt Security;
(v) reduce the above-stated percentage of holders of Debt Securities of any
series necessary to modify or amend the Indenture for such Debt Securities;
(vi) modify the foregoing requirements or reduce the percentage in
principal amount of outstanding Debt Securities of any series necessary to
waive any covenant or past default; or (vii) in the case of Senior
Subordinated Debt Securities or Subordinated Debt Securities, amend or
modify any of the provisions of such Indenture relating to subordination of
the Debt Securities in any manner adverse to the holders of such Debt
Securities. Holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series may waive certain past defaults
and may waive compliance by AIC with certain of the restrictive covenants
described above or in any supplemental indenture or Prospectus Supplement
with respect to the Debt Securities of such series.
DISCHARGE AND DEFEASANCE
Unless otherwise indicated in an applicable Prospectus Supplement,
each Indenture provides that AIC may satisfy and discharge obligations
thereunder with respect to the Debt Securities of any series by delivering
to the Trustee for cancellation all outstanding Debt Securities of such
series or depositing with the Trustee, after such outstanding Debt
Securities have become due and payable, cash sufficient to pay at Stated
Maturity all of the outstanding Debt Securities of such series and paying
all other sums payable under the Indenture with respect to such series.
In addition, unless otherwise indicated in an applicable Prospectus
Supplement, each Indenture provides that: AIC (a) shall be discharged from
its obligations in respect of the Debt Securities of such series
("defeasance and discharge"), or (b) may cease to comply with certain
restrictive covenants ("covenant defeasance"), including those described
under "Mergers and Sales of Assets," and any such omission shall not be an
Event of Default with respect to the Debt Securities of such series, in
each case, at any time prior to the Stated Maturity or redemption thereof,
when AIC has irrevocably deposited with the Trustee, in trust, (i)
sufficient funds to pay the principal of and interest to Stated Maturity
(or redemption) on, the Debt Securities of such series, or (ii) such amount
of direct obligations of, or obligations the principal of (and premium, if
any) and interest on which are fully guaranteed by, the government of the
United States and which are not subject to prepayment, redemption or call,
as will, together with the predetermined and certain income to accrue
thereon without consideration of any reinvestment thereof, be sufficient to
pay when due the principal of (and premium, if any) and interest to Stated
Maturity (or redemption) on, the Debt Securities of such series. Upon such
defeasance and discharge, the holders of the Debt Securities of such series
shall no longer be entitled to the benefits of the Indenture, except for
the purposes of registration of transfer and exchange of the Debt
Securities of such series and replacement of lost, stolen or mutilated Debt
Securities and shall look only to such deposited funds or obligations for
payment.
THE TRUSTEES
The Senior Debt Securities Trustee, the Senior Subordinated Debt
Securities Trustee and the Subordinated Debt Securities Trustee will be
named in the applicable Prospectus Supplement. Each Trustee will be
permitted to engage in other transactions with AIC and each of its
subsidiaries; however, if a Trustee acquires any conflicting interest, it
must eliminate such conflict or resign.
DESCRIPTION OF PREFERRED STOCK
GENERAL
AIC may issue, from time to time, shares of one or more series or
classes of Preferred Stock. The following description sets forth certain
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. The particular terms of any series of Preferred
Stock and the extent, if any, to which such general provisions may apply to
the series of Preferred Stock so offered will be described in the
Prospectus Supplement relating to such Preferred Stock. The following
summary of certain provisions of the Preferred Stock do not purport to be
complete and is subject to, and is qualified in its entirety by express
reference to, the provisions of AIC's Articles of Incorporation (the
"Charter") relating to a specific series of the Preferred Stock, which will
be in the form filed as an exhibit to or incorporated by reference in the
Registration Statement of which this Prospectus is a part at or prior to
the time of issuance of such series of Preferred Stock.
Under the Charter, AIC has the authority to issue up to 50,000,000
shares of capital stock, which may be classified or reclassified as
Preferred Stock. The Board of Directors of AIC (the "Board of Directors" or
the "Board") may classify or reclassify any unissued shares of capital
stock by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of such
shares of capital stock including, but not limited to, ownership
restrictions consistent with the Ownership Limit (defined below under
"Description of Common Stock - Restrictions on Transfer") with respect to
each class or subclass of capital stock.
The Board of Directors of AIC shall be authorized to determine for
each series of Preferred Stock, and the Prospectus Supplement shall set
forth with respect to such series: (i) the designation of such shares and
the number of shares that constitute such series, (ii) the dividend rate
(or the method of calculation thereof), if any, on the shares of such
series and the priority as to payment of dividends with respect to other
classes or series of capital stock of AIC, (iii) the dividend periods (or
the method of calculation thereof), (iv) the voting rights of the shares,
(v) the liquidation preference and the priority as to payment of such
liquidation preference with respect to other classes or series of capital
stock of AIC and any other rights of the shares of such series upon any
liquidation or winding-up of AIC, (vi) whether or not and on what terms the
shares of such series will be subject to redemption or repurchase at the
option of AIC, (vii) whether and on what terms the shares of such series
will be convertible into or exchangeable for other debt or equity
securities of AIC, (viii) whether the shares of such series of Preferred
Stock will be listed on a securities exchange, (x) any special United
States Federal income tax considerations applicable to such series, and
(ix) the other rights and privileges and any qualifications, limitations or
restrictions of such rights or privileges of such series not inconsistent
with the Charter and the Maryland General Corporation Law ("MGCL").
DIVIDENDS
Holders of shares of Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors out of funds of AIC legally
available therefor, an annual cash dividend payable at such dates and at
such rates, if any, per share per annum as set forth in the applicable
Prospectus Supplement.
Unless otherwise set forth in the applicable Prospectus Supplement,
each series of Preferred Stock will rank junior as to dividends to any
Preferred Stock that may be issued in the future that is expressly senior
as to dividends to the Preferred Stock. If at any time AIC has failed to
pay accrued dividends on any such senior shares at the time such dividends
are payable, AIC may not pay any dividend on the Preferred Stock or redeem
or otherwise repurchase shares of Preferred Stock until such accumulated
but unpaid dividends on such senior shares have been paid or set aside for
payment in full by AIC.
Unless otherwise set forth in the applicable Prospectus Supplement,
no dividends (other than in common stock or other capital stock ranking
junior to the Preferred Stock of any series as to dividends and upon
liquidation) shall be declared or paid or set aside for payment, nor shall
any other distribution be declared or made upon the common stock, or any
other capital stock of AIC ranking junior to or on a parity with the
Preferred Stock of such series as to dividends, nor shall any common stock
or any other capital stock of AIC ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption
of any shares of any such stock) by AIC (except by conversion into or
exchange for other capital stock of AIC ranking junior to the Preferred
Stock of such series as to dividends and upon liquidation) unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for all past dividend periods and the
then current dividend period and (ii) if such series of Preferred Stock
does not have a cumulative dividend, full dividends on the Preferred Stock
of such series have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for the then current dividend period; provided, however, that any monies
theretofore deposited in any sinking fund with respect to any preferred
stock in compliance with the provisions of such sinking fund may thereafter
be applied to the purchase or redemption of such preferred stock in
accordance with the terms of such sinking fund, regardless of whether at
the time of such application full cumulative dividends upon shares of the
Preferred Stock outstanding on the last dividend payment date shall have
been paid or declared and set apart for payment; and provided, further,
that any such junior or parity preferred stock or common stock may be
converted into or exchanged for stock of AIC ranking junior to the
Preferred Stock as to dividends.
The amount of dividends payable for the initial dividend period or
any period shorter than a full dividend period shall be computed on the
basis of a 360-day year of twelve 30-day months. Accrued but unpaid
dividends will not bear interest.
CONVERTIBILITY
No series of Preferred Stock will be convertible into, or
exchangeable for, other securities or property except as set forth in the
applicable Prospectus Supplement, which will set forth the terms and
conditions upon which such conversion or exchange may be effected,
including the initial conversion or exchange rate and any adjustments
thereto, the conversion or exchange period and any other conversion or
exchange provisions.
REDEMPTION AND SINKING FUND
No series of Preferred Stock will be redeemable or be entitled to
receive the benefit of a sinking fund except as set forth in the applicable
Prospectus Supplement, which will set forth the terms and conditions
thereof, including the dates and redemption prices of any such redemption,
any conditions thereto, and any other redemption or sinking fund
provisions.
LIQUIDATION RIGHTS
Unless otherwise set forth in the applicable Prospectus Supplement,
in the event of any liquidation, dissolution or winding up of AIC, the
holders of shares of each series of Preferred Stock are entitled to receive
out of assets of AIC available for distribution to stockholders, before any
distribution of assets is made to holders of: (i) any other shares of
preferred stock ranking junior to such series of Preferred Stock as to
rights upon liquidation, dissolution or winding up; and (ii) shares of
common stock, liquidating distributions per share in the amount of the
liquidation preference specified in the applicable Prospectus Supplement
for such series of Preferred Stock plus any dividends accrued and
accumulated but unpaid to the date of final distribution; but the holders
of each series of Preferred Stock will not be entitled to receive the
liquidating distribution of, plus such dividends on, such shares until the
liquidation preference of any shares of AIC's capital stock ranking senior
to such series of the Preferred Stock as to the rights upon liquidation,
dissolution or winding up shall have been paid (or a sum set aside therefor
sufficient to provide for payment) in full. If upon any liquidation,
dissolution or winding up of AIC, the amounts payable with respect to the
Preferred Stock, and any other Preferred Stock ranking as to any such
distribution on a parity with the Preferred Stock are not paid in full, the
holders of the Preferred Stock and such other parity Preferred Stock will
share ratably in any such distribution of assets in proportion to the full
respective preferential amount to which they are entitled. Unless otherwise
specified in a Prospectus Supplement for a series of Preferred Stock, after
payment of the full amount of the liquidating distribution to which they
are entitled, the holders of shares of Preferred Stock will not be entitled
to any further participation in any distribution of assets by AIC. Neither
a consolidation or merger of AIC with another corporation nor a sale of
securities shall be considered a liquidation, dissolution or winding up of
AIC.
VOTING RIGHTS
Holders of Preferred Stock will not have any voting rights except as
set forth below or in the applicable Prospectus Supplement or as otherwise
from time to time required by law. Whenever dividends on any applicable
series of Preferred Stock or any other class or series of stock ranking on
a parity with the applicable series of Preferred Stock with respect to the
payment of dividends shall be in arrears for the equivalent of six
quarterly dividend periods, whether or not consecutive, the holders of
shares of such series of Preferred Stock (voting separately as a class with
all other series of Preferred Stock then entitled to such voting rights)
will be entitled to vote for the election of two of the authorized number
of directors of AIC at the next annual meeting of stockholders and at each
subsequent meeting until all dividends accumulated on such series of
Preferred Stock shall have been fully paid or set apart for payment. The
term of office of all directors elected by the holders of such Preferred
Stock shall terminate immediately upon the termination of the right of the
holders of such Preferred Stock to vote for directors. Unless otherwise set
forth in the applicable Prospectus Supplement, holders of shares of
Preferred Stock will have one vote for each share held.
So long as any shares of any series of Preferred Stock remain
outstanding, AIC shall not, without the consent of holders of at least
two-thirds of the shares of such series of Preferred Stock outstanding at
the time, voting separately as a class with all other series of Preferred
Stock of AIC upon which like voting rights have been conferred and are
exercisable, (i) issue or increase the authorized amount of any class or
series of stock ranking prior to the outstanding Preferred Stock as to
dividends or upon liquidation or (ii) amend, alter or repeal the provisions
of AIC's Charter relating to such series of Preferred Stock, whether by
merger, consolidation or otherwise, so as to materially adversely affect
any power, preference or special right of such series of Preferred Stock or
the holders thereof; provided, however, that any increase in the amount of
the authorized common stock or authorized preferred stock or any increase
or decrease in the number of shares of any series of preferred stock or the
creation and issuance of other series of common stock or preferred stock
ranking on a parity with or junior to Preferred Stock as to dividends and
upon liquidation, dissolution or winding up shall not be deemed to
materially adversely affect such powers, preferences or special rights.
MISCELLANEOUS
The holders of Preferred Stock will have no preemptive rights. The
Preferred Stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. Shares of Preferred Stock
redeemed or otherwise reacquired by AIC shall resume the status of
authorized and unissued shares of Preferred Stock undesignated as to
series, and shall be available for subsequent issuance. There are no
restrictions on repurchase or redemption of the Preferred Stock while there
is any arrearage on sinking fund installments except as may be set forth in
an applicable Prospectus Supplement. Payment of dividends on, and the
redemption or repurchase of, any series of Preferred Stock may be
restricted by loan agreements, indentures and other agreements entered into
by AIC. The accompanying Prospectus Supplement will describe any material
contractual restrictions on such dividend payments.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any
preferences, voting powers or relative, participating, optional or other
special rights except as set forth above or in the applicable Prospectus
Supplement or the Charter or as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for each series of Preferred Stock
will be designated in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
GENERAL
The Charter authorizes the issuance of up to 50,000,000 shares of
Common Stock with a par value of $.01 per share. As of September 25, 1998,
there were 5,097,540 shares of Common Stock issued and outstanding. In
addition, up to 169,541 and 3,000,000 shares of Common Stock have been
reserved for issuance under AIC's Stock Option and Incentive Compensation
Plan (the "1997 Plan") and AIC's 1998 Stock Incentive Plan (the "1998
Plan"), respectively. The Common Stock is traded on the NYSE under the
symbol "AIC." Norwest Bank Minnesota, N.A. serves as transfer agent and
registrar of the Common Stock.
Holders of the Common Stock are entitled to receive dividends, when
and as declared by the Board of Directors, out of funds legally available
therefor. The holders of shares of Common Stock, upon any liquidation,
dissolution or winding-up of AIC, are entitled to receive ratably any
assets remaining after payment in full of all liabilities of AIC and the
liquidation preferences of preferred stock. The shares of Common Stock
possess ordinary voting rights for the election of Directors and in respect
of other corporate matters, each share entitling the holder thereof to one
vote. Holders of shares of Common Stock do not have cumulative voting
rights in the election of Directors, which means that holders of more than
50% of the shares of Common Stock voting for the election of Directors can
elect all of the Directors if they choose to do so and the holders of the
remaining shares cannot elect any Directors. Holders of shares of Common
Stock do not have preemptive rights, which means they have no right to
acquire any additional shares of Common Stock that may be issued by AIC at
a subsequent date.
RESTRICTIONS ON TRANSFER
For AIC to qualify as a REIT under the Internal Revenue Code of 1986,
as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year, and the shares of common stock must be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter
taxable year (see "Certain Federal Income Tax Considerations - Taxation of
AIC - Income Tests"). Because the Board of Directors believes that it is
desirable for AIC to continue to qualify as a REIT, the Board of Directors
has adopted, and the shareholders have approved, provisions of AIC's
Charter restricting the acquisition of shares of Common Stock.
Subject to certain exceptions specified in AIC's Charter, no holder
may own, or be deemed to own by virtue of various attribution and
constructive ownership provisions of the Code and Rule 13d-3 under the
Exchange Act, more than 9.8% of the outstanding shares of Common Stock (the
"Ownership Limit"). The Board of Directors has the right to refuse to
transfer shares if, as a result of the transfer, any person would hold,
directly or indirectly, shares in excess of the Ownership Limit. The Board
of Directors may, in its discretion, exempt from the Ownership Limit, and
from certain filing requirements described below, ownership or transfers of
certain designated shares while owned by or transferred to a person who has
provided the Board with evidence and assurances acceptable to the Board
that the qualification of AIC as a REIT would not be jeopardized. The
Ownership Limit shall not apply to the acquisition of shares of AIC by an
underwriter in a public offering of shares of AIC, or in any transaction
involving the issuance of shares by AIC, in which the Board of Directors
determines that the underwriter or other person or party initially
acquiring such shares will timely distribute such shares to or among others
such that, following such distribution, none of the shares will be owned,
directly or indirectly, by any person in excess of the Ownership Limit.
Any acquisition of shares of AIC that would result in the
disqualification of AIC as a REIT shall be void to the fullest extent
permitted under applicable law and the intended transferee of such shares
shall be deemed never to have had an interest therein. If the foregoing
provision is determined to be void or invalid by virtue of any legal
decision, statute, rule or regulation, then the transferee of such shares
shall be deemed, at the option of AIC, to have acted as agent on behalf of
AIC in acquiring such shares and to hold such shares on behalf of AIC.
All shares of Common Stock owned, directly or indirectly, by any
person in excess of the Ownership Limit may be redeemed by AIC, in the
discretion of the Board of Directors, by mailing a written notice of
redemption to the holder of such shares not less than one week prior to the
redemption date as determined by the Board of Directors and included in the
notice. The price to be paid for the shares shall be equal to (A) the
closing price of the shares on the last business day prior to the
redemption date on the principal national securities exchange on which such
shares are listed or admitted to trading, or (B) if such shares are not so
listed or admitted to trading, the closing bid price on such last business
day as reported on the National Association of Securities Dealers Automated
Quotation Systems, if quoted thereon, or (C) if not determinable as
aforesaid, the net asset value of the shares redeemed, as determined in
good faith by the Board of Directors. Notwithstanding the foregoing
sentence, in no event may the redemption price be greater than the net
asset value of the shares redeemed, as determined in good faith by the
Board of Directors. The price paid for any shares redeemed shall be paid on
the redemption date fixed by the Board of Directors and included in the
notice to the shareholder. From and after the date fixed for redemption,
the holder of any shares so called for redemption shall cease to be
entitled to any distributions and other benefits with respect to such
shares, except only the right to payment of the redemption price fixed as
aforesaid.
Prior to any transfer or transaction which would cause a stockholder
to own, directly or by virtue of the attribution provisions of the Code and
Rule 13d-3 under the Exchange Act, shares in excess of the Ownership Limit,
and in any event upon demand by the Board of Directors, such stockholder
must file an affidavit with AIC containing the information specified in
AIC's Charter at least 15 days prior to any such transfer or transaction or
within 10 days after demand therefor, as the case may be. In addition, the
Board of Directors has the right to refuse to transfer any shares
purportedly transferred other than in compliance with the foregoing filing
provisions. Whenever it is deemed by the Board of Directors to be prudent
in protecting the tax status of AIC, the Board of Directors may require to
be filed with AIC a statement or affidavit from each proposed transferee of
shares of AIC setting forth the number of shares already owned by the
transferee and any related person(s) specified in the form prescribed by
the Board of Directors for that purpose.
The Board of Directors has the right to refuse to transfer any shares
of AIC's Common Stock to any person if the ownership of shares by such
person would result in the imposition of a tax on AIC or any other holder
(nominee or otherwise) of shares of AIC (a "Disqualified Organization").
Any shares of AIC owned by a Disqualified Organization may, in the
discretion of the Board, be redeemed by AIC at the redemption price and in
the same manner as shares owned in excess of the Ownership Limit may be
redeemed pursuant to the provisions contained in the second preceding
paragraph. If the foregoing provision of this paragraph is determined to be
void or invalid by virtue of any legal decision, statute, rule or
regulation, then any Disqualified Organization holding shares of AIC shall
be deemed, at the option of AIC, to have acted as an agent of AIC in
acquiring such shares and to hold such shares on behalf of AIC. The Board
of Directors may adopt such procedures regarding the transfer and
redemption of shares as it deems necessary to implement the foregoing
provisions.
The ownership limitations may have the effect of precluding
acquisition of control of AIC by certain third parties unless the Board of
Directors determines that maintenance of REIT status is no longer in the
best interests of AIC.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset
transfer or issuance or reclassification of equity securities) between a
Maryland corporation and any person who beneficially owns 10% or more of
the voting power of the corporation's shares, or an affiliate of the
corporation who, at any time within the two-year period prior to the date
in question, was the beneficial owner of 10% or more of the voting power of
the then outstanding voting stock of the corporation (an "Interested
Stockholder") or an affiliate thereof, are prohibited for five years after
the most recent date on which the Interested Stockholder became an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of the corporation and approved by
the affirmative vote of at least (a) 80% of the votes entitled to be cast
by holders of outstanding voting shares of the corporation, voting together
as a single voting group, and (b) two-thirds of the votes entitled to be
cast by holders of outstanding voting shares of the corporation, other than
shares held by the Interested Stockholder with whom the business
combination is to be effected, unless, among other conditions, the
corporation's shareholders receive a minimum price (as defined in the MGCL)
for their shares and the consideration is received in cash or in the same
form as previously paid by the Interested Stockholder for its shares. The
business combination statute could have the effect of discouraging offers
to acquire AIC and of increasing the difficulty of consummating any such
offer. These provisions of the MGCL do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to
the extent approved by a vote of two-thirds of the votes entitled to be
cast on the matter, excluding shares of stock owned by the acquirer or by
officers or directors who are employees of the corporation. "Control
shares" are voting shares of stock that, if aggregated with all other
shares of stock previously acquired by that person, would entitle the
acquirer to exercise voting power in electing directors within one of the
following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority or (iii) a
majority or more of all voting power. Control shares do not include shares
the acquiring person is then entitled to vote as a result of having
previously obtained stockholder approval.
A "control share acquisition" means the acquisition of control
shares, subject to certain exceptions. A person who has made or proposes to
make a control share acquisition, upon satisfaction of certain conditions
(including an undertaking to pay expenses), may compel the corporation's
board of directors to call a special meeting of shareholders, to be held
within 50 days of demand, to consider the voting rights of the shares. If
no request for a meeting is made, the corporation may itself present the
question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an "acquiring person statement" as required by the
statute, then, subject to certain conditions and limitations, the
corporation may redeem any or all of the control shares (except those for
which voting rights have previously been approved) for fair value
determined, without regard to voting rights, as of the date of the last
control share acquisition or of any meeting of shareholders at which the
voting rights of such shares were considered and not approved. If voting
rights for control shares are approved at a shareholders meeting and the
acquirer becomes entitled to vote a majority of the shares entitled to
vote, all other shareholders may exercise appraisal rights. The fair value
of the shares as determined for purposes of the appraisal rights may not be
less than the highest price per share paid in the control share
acquisition, and certain limitations and restrictions otherwise applicable
to the exercise of dissenters' rights do not apply in the context of a
control share acquisition.
The control share acquisition statute does not apply to shares
acquired in a merger, consolidation or share exchange if the corporation is
a party to the transaction, or to acquisitions approved or exempted by the
corporation's articles of incorporation or bylaws prior to the control
share acquisition. The control share acquisition statute could have the
effect of discouraging offers to acquire AIC and of increasing the
difficulty of consummating any such offer.
DESCRIPTION OF WARRANTS
GENERAL
AIC may issue, together with other Securities or separately, warrants
for the purchase of Debt Securities, Preferred Stock or Common Stock (the
"Warrants"). The Warrants may be issued under a Warrant Agreement (each, a
"Warrant Agreement") to be entered into between AIC and a bank or trust
company, as warrant agent (the "Warrant Agent"), as set forth in the
applicable Prospectus Supplement relating to any or all Warrants in respect
of which this Prospectus is being delivered. The Warrant Agent will act
solely as an agent of AIC in connection with the Warrants of a particular
series and will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of Warrants. The Warrant
Agreement for each Warrant, including the forms of certificates
representing the Warrants ("Warrant Certificates"), will be filed as an
exhibit to, or incorporated by reference in, the Registration Statement of
which this Prospectus forms a part at or prior to the time of the issuance
of such Warrants.
The following description sets forth certain general terms and
provisions of the Warrants to which any Prospectus Supplement may relate.
The particular terms of the Warrants to which any Prospectus Supplement may
relate and the extent, if any, to which such general provisions may apply
to the Warrants so offered will be described in the applicable Prospectus
Supplement. Capitalized terms used in this section which are not otherwise
defined in this Prospectus shall have the meanings set forth in the Warrant
Agreement and Warrant Certificate. The following summary of certain
provisions of the Warrants, Warrant Agreement and Warrant Certificate does
not purport to be complete and is subject to, and is qualified in its
entirety by express reference to, all the provisions of the Warrant
Agreement and Warrant Certificate, including the definitions therein of
certain terms.
Reference is made to the applicable Prospectus Supplement for the
terms of Warrants in respect of which this Prospectus is being delivered,
the Warrant Agreement relating to such Warrants and the Warrant
Certificates representing such Warrants, including the following: (i) the
designation, aggregate principal amount and terms of the Debt Securities or
the designation and terms of the Preferred Stock, if any, purchasable upon
exercise of such Warrants; (ii) the procedures and conditions relating to
the exercise of such Warrants; (iii) the designation and terms of any
related Securities with which such Warrants are issued and the number of
such Warrants issued with each such Security; (iv) the date, if any, on and
after which such Warrants and the related Securities will be separately
transferable; (v) the offering price of the Warrants, if any; (vi) the
principal amount of Debt Securities or the number of shares of Preferred
Stock or Common Stock purchasable upon exercise of each Warrant and the
price at which such principal amount of Debt Securities or shares of
Preferred Stock or Common Stock may be purchased upon such exercise, or the
method of determining such number and price; (vii) the date on which the
right to exercise such Warrants shall commence and the date on which such
right shall expire; (viii) a discussion of United States Federal income tax
considerations applicable to the ownership or exercise of such Warrants;
(ix) whether the Warrants represented by the Warrant Certificates will be
issued in registered or bearer form, and, if registered, where they may be
transferred and registered; (x) call provisions of such Warrants, if any;
and (xi) any other terms of the Warrants.
Warrant Certificates will be exchangeable for new Warrant
Certificates of different denominations and Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office
indicated in the applicable Prospectus Supplement. Prior to the exercise of
their Warrants, holders of Warrants will not have any of the rights of
holders of the Securities purchasable upon such exercise and will not be
entitled to payments of principal of (or premium, if any) or interest, if
any, on the Debt Securities purchasable upon such exercise or to any
dividend payments or voting rights that holders of the Preferred Stock or
Common Stock purchasable upon such exercise may be entitled to.
Each Warrant will entitle the holder to purchase for cash such
principal amount of Debt Securities, or such number of shares of Preferred
Stock or Common Stock, at such exercise price as shall, in each case, be
set forth in, or be determinable as set forth in, the applicable Prospectus
Supplement relating to the Warrants offered thereby. Unless otherwise
specified in the applicable Prospectus Supplement, Warrants may be
exercised at any time up to 5:00 p.m. New York City time on the expiration
date set forth in the applicable Prospectus Supplement. After 5:00 p.m. New
York City time on the expiration date, unexercised Warrants will become
void.
Warrants may be exercised as set forth in the applicable Prospectus
Supplement relating to the Warrants. Upon receipt of payment and the
Warrant Certificate properly completed and duly executed at the corporate
trust office of the Warrant Agent or any other office indicated in the
applicable Prospectus Supplement, AIC will, as soon as practicable, forward
the Securities purchasable upon such exercise. If less than all of the
Warrants represented by such Warrant Certificate are exercised, a new
Warrant Certificate will be issued for the remaining amount of Warrants.
PLAN OF DISTRIBUTION
AIC may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly
or through agents or dealers. Any such underwriter, agent or dealer
involved in the offer and sale of the Securities will be named in the
applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or
prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices at the time of sale or at negotiated prices. AIC also may, from time
to time, authorize underwriters acting as AIC's agents to offer and sell
the Securities upon the terms and conditions set forth in the applicable
Prospectus Supplement. In connection with the sale of Securities,
underwriters may be deemed to have received compensation from AIC in the
form of underwriting discounts or commissions and may also receive
commissions from purchasers of Securities for whom they may act as agent.
Underwriters may sell Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or
commissions (which may be changed from time to time) from the underwriters
and/or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by AIC to underwriters or agents
in connection with the offering of Securities, and any discounts,
concessions or commissions allowed by underwriters to participating
dealers, will be set forth in the applicable Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Securities may be deemed to be underwriters under the Securities Act, and
any discounts and commissions received by them and any profit realized by
them on resale of the Securities may be deemed to be underwriting discounts
and commissions under the Securities Act. Underwriters, dealers and agents
may be entitled under agreements entered into with AIC, to indemnification
against and contribution toward certain civil liabilities, including
liabilities under the Securities Act.
If a dealer is utilized in the sale of the Securities in respect of
which this Prospectus is delivered, AIC will sell such Securities to such
dealer, as principal. The dealer may then resell such Securities to the
public at varying prices to be determined by such dealer at the time of
resale.
If so indicated in the applicable Prospectus Supplement, AIC will
authorize dealers acting as AIC's agents to solicit offers by certain
institutions to purchase Securities from AIC at the public offering price
set forth in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date or
dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Securities sold
pursuant to Contracts shall not be less nor more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with
whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies,
educational and charitable institutions, and other institutions, but will,
in all cases, be subject to the approval of AIC. The terms and conditions
of any Contracts will be set forth in any Prospectus Supplement relating to
the Securities being offered. Agents and underwriters will have no
responsibility in respect of the delivery or performance of Contracts.
Until the distribution of the Securities offered pursuant to any
Prospectus Supplement is completed, the Commission's rules may limit the
ability of any underwriter participating in such distribution to bid for
and purchase the Securities offered thereby and other securities of AIC. As
an exception to these rules, the underwriters are permitted to engage in
certain transactions that stabilize or maintain the price of such
securities. Such transactions consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of such securities. If any such
underwriter creates a short position in such securities in connection with
the offering, such underwriter may reduce such short position by purchasing
securities.
In general, bids for or purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might otherwise be in the absence of such
bids or purchases.
Neither AIC nor any underwriter participating in any distribution
makes any representation or prediction as to the direction or magnitude of
any effect that the transactions described above may have on the price of
the offered Securities or other securities of AIC. In addition, neither AIC
nor any such underwriter makes any representation that such underwriter
will engage in such transactions or that such transactions, once commenced,
will not be discontinued without notice.
Certain of the underwriters, if any, and their affiliates may be
customers of, engage in transactions with and perform services for AIC in
the ordinary course of business.
The Securities may or may not be listed on a national securities
exchange. No assurances can be given that there will be a market for any of
the Securities.
SELLING STOCKHOLDERS
GENERAL
In addition to the offer and sale of the Securities as described
above in this Prospectus, this Prospectus relates to periodic offers and
sales of up to 1,423,104 shares of Common Stock by the selling stockholders
named below and their respective pledgees, donees and other successors in
interest (collectively, "the Selling Stockholders"). The shares of Common
Stock that may be offered and sold by the Selling Stockholders include
shares that may be issued in exchange for Partnership Common Units ("OP
Units") of the Operating Partnership.
The following table sets forth certain information with respect to
the Selling Stockholders and their beneficial ownership of shares of
Common Stock as of the date hereof. Except as indicated below, none of the
Selling Stockholders holds any position, office or has had any other
material relationship with AIC, or any of its predecessors or affiliates,
during the past three years.
<PAGE>
SELLING SHARES OWNED SHARES OFFERED
STOCKHOLDER PRIOR TO OFFER(1) HEREBY(1)
Terry Considine 199,315(2) 145
Thomas L. Rhodes 26,095(3) 145
Bruce E. Moore 12,436(4) 25,355
Financial Asset
Management, L.L.C. 676,696(5) 676,696
HFIC, Inc. 62,650(6) 25,470
Wilder Corporation of
Delaware 602,837(7) 600,000
Salem Farm Mobile Home Park,
Inc. 0(8) 44,583
Roth Associates of New Jersey 0(9) 50,710
(1) Unless otherwise indicated, the number of shares shown reflects the
number of shares of Common Stock (subject to adjustment pursuant to
antidilution adjustment provisions) that may by issued to the Selling
Stockholder from time to time by AIC in exchange for OP Units
tendered for redemption by such Selling Stockholder pursuant to the
Agreement of Limited Partnership of the Operating Partnership.
(2) TERRY CONSIDINE has been Chairman of the Board of Directors and Chief
Executive Officer of AIC since April 1998. From September 1996 to
April 1998, Mr. Considine served as Co-Chairman of the Board of
Directors and Co-Chief Executive Officer of AIC. Mr. Considine also
serves as Chairman of the Board of Directors and Chief Executive
Officer of CAX. Mr. Considine's shares are held by Titahotwo Ltd. and
Titahothree Ltd., limited partnerships in which he is the sole
general partner. The number of shares shown as owned by Mr. Considine
prior to this offering includes 145 OP Units redeemable within 60
days. Such number of shares does not include any OP Units owned or
offered hereby by Financial Assets Management, L.L.C., an entity in
which Mr. Considine owns a 30.18% interest and with respect to which
he acts as Manager.
(3) THOMAS L. RHODES has been Vice Chairman of the Board of Directors of
AIC since April 1998. From September 1996 to April 1998, Mr. Rhodes
served as Co-Chairman of the Board of Directors and Co-Chief
Executive Officer of AIC. Mr. Rhodes also serves as Vice Chairman of
the Board of Directors of CAX. The number of shares shown as owned by
Mr. Rhodes prior to this offering includes 145 OP Units redeemable
within 60 days.
(4) BRUCE E. MOORE was appointed as President and Chief Operating Officer
of AIC in February 1998. Mr. Moore owns 25,335 OP Units, none of
which are redeemable within 60 days.
(5) FINANCIAL ASSETS MANAGEMENT, L.L.C. ("FAM") is owned 30.18% by Terry
Considine, 20.46% by Thomas L. Rhodes and 9.43% by Bruce D. Benson
(Mr. Benson has served as a Director of AIC and CAX since October
1996). The remaining interests in FAM are owned by non-affiliates.
The number of shares shown as owned by FAM prior to this offering
includes 676,696 OP Units redeemable within 60 days.
(6) The number of shares shown as owned by HFIC, Inc. prior to this
offering includes 25,470 OP Units, 22,650 of which are redeemable
within 60 days.
(7) Includes 602,837 OP Units, 600,000 of which are redeemable within 60
days.
(8) The Selling Stockholder owns 44,583 OP Units, none of which are
redeemable within 60 days.
(9) The Selling Stockholder owns 50,710 OP Units, none of which are
redeemable within 60 days.
Because the Selling Stockholders may sell some or all of the shares
of Common Stock offered hereby, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any
of such shares, no estimate can be given as to the number of shares of
Common Stock that will be held by the Selling Stockholders upon termination
of any offering made hereby.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by
the Selling Stockholders of up to 1,423,104 shares of Common Stock. The
Common Stock may be sold from time to time by the Selling Stockholders.
Such sales may be made in underwritten offerings or in open market or
block transactions or otherwise on the NYSE, or such other national
securities exchange or automated interdealer quotation system on which
shares of Common Stock are then listed, in the over-the counter market, in
private transactions or otherwise at prices related to prevailing market
prices at the time of the sale or negotiated prices. Some or all of the
shares of Common Stock may be sold through brokers acting on behalf of the
Selling Stockholders or to dealers for resale for such dealers. In
connection with such sales, such brokers and dealers may receive
compensation in the form of discounts or commissions from the Selling
Stockholders and may receive commissions from the purchasers of such
shares for whom they act as broker or agent (which discounts and
commissions are not anticipated to exceed those customary in the types of
transactions involved). The Selling Stockholders may offer to sell and may
sell shares of the Common Stock in options transactions or deliver such
shares to cover short sales "against the box." If necessary, a
supplemental or amended Prospectus will describe the method of sale in
greater detail. In effecting sales, brokers or dealers engaged by the
Selling Stockholders and/or purchasers of the Common Stock may arrange for
other brokers or dealers to participate. In addition, any of the Common
Stock covered by this Prospectus which qualifies for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this Prospectus.
If shares of Common Stock are sold in an underwritten offering, the
shares will be acquired by the underwriters for their own accounts and may
be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or prices at the
time of the sale or at negotiated prices. Any initial public offering
price and any discounts or commissions allowed or reallowed or paid to
dealers may be changed from time to time. Underwriters may sell shares to
or through brokers or dealers, and such brokers and dealers may receive
compensation in the form of discounts, commissions or commissions from the
underwriters and may receive commissions from the purchasers of such
shares for whom they act as broker or agent (which discounts and
commissions are not anticipated to exceed those customary in the types of
transactions involved).
AIC has agreed to pay all expenses in connection with the
registration of the Common Stock being offered hereby by the Selling
Stockholders. Selling Stockholders are responsible for paying any other
selling expenses, including underwriting discounts and brokers'
commissions, and expenses of Selling Stockholders' counsel.
The Selling Stockholders and any underwriter, broker or dealer who
acts in connection with the sale of the Common Stock hereunder may be
deemed to be "underwriters" within the meaning of Section 2(11) of
the Securities Act, and any compensation received by them and any profit
on any resale of the Common Stock as principals may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Selling Stockholders have been advised that during the time each
is engaged in "distribution" (as defined under Regulation M under the
Exchange Act) of the securities covered by this Prospectus, each must
comply with Regulation M under the Exchange Act and pursuant thereto: (i)
shall not engage in any stabilization activity in connection with AIC's
securities and (ii) shall not bid for or purchase any securities of AIC or
attempt to induce any person to purchase any of AIC's securities other
than as permitted under the Securities Act. Any Selling Stockholders who
may be "affiliated purchasers" of AIC as defined in Regulation M have been
further advised that they must coordinate their sales under this
Prospectus with each other and AIC for purposes of Regulation M. Each
Selling Stockholder must also furnish each purchaser or broker through
which Common Stock is sold copies of this Prospectus. AIC has deposited
copies of this Prospectus with the NYSE pursuant to Rule 153 under the
Securities Act.
In order to comply with the securities laws of certain jurisdictions,
the securities offered hereby will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the securities offered hereby may not
be offered or sold unless they have been registered or qualified for sale
in such jurisdictions or an exemption from registration or qualification
is available and is complied with.
Pursuant to registration rights agreements between AIC and the
Selling Stockholders, AIC has agreed to indemnify the Selling
Stockholders, each of their respective officers and directors and any
person who controls such Selling Stockholders, against certain liabilities
and expenses arising out of or based upon the information set forth or
incorporated by reference in this Prospectus, and the Registration
Statement of which this Prospectus is part, including liabilities under
the Securities Act.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain federal income tax
considerations relating to the acquisition, holding, and disposition of the
Securities. The Prospectus Supplement may contain additional information,
as applicable, about certain United States federal income tax
considerations relating to the particular Securities offered thereby. The
discussion contained herein is based upon the Internal Revenue Code of
1986, as amended (the "Code"), regulations issued thereunder ("Treasury
Regulations"), rulings and other administrative pronouncements issued by
the Internal Revenue Service ("IRS"), and judicial decisions, all in effect
as of the date of this Prospectus, and all of which are subject to change,
possibly with retroactive effect. The summary is also based upon the
assumption that the operation of each of the entities comprising the
Company, as well as certain affiliated entities (including CAX) will be in
accordance with its applicable organizational documents or partnership
agreement. This summary is for general information only and does not
purport to discuss all aspects of federal income taxation that may be
important to a particular investor in light of its investment or tax
circumstances, or to certain types of investors subject to special tax
rules (including financial institutions, broker-dealers, insurance
companies, and, except to the extent discussed below, tax-exempt
organizations and foreign investors, as determined for United States
federal income tax purposes). This summary assumes that investors will
hold their Securities as "capital assets" (generally, property held for
investment).
THE FEDERAL INCOME TAX TREATMENT OF HOLDERS OF SECURITIES DEPENDS IN
SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX
PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS
TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF ACQUIRING, HOLDING, EXCHANGING, OR OTHERWISE DISPOSING OF
SECURITIES, AND OF AIC'S ELECTION TO BE TREATED FOR FEDERAL INCOME TAX
PURPOSES AS A REIT.
TAXATION OF AIC
General
AIC elected to be taxed as a REIT commencing with its initial taxable
year ended December 31, 1986. AIC believes that it was organized and has
operated in such a manner as to qualify for taxation as a REIT, and intends
to continue to operate in such a manner. Qualification and taxation as a
REIT depends upon AIC's ability to meet, on a continuing basis, various
qualification requirements imposed upon REITs pursuant to the Code, some of
which are summarized below. While AIC intends to operate so that it
qualifies as a REIT, given the highly complex nature of the rules governing
REITs, the ongoing importance of factual determinations, and the
possibility of future changes in circumstances of AIC and the Company, no
assurance can be given that AIC satisfies the REIT tests or will continue
to do so. See "Failure to Qualify" below.
Provided that AIC qualifies as a REIT, it will generally not be
subject to federal corporate income tax on its net income that is currently
distributed to its stockholders. This treatment substantially eliminates
the "double taxation" (at the corporate and stockholder levels) that
generally results from investment in a corporation. Rather, income
generated by a REIT generally is taxed only at the shareholder level upon a
distribution of dividends by the REIT. Net operating losses, foreign tax
credits and other tax attributes of a REIT generally do not pass through to
the stockholders of the REIT, subject to special rules relating to capital
gains recognized by a REIT and distributions thereof, as described below.
See "Taxation of Stockholders - Taxation of Taxable Domestic Stockholders
Distributions".
If AIC qualifies as a REIT, it may nonetheless be subject to federal
tax in certain circumstances, including the following: First, AIC will
generally be taxed at regular corporate rates on any undistributed income,
including undistributed net capital gains. Second, under certain
circumstances, AIC may be subject to the "alternative minimum tax" on its
items of tax preference. Third, if AIC has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of
business, other than foreclosure property), such income will be subject to
a 100% tax. Fourth, if AIC should fail to satisfy the 75% gross income
test or the 95% gross income test (as discussed below), but nonetheless
maintains its qualification as a REIT because certain other requirements
are met, it will be subject to a 100% tax on an amount equal to (a) the
greater of the amount by which AIC fails the 75% or the 95% gross income
test, as the case may be, multiplied by (b) a fraction intended to reflect
AIC's profitability. Fifth, if AIC should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain net income for such year
(other than certain long-term capital gains that AIC elects to retain and
pay the tax thereon), and (iii) any undistributed taxable income from prior
periods, AIC would be subjected to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Sixth, AIC
may be required to pay monetary penalties to the IRS in certain
circumstances, including if it fails to meet certain record keeping
requirements intended to monitor its compliance with rules relating to the
composition of a REIT's shareholders, as described below. (See
"Requirements for Qualification".) Seventh, if AIC acquires assets from a
corporation that was taxable pursuant to subchapter C of the Code (a
"subchapter C corporation") in a transaction in which the adjusted tax
basis of the assets in the hands of AIC is determined by reference to the
adjusted tax basis of such assets in the hands of the subchapter C
corporation, under Treasury Regulations that are yet to be issued, the
subchapter C corporation would be required to recognize any net built-in
gain that would have been realized if it had liquidated on the day before
the date of the transfer. Pursuant to IRS Notice 88-19, however, in lieu
of taxation of the transferor subchapter C corporation as described
immediately above, AIC may elect to be subject to tax at the highest
corporate income tax rate then applicable if it subsequently recognizes
gain on the disposition of any such assets during the ten-year period
following their acquisition from the subchapter C corporation. In
addition, AIC could also be subject to tax in certain situations and on
certain transactions not presently contemplated.
Requirements for Qualification
The Code defines a REIT as a corporation, trust or association (1)
that is managed by one or more trustees or directors; (2) the beneficial
ownership of which is evidenced by transferable shares, or by transferable
certificates of beneficial interest; (3) which would be taxable as a
domestic corporation but for the special Code provisions applicable to
REITs; (4) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code; (5) the beneficial ownership of
which is held by 100 or more persons; (6) in which, during the last half of
each taxable year, not more than 50% in value of the outstanding stock is
owned, directly or indirectly, by five or fewer "individuals" (as defined
in the Code to include certain entities); and (7) which meets certain other
tests described below (including with respect to the nature of its income
and assets). The Code provides that conditions (1) through (4) must be met
during the entire taxable year, and that condition (5) must be met during
at least 335 days of a taxable year of 12 months, or during a proportionate
part of a taxable year of less than 12 months. AIC's Charter provides
certain restrictions regarding transfers of its shares, which provisions
are intended to assist AIC in satisfying the share ownership requirements
described in conditions (5) and (6) above.
To monitor AIC's compliance with the share ownership requirements, AIC
is generally required to maintain records regarding the actual ownership of
its shares. To do so, AIC must demand written statements each year from
the record holders of certain percentages of its stock in which the record
holders are to disclose the actual owners of the shares (i.e., the persons
required to include in gross income the dividends paid by AIC). A list of
those persons failing or refusing to comply with this demand must be
maintained as part of AIC's records. Failure by AIC to comply with the
foregoing record keeping requirements could subject it to certain monetary
penalties, but would not, effective with respect to the 1998 taxable year
and thereafter, affect its qualification as a REIT. A stockholder who
fails or refuses to comply with the demand is required by Treasury
Regulations to submit a statement with its tax return disclosing the actual
ownership of the shares and certain other information.
In addition, a corporation generally may not elect to become a REIT
unless its taxable year is the calendar year. AIC satisfies this
requirement.
Ownership of Partnership Interests. In the case of a REIT that
is a partner in a partnership, Treasury Regulations provide that the REIT
is deemed to own its proportionate share of the partnership's assets, and
to earn its proportionate share of the partnership's income, for purposes
of the asset and gross income tests applicable to REITs as described below.
In addition, the assets and gross income of the partnership are deemed to
retain the same character in the hands of the REIT. Thus, AIC's
proportionate share of the assets, liabilities and items of income of the
partnerships and limited liability companies in which it has a direct or
indirect ownership interest, including the Operating Partnership
(collectively, the "Subsidiary Partnerships") will be treated as assets,
liabilities and items of income of AIC for purposes of applying the REIT
requirements described herein. A summary of certain rules governing the
federal income taxation of partnerships and their partners is provided
below in "Tax Aspects of AIC's Investments in Affiliated Entities
Partnerships."
Wholly-Owned Subsidiaries. If a REIT owns a corporate subsidiary that
is a "qualified REIT subsidiary," that subsidiary is disregarded for
federal income tax purposes, and all assets, liabilities and items of
income, deduction and credit of the subsidiary are treated as assets,
liabilities and items of income, deduction and credit of the REIT itself,
including for purposes of the gross income and asset tests applicable to
REITs as described below. A qualified REIT subsidiary is any corporation
wholly owned by a REIT, or by other qualified REIT subsidiaries, or by a
combination of the two. AIC has several such wholly-owned corporate
subsidiaries. Similarly, a single member limited liability company owned
by AIC or by the Operating Partnership would also generally be disregarded
as a separate entity for federal income tax purposes.
Income Tests. In order to maintain qualification as a REIT, AIC
annually must satisfy two gross income requirements. First, at least 75%
of AIC's gross income (excluding gross income from sales of inventory or
dealer property in "prohibited transactions") for each taxable year must be
derived directly or indirectly from investments relating to real property
or mortgages on real property (including "rents from real property",
dividends received from other REITs, and certain interest income derived
from mortgage loans secured by real property), or from certain types of
temporary investments. Second, at least 95% of AIC's gross income
(excluding gross income from prohibited transactions) for each taxable year
must be derived from some combination of such income from investments in
real property, as well as other dividends, interest and gain from the sale
or disposition of stock or securities.
Rents received by AIC directly or through the Subsidiary Partnerships
will qualify as "rents from real property" in satisfying the gross income
requirements described above, only if several conditions are met, including
the following. If rent attributable to personal property leased in
connection with a lease of real property is greater than 15% of the total
rent received under the lease, then the portion of rent attributable to
such personal property will not qualify as "rents from real property."
Moreover, for rents received to qualify as "rents from real property," the
REIT generally must not operate or manage the property or furnish or render
services to the tenants of such property, other than through an
"independent contractor" from which the REIT derives no revenue. However,
AIC and its affiliates are permitted to directly perform services that are
"usually or customarily rendered" in connection with the rental of space
for occupancy only and are not otherwise considered rendered to the
occupant of the property. In addition, effective in 1998, AIC and its
affiliates may provide non-customary services to tenants of its properties
without disqualifying all of the rent from the property if the payment for
such services does not exceed 1% of the total gross income from the
property. For purposes of this test, the income received from such non-
customary services is deemed to be at least 150% of the direct cost of
providing the services. Rental income derived by the Company from any
lessee that is an entity will also qualify as rents from real property only
to the extent that AIC does not directly or indirectly hold a 10% or
greater interest, as measured by vote or value, in the lessee's equity.
To the extent that a REIT derives interest income from a mortgage loan
or income from the rental of real property where all or a portion of the
amount of interest or rental income payable is contingent, such income
generally will qualify for purposes of the gross income tests only if it is
based upon the gross receipts or sales, and not the net income or profits,
of the borrower or lessee. The foregoing limitation does not apply,
however, where the borrower or lessee leases substantially all of its
interest in the property to tenants (or subtenants), to the extent that the
rental income derived by the borrower or lessee, as the case may be, would
qualify as rents from real property had it been earned by a REIT. The
Company and CAX have made certain mortgage loans and entered into certain
ground leases (as lessor) in reliance upon the exception described in the
preceding sentence. Accordingly, the ability of AIC and CAX to treat the
income derived from these arrangements as income that qualifies for
purposes of the REIT gross income tests will depend, in part, upon the
character of the income generated by particular borrower or lessee, which
may not be within the control of AIC or CAX. As described below (see "Tax
Aspects of Investments in Affiliated Entities - CAX"), the ability of AIC
to qualify as a REIT will depend upon CAX's qualification as a REIT.
AIC indirectly receives distributions from certain corporations that
are not REITs or qualified REIT subsidiaries, including AICMHC and AICMC
("Taxable Corporations"). Such distributions will be classified as
dividend income to the extent of the earnings and profits of the
distributing Taxable Corporation. Such distributions will generally
constitute qualifying income for purposes of the 95% gross income test, but
not under the 75% gross income test.
If AIC fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such
year if it is entitled to relief under certain provisions of the Code.
These relief provisions will be generally available if AIC's failure to
meet such tests was due to reasonable cause and not due to willful neglect,
AIC attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to
evade tax. It is not possible, however, to state whether in all
circumstances AIC would be entitled to the benefit of these relief
provisions. If these relief provisions are inapplicable to a particular
set of circumstances involving AIC, AIC will not qualify as a REIT. As
discussed above under "Taxation of AIC - General," even where these relief
provisions apply, a tax would be imposed upon the amount by which AIC fails
to satisfy the particular gross income test.
Asset Tests. AIC, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First,
at least 75% of the value of AIC's total assets must be represented by some
combination of real estate assets (including its allocable share of real
estate assets held by the Subsidiary Partnerships, and stock of other
corporations that qualify as REITs), certain stock or debt instruments
purchased by the Company with new capital, cash, cash items, and U.S.
government securities. For this purpose, real estate assets include
interests in real property, and certain mortgage backed securities and
mortgage loans. Second, not more than 25% of AIC's total assets may be
represented by securities other than those in the 75% asset class. Third,
of the investments included in the 25% asset class, the value of any one
issuer's securities owned by AIC may not exceed 5% of the value of AIC's
total assets, and AIC may not own more than 10% of any one issuer's
outstanding voting securities.
AIC indirectly owns interests in certain Taxable Corporations,
including AICMHC and AICMC. As set forth above, the ownership of more than
10% of the voting securities of any one issuer by a REIT or the investment
of more than 5% of the REIT's total assets in any one issuer's securities
is prohibited by the asset tests. AIC believes that its indirect ownership
interests in the Taxable Corporations qualify under these rules. However,
no independent appraisals have been obtained to support AIC's conclusions
as to the value of the Operating Partnership's total assets or the value of
the Operating Partnership's interest in the Taxable Corporations, and these
values are subject to change in the future. Accordingly, there can be no
assurance that the IRS will not contend that the Operating Partnership's
ownership interests in the Taxable Corporations disqualifies AIC from
treatment as a REIT.
As indicated above (see "-Wholly-Owned Subsidiaries"), a corporate
subsidiary of a REIT that is a qualified REIT subsidiary is disregarded for
federal income tax purposes. AIC's ownership of the voting stock of its
qualified REIT subsidiaries therefore does not violate the general
restriction against ownership of more than 10% of the voting securities of
any issuer.
Annual Distribution Requirements. AIC, in order to qualify as a REIT,
is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to (A) the sum of (i) 95% of
AIC's "REIT taxable income" (computed without regard to the deduction for
dividends paid and AIC's net capital gain) and (ii) 95% of the net income
(after tax), if any, from foreclosure property, minus (B) the sum of
certain items of noncash income. Such distributions must be paid in the
taxable year to which they relate, or in the following taxable year if
declared before AIC timely files its tax return for such year and if paid
with or before the first regular dividend payment after such declaration.
To the extent that AIC distributes at least 95%, but less than 100%, of its
"REIT taxable income," as adjusted, it will be subject to tax thereon at
ordinary corporate tax rates. AIC may elect to retain, rather than
distribute, its net long-term capital gains and pay tax on such gains. In
such a case, AIC could elect to have its stockholders include their
proportionate share of such undistributed long-term capital gains in
income, and to receive a corresponding credit for their share of the tax
paid by AIC. AIC's stockholders would then increase the adjusted basis of
their AIC shares by the difference between the designated amounts included
in their long-term capital gains and the tax deemed paid with respect to
their shares. To the extent that AIC has available net operating losses
and capital losses carried forward from prior tax years, such losses may,
in part, reduce the amount of distributions that AIC must make in order to
comply with the REIT distribution requirements described in this paragraph.
However, such losses generally will not affect the character, in the hands
of stockholders, of any distributions that are actually made by AIC (which
are generally taxable to stockholders to the extent that AIC has current or
accumulated earnings and profits). See "Taxation of Stockholders
Taxation of Taxable Domestic Stockholders - Distributions".
If AIC should fail to distribute during each calendar year (without
regard to distributions made in the following tax year but prior to the
filing of AIC's tax return) at least the sum of (i) 85% of its REIT
ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year (excluding retained long-term capital gains), and (iii) any
undistributed taxable income from prior periods, AIC would be subject to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed. AIC believes that it has made, and intends to make,
timely distributions sufficient to satisfy this annual distribution
requirement.
It is possible that AIC, from time to time, may not have sufficient
cash to meet the 95% distribution requirement due to timing differences
between (i) the actual receipt of cash (including receipt of distributions
from the Operating Partnership), and (ii) the inclusion of certain items in
income by AIC for federal income tax purposes. In the event that such
timing differences occur, in order to meet the 95% distribution
requirement, AIC may find it necessary to arrange for short-term, or
possibly long-term, borrowings, or to pay dividends in the form of taxable
in-kind distributions of property.
Under certain circumstances, AIC may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year, which may be included in AIC's
deduction for dividends paid for the earlier year. In such a case, AIC may
be able to avoid losing its REIT status or being taxed on amounts
distributed as deficiency dividends. However, AIC will be required to pay
interest and a penalty based on the amount of any such deduction taken for
deficiency dividends.
Absence of Earnings and Profits. The Code provides that when a REIT
acquires a corporation that is or was a subchapter C corporation, the
acquiror may qualify as a REIT only if, as of the close of the year of
acquisition, it has no "earnings and profits" acquired from such subchapter
C corporation. If AIC succeeds to the earnings and profits of a subchapter
C corporation in connection with an acquisition of its assets or otherwise,
it must distribute such earnings and profits effective on or before
December 31 of the year of such acquisition. Any adjustments to the
subchapter C corporation's income for taxable years ending on or before the
closing of such acquisition by AIC, including as a result of an examination
of its returns by the IRS, could affect the calculation of its earnings and
profits and thus AIC's ability to qualify as a REIT.
Failure to Qualify
If AIC fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, AIC will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in
which AIC fails to qualify will not be deductible by AIC nor will they be
required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations of the
Code, corporate distributees may be eligible for the dividends received
deduction. Unless AIC is entitled to relief under specific statutory
provisions, AIC would also be disqualified from taxation as a REIT for the
four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances AIC would be
entitled to such statutory relief.
TAX ASPECTS OF INVESTMENTS IN AFFILIATED ENTITIES
Partnerships
General. Substantially all of AIC's investments are held indirectly
through the Operating Partnership. In general, partnerships are "pass-
through" entities that are not subject to federal income tax. Rather,
partners are allocated their proportionate shares of the items of income,
gain, loss, deduction and credit of a partnership, and are potentially
subject to tax thereon, without regard to whether the partners receive a
distribution from the partnership. AIC will include in its income its
proportionate share of the foregoing partnership items for purposes of the
various REIT income tests and in the computation of its REIT taxable
income. Moreover, for purposes of the REIT asset tests, AIC will include
its proportionate share of assets held by the Operating Partnership and the
other Subsidiary Partnerships. See "Taxation of AIC - Requirements for
Qualification - Ownership of Partnership Interests."
Entity Classification. AIC's direct and indirect investment in
partnerships involves special tax considerations, including the possibility
of a challenge by the IRS of the status of any of the Subsidiary
Partnerships as a partnership (as opposed to an association taxable as a
corporation) for federal income tax purposes. If any of these entities
were treated as an association for federal income tax purposes, it would be
taxable as a corporation and therefore subject to an entity-level tax on
its income. In such a situation, the character of AIC's assets and items
of gross income would change and could preclude AIC from satisfying the
REIT asset tests and/or the gross income tests (see "Taxation of AIC
Requirements for Qualification - Asset Tests" and " - Income Tests"), and in
turn could prevent AIC from qualifying as a REIT. See "Taxation of AIC -
Failure to Qualify", above, for a discussion of the effect of AIC's failure
to meet such tests for a taxable year. In addition, any change in the
status of any of the Subsidiary Partnerships for tax purposes might be
treated as a taxable event, in which case AIC might incur a tax liability
without any related cash distributions.
Tax Allocations with Respect to the Properties. Under the Code and
the Treasury Regulations, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for tax
purposes in a manner such that the contributing partner is charged with, or
benefits from, respectively, the unrealized gain or unrealized loss
associated with the property at the time of the contribution. The amount
of such unrealized gain or unrealized loss is generally equal to the
difference between the fair market value of the contributed property at the
time of contribution, and the adjusted tax basis of such property at the
time of contribution (a "Book-Tax Difference"). Such allocations are
solely for federal income tax purposes and do not affect the book capital
accounts or other economic or legal arrangements among the partners. The
Operating Partnership has acquired its interest in certain properties by
way of contributions of appreciated property (including certain of the
Direct Properties), and may acquire additional properties in that manner in
the future. Consequently, allocations must be made in a manner consistent
with these requirements. Where a partner contributes cash to a partnership
that holds appreciated property, the Treasury Regulations provide for a
similar allocation of such items to the other (i.e., non-contributing)
partners. These rules apply to the contribution by AIC to the Operating
Partnership of the cash proceeds received in any offerings of its stock.
In general, certain holders of interests in the Operating Partnership
will be allocated lower amounts of depreciation deductions for tax purposes
and increased taxable income and gain on the sale by the Operating
Partnership or other Subsidiary Partnerships of contributed properties.
This will tend to eliminate the Book-Tax Difference over the life of these
partnerships. However, the special allocations do not always entirely
rectify the Book-Tax Difference on an annual basis or with respect to a
specific taxable transaction such as a sale. Thus, the carryover basis of
the contributed properties in the hands of the Operating Partnership or
other Subsidiary Partnerships may cause AIC to be allocated lower
depreciation and other deductions, and possibly greater amounts of taxable
income in the event of a sale of such contributed assets in excess of the
economic or book income allocated to it as a result of such sale. This may
cause AIC to recognize taxable income in excess of cash proceeds, which
might adversely affect AIC's ability to comply with the REIT distribution
requirements. See "Taxation of AIC - Requirements for Qualification
Annual Distribution Requirements."
With respect to any property purchased or to be purchased by any of
the Subsidiary Partnerships (other than through the issuance of interests
in the acquiring partnership) subsequent to the formation of AIC, such
property will initially have a tax basis equal to its fair market value,
and the special allocation provisions described above will not apply.
Sale of the Properties. AIC's share of any gain realized by the
Operating Partnership or any other Subsidiary Partnership on the sale of
any property held as inventory or primarily for sale to customers in the
ordinary course of business will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax. See "Taxation of AIC
General." Under existing law, whether property is held as inventory or
primarily for sale to customers in the ordinary course of a trade or
business is a question of fact that depends upon all of the facts and
circumstances with respect to the particular transaction. The Operating
Partnership and the other Subsidiary Partnerships generally intend to hold
their interests in the Direct Properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, operating, financing and leasing the Direct Properties, and to make
such occasional sales of the Direct Properties, including peripheral land,
as are consistent with AIC's investment objectives.
Taxable Corporations
A portion of the amounts to be used to fund distributions to
stockholders of AIC is expected to come from distributions made by certain
Taxable Corporations, including AICMHC and AICMC, to the Operating
Partnership, and interest paid by Taxable Corporations on certain notes
held by the Operating Partnership. In general, Taxable Corporations pay
federal, state and local income taxes on their taxable income at normal
corporate rates. Any federal, state or local income taxes that the Taxable
Corporations are required to pay may reduce AIC's cash flow from operating
activities and its ability to make payments to holders of its Securities.
In order for AIC to qualify as a REIT, as of the end of each calendar
quarter, the value of its direct or indirect interest in any Taxable
Corporation generally may not exceed 5% of the value of its total assets,
and AIC may not directly or indirectly own more than 10% of the outstanding
voting securities of any Taxable Corporation. See "Taxation of AIC
Requirements for Qualification - Asset Tests". AIC believes that it has
satisfied both the 5% and the 10% asset requirements as they relate to the
Company's interests in Taxable Corporations, and AIC intends to monitor
these interests so that the value of securities of any one issuer do not
exceed 5% of AIC's total assets. However, no assurance can be given that
the relative values of the Company's assets will not change, or that they
will be accepted by the IRS.
Wholly-Owned Corporations
As described above (see "Taxation of AIC - Requirements for
Qualification - Wholly-Owned Subsidiaries"), a corporation that is wholly-
owned by a REIT and constitutes a qualified REIT subsidiary is generally
disregarded for federal income tax purposes. In the event that a qualified
REIT subsidiary of AIC ceases to be wholly owned, for example if any equity
interest in the subsidiary is acquired by a person other than AIC or
another qualified REIT subsidiary of AIC, the subsidiary could no longer be
treated as a qualified REIT subsidiary. Such an event could, in turn,
adversely affect AIC's ability to satisfy the various asset and gross
income requirements applicable to REITs, including the requirement that a
REIT may not own, directly or indirectly, more than 10% of the voting
securities of a Taxable Corporation. See "Taxation of AIC - Requirements
for Qualification - Asset Tests" and "- Income Tests".
CAX
Stock of a corporation that qualifies as a REIT is treated, in the
hands of a shareholder that is a REIT, as a qualifying interest in real
property for purposes of the asset tests applicable to the shareholder
REIT, and any dividend income derived from such stock is treated as
qualifying income of the shareholder for purposes of the 95% and 75% gross
income requirements described above. See "Taxation of AIC - Requirements
of Qualification - Asset Tests" and "- Income Tests". AIC holds
approximately 27% of the outstanding stock of CAX, a public corporation
which has elected to be taxed as a REIT.
CAX, as a separate REIT, is subject to all of the same REIT
qualification requirements that apply to AIC, as described above. See
"Taxation of AIC - Requirements for Qualification". In the event that CAX
were to fail to qualify as a REIT, or were to terminate its election to be
taxed as a REIT, this would alter the composition of AIC's income and
assets and would preclude AIC from qualifying as a REIT.
TAXATION OF STOCKHOLDERS
Taxation of Taxable Domestic Stockholders
Distributions. Provided that AIC qualifies as a REIT, distributions
made to its taxable domestic stockholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by them as ordinary income and will not be eligible for
the dividends received deduction for corporations. Distributions that are
designated as capital gain dividends will be taxed to shareholders as long-
term capital gains (to the extent that they do not exceed AIC's actual net
capital gain for the taxable year), without regard to the period for which
the stockholder has held its stock. A similar treatment will apply to
long-term capital gains retained by AIC, to the extent that AIC elects the
application of recently enacted provisions of the Code that treat
stockholders of a REIT as having received, for federal income tax purposes,
undistributed capital gains of the REIT, while passing through to
stockholders a corresponding credit for taxes paid by the REIT on such
retained capital gains. Corporate stockholders may be required to treat up
to 20% of certain capital gain dividends as ordinary income.
Distributions in excess of current and accumulated earnings and
profits will not be taxable to a stockholder to the extent that they do not
exceed the adjusted basis of the stockholder's shares in respect of which
the distributions were made, but rather, will reduce the adjusted basis of
such shares. To the extent that such distributions exceed the adjusted
basis of a stockholder's shares in respect of which the distributions were
made, they will be included in income as long-term capital gain (or short-
term capital gain if the shares have been held for one year or less),
provided that the shares are a capital asset in the hands of the
stockholder. In addition, any dividend declared by AIC in October,
November or December of any year and payable to a stockholder of record on
a specified date in any such month shall be treated as both paid by AIC and
received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by AIC before the end of January of the following
calendar year.
To the extent that AIC has available net operating losses and capital
losses carried forward from prior tax years, such losses may reduce the
amount of distributions that AIC must make in order to comply with the REIT
distribution requirements. See "Taxation of AIC - Requirements for
Qualification - Annual Distribution Requirements". Such losses, however,
are not passed through to stockholders and do not offset income of
stockholders from other sources, nor would they affect the character of any
distributions that are actually made by AIC, which are generally subject to
tax in the hands of stockholders to the extent that AIC has current or
accumulated earnings and profits.
Dispositions of AIC Stock. In general, under the recently enacted
Internal Revenue Service Restructuring and Reform Act of 1998, capital
gains recognized by individuals and other non-corporate stockholders upon
the sale or disposition of shares of AIC stock will be subject to a maximum
federal income tax rate of 20% if the AIC stock is held for more than 12
months, and will be taxed at ordinary income rates if the AIC stock is held
for 12 months or less. Capital losses recognized by a stockholder upon the
disposition of AIC stock held for more than one year at the time of
disposition will be considered long-tem capital losses. In addition, any
loss upon a sale or exchange of shares of AIC stock by a stockholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent of
distributions received from AIC that are required to be treated by such
stockholder as long-term capital gain.
Taxation of Foreign Stockholders
The following is a discussion of certain anticipated United States
federal income and estate tax consequences of the ownership and disposition
of AIC stock applicable to Non-U.S. Holders of AIC stock. A "Non-U.S.
Holder" is any person other than (i) a citizen or resident of the United
States, (ii) a corporation or partnership created or organized in the
United States or under the laws of the United States or of any state
thereof or the District of Columbia, (iii) an estate whose income is
includable in gross income for U.S. federal income tax purposes regardless
of its source, or (iv) a trust if a United States court is able to exercise
primary supervision over the administration of such trust and one or more
United States fiduciaries have the authority to control all substantial
decisions of such trust. The discussion is based on current law and is for
general information only. The discussion addresses only certain and not
all aspects of United States federal income and estate taxation.
Ordinary Dividends. The portion of dividends received by Non-U.S.
Holders payable out of AIC's earnings and profits which are not
attributable to capital gains of AIC and which are not effectively
connected with a U.S. trade or business of the Non-U.S. Holder will be
subject to U.S. withholding tax at the rate of 30% (unless reduced by
treaty). In general, Non-U.S. Holders will not be considered engaged in a
U.S. trade or business solely as a result of their ownership of AIC stock.
In cases where the dividend income from a Non-U.S. Holder's investment in
AIC stock is (or is treated as) effectively connected with the Non-U.S.
Holder's conduct of a U.S. trade or business, the Non-U.S. Holder generally
will be subject to U.S. tax at graduated rates, in the same manner as
domestic stockholders are taxed with respect to such dividends (and may
also be subject to the 30% branch profits tax in the case of a Non-U.S.
Holder that is a corporation).
Non-Dividend Distributions. Unless AIC stock constitutes a United
States Real Property Interest (a "USRPI"), distributions by AIC which are
not dividends out of the earnings and profits of AIC will not be subject to
U.S. income or withholding tax. In general, except as described below, a
USRPI includes the stock of a corporation if 50% or more of the
corporation's assets, by value, at any time within a prescribed testing
period, consist of certain direct or indirect interests in real property
located within the United States. If it cannot be determined at the time at
which a distribution is made whether or not such distribution will exceed
current and accumulated earnings and profits, the distribution will be
subject to withholding at the rate applicable to dividends. However, the
Non-U.S. Holder may seek a refund of such amounts from the IRS if it is
subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of AIC. If AIC stock
constitutes a USRPI, distributions by AIC in excess of the sum of its
earnings and profits plus and the stockholder's basis in its AIC stock will
be taxed pursuant to the Foreign Investment in Real Property Tax Act of
1980 ("FIRPTA") at the rate of tax (including any applicable capital gains
rates) that would apply to a domestic stockholder of the same type (e.g. an
individual or a corporation, as the case may be), and the collection of
such tax will be enforced by a refundable withholding at a rate of 10% of
the amount by which the distribution exceeds the stockholder's share of
AIC's earnings and profits.
Capital Gain Dividends. Under FIRPTA, a distribution made by AIC to a
Non-U.S. Holder, to the extent attributable to gains from dispositions of
USRPIs such as the properties beneficially owned by AIC ("USRPI Capital
Gains"), will be considered effectively connected with a U.S. trade or
business of the Non-U.S. Holder and subject to U.S. income tax at the rates
applicable to U.S. individuals or corporations, without regard to whether
such distribution is designated as a capital gain dividend. In addition,
AIC will be required to withhold tax equal to 35% of the amount of
dividends to the extent such dividends constitute USRPI Capital Gains.
Distributions subject to FIRPTA may also be subject to a 30% branch profits
tax in the hands of Non-U.S. Holder that is a corporation.
Dispositions of AIC Stock. Unless AIC stock constitutes a USRPI, a
sale of such stock by a Non-U.S. Holder generally will not be subject to
U.S. taxation under FIRPTA. The stock will not constitute a USRPI if AIC
is a "domestically controlled REIT." A domestically controlled REIT is a
REIT in which, at all times during a specified testing period, less than
50% in value of its shares is held directly or indirectly by Non-U.S.
Holders. AIC believes that it is, and it expects to continue to be, a
domestically controlled REIT and, therefore, the sale of AIC stock should
not be subject to taxation under FIRPTA. Because AIC's Common Stock is
publicly traded, however, no assurance can be given that AIC is or will
continue to be a domestically controlled REIT.
Even if AIC does not constitute a domestically controlled REIT, a Non-
U.S. Holder's sale of stock nonetheless will generally not be subject to
tax under FIRPTA as a sale of a USRPI, provided that (i) the stock is
"regularly traded" (as defined by applicable Treasury Regulations) on an
established securities market (e.g., the NYSE, on which AIC Common Stock is
listed), and (ii) the selling Non-U.S. Holder held 5% or less of AIC's
outstanding stock at all times during a specified testing period.
If gain on the sale of stock of AIC were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a
U.S. stockholder with respect to such gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case
of nonresident alien individuals), and the purchaser of the stock could be
required to withhold 10% of the purchase price and remit such amount to the
IRS.
Gain from the sale of AIC stock that would not otherwise be subject to
FIRPTA will nonetheless be taxable in the United States to a Non-U.S.
Holder in two cases: (i) if the Non-U.S. Holder's investment in the AIC
stock is effectively connected with a U.S. trade or business conducted by
such Non-U.S. Holder, the Non-U.S. Holder will be subject to the same
treatment as a U.S. stockholder with respect to such gain, or (ii) if the
Non-U.S. Holder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year and has a "tax
home" in the United States, the nonresident alien individual will be
subject to a 30% tax on the individual's capital gain.
Estate Tax. AIC stock owned or treated as owned by an individual who
is not a citizen or resident (as specially defined for U.S. federal estate
tax purposes) of the United States at the time of death will be includable
in the individual's gross estate for U.S. federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise. Such
individual's estate may be subject to U.S. federal estate tax on the
property includable in the estate for U.S. federal estate tax purposes.
Information Reporting Requirements and Backup Withholding
AIC will report to its U.S. stockholders and to the IRS the amount of
distributions paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a stockholder may be
subject to backup withholding at the rate of 31% with respect to
distributions paid unless such holder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact,
or (ii) provides a taxpayer identification number, certifies as to no loss
of exemption from backup withholding, and otherwise complies with the
applicable requirements of the backup withholding rules. A stockholder who
does not provide AIC with his correct taxpayer identification number also
may be subject to penalties imposed by the IRS. Any amount paid as backup
withholding will be creditable against the stockholder's income tax
liability.
In addition, AIC may be required to withhold a portion of capital gain
distributions to any Non-U.S. Holders who fail to certify their foreign
status to AIC. The IRS has issued final Treasury Regulations regarding the
backup withholding rules as applied to Non-U.S. Holders. Those final
Treasury Regulations alter the current system of backup withholding
compliance and will be effective for payments made after December 31, 1999.
Prospective investors in Securities should consult their tax advisors
regarding the application of these Treasury Regulations.
Taxation of Tax-Exempt Stockholders
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are
subject to taxation upon their unrelated business taxable income ("UBTI").
While many investments in real estate generate UBTI, the IRS has ruled that
dividend distributions from a REIT to an exempt employee pension trust do
not constitute UBTI, provided that the shares of the REIT are not otherwise
used in an unrelated trade or business of the exempt employee pension
trust. Based on that ruling, amounts distributed by AIC to Exempt
Organizations should generally not constitute UBTI. However, if an Exempt
Organization finances its acquisition of the AIC stock with debt, a portion
of its income from AIC may constitute UBTI pursuant to the "debt-financed
property" rules.
OTHER TAX CONSIDERATIONS
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
The rules dealing with federal income taxation are constantly under
review by persons involved in the legislative process and by the IRS and
the U.S. Treasury Department. Changes to the federal laws and
interpretations thereof could adversely affect an investment in AIC. For
example, a proposal issued by President Clinton on February 2, 1998, if
enacted into law, may adversely affect the ability of AIC to expand the
present activities of Taxable Corporations or similarly structured
affiliates in which the Company holds, or may in the future hold, an
interest. It cannot be predicted whether, when, in what forms, or with
what effective dates, the tax laws applicable to AIC, or an investment
therein, will be changed.
STATE, LOCAL AND FOREIGN TAXES
AIC and its stockholders may be subject to state, local or foreign
taxation in various jurisdictions, including those in which it or they
transact business, own property or reside. The Company owns properties
located in a number of states and local jurisdictions, and may be required
to file tax returns in some or all of those jurisdictions. The state,
local or foreign tax treatment of AIC and its stockholders may not conform
to the federal income tax treatment discussed above. Consequently,
prospective investors should consult their own tax advisors regarding the
application and effect of state, local and foreign income and other tax
laws on an investment in the Securities.
LEGAL MATTERS
The validity of the Securities offered hereby and the shares of
Common Stock to be offered hereby by the Selling Stockholders will be
passed upon for AIC and the Selling Stockolders, as applicable, by Piper &
Marbury L.L.P., Baltimore, Maryland. Certain matters as to Maryland law
will be passed upon for AIC by Piper & Marbury L.L.P.
EXPERTS
The consolidated financial statements and schedules of Asset Investors
Corporation, and the financial statements of Commercial Assets, Inc., in each
case included in AIC's Annual Report on Form 10-K for the year ended December
31, 1997, and (i) the Statements of Excess of Revenues over Specific
Operating Expenses of Salem Farm Manufactured Home Community and Mullica
Woods Adult Community, in each case for the year ended December 31, 1997,
included in Amendment No. 1 to AIC's Current Report on Form 8-K filed May
13, 1998; (ii) the Statements of Excess of Revenues over Specific
Operating Expenses of Brentwood West Manufactured Home Community and
Serendipity Manufactured Home Community, in each case for the year ended
December 31, 1997, included in Amendment No. 1 to AIC's Current Report on
Form 8-K filed July 29, 1998; and (iii) the Statements of Excess of Revenues
over Specific Operating Expenses of the Gulfstream Harbor Manufactured Home
Communities, for the year ended December 31, 1997, included in Amendment
No. 1 to AIC's Current Report on Form 8-K filed September 28, 1998, have,
in all cases, been audited by Ernst & Young LLP, independent auditors, as
set forth in their reports thereon included therein, respectively, and
incorporated herein by reference. Such consolidated and combined financial
statements and Statements of Excess of Revenues over Specific Operating
Expenses, respectively, are incorporated herein by reference in reliance
upon such reports given upon the authority of such firm as experts in
accounting and auditing.
Any financial statements and schedules hereafter filed by AIC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and
incorporated by reference in this Prospectus that have been examined and
are the subject of a report by independent accountants will be so
incorporated herein by reference in reliance upon such reports given and
upon the authority of such firms as experts in accounting and auditing to
the extent covered by consents filed with the Commission.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONS.
The estimated expenses, other than underwriting discounts and
commissions, in connection with the offering of the Securities, are as
follows:
Registration Fee - Securities and
Exchange Commission $ 66,375
Printing and Engraving Expenses 125,000
Legal Fees and Expenses (other than
Blue Sky) 100,000
Accounting Fees and Expenses 75,000
Blue Sky Fees and Expenses (including
fees of counsel) 20,000
Trustee's and registrar's fees and
expenses 5,000
NASD Transaction Fees 6,750
Miscellaneous 10,000
--------
TOTAL $408,125
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AIC's Charter limits the liability of AIC's directors and officers to
AIC and its stockholders to the fullest extent permitted from time to time
by Maryland law. Maryland law presently permits the liability of directors
and officers to a corporation or its stockholders for money damages to be
limited, except (i) to the extent that it is proved that the director or
officer actually received an improper benefit or profit in money, property
or services for the amount of the benefit or profit in money, property or
services actually received, or (ii) if a judgment or other final
adjudication is entered in a proceeding based on a finding that the
director's or officer's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. This provision does not limit the ability
of AIC or its stockholders to obtain other relief, such as an injunction
or rescission.
The Charter and AIC's Bylaws require AIC to indemnify its directors,
officers and certain other parties to the fullest extent permitted from
time to time by Maryland law. The MGCL permits a corporation to indemnify
its directors, officers and certain other parties against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by
them in connection with any proceeding to which they may be made a party
by reason of their service to or at the request of the corporation, unless
it is established that (i) the act or omission of the indemnified party
was material to the matter giving rise to the proceeding and (x) was
committed in bad faith or (y) was the result of active and deliberate
dishonesty, (ii) the indemnified party actually received an improper
personal benefit in money, property or services or (iii) in the case of
any criminal proceeding, the indemnified party had reasonable cause to
believe that the act or omission was unlawful. Indemnification may be made
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by the director or officer in connection with the
proceeding; provided, however, that if the proceeding is one by or in the
right of the corporation, indemnification may not be made with respect to
any proceeding in which the director or officer has been adjudged to be
liable to the corporation. In addition, a director or officer may not be
indemnified with respect to any proceeding charging improper personal
benefit to the director or officer in which the director or officer was
judged to be liable on the basis that personal benefit was improperly
received. The termination of any proceeding by conviction, or upon a plea
of nolo contendere or its equivalent, or an entry of any order of
probation prior to judgment, creates a rebuttable presumption that the
director or officer did not meet the requisite standard of conduct
required for indemnification to be permitted. It is the position of the
Securities and Exchange Commission that indemnification of directors and
officers for liabilities arising under the Securities Act is against
public policy and is unenforceable pursuant to Section 14 of the
Securities Act.
AIC has entered into agreements with certain of its officers,
pursuant to which AIC has agreed to indemnify such officers to the fullest
extent permitted by applicable law.
The Agreement of Limited Partnership of the Operating Partnership
(the "Operating Partnership Agreement") also provides for indemnification
of AIC, and any director, officer or shareholder of AIC, as set forth in
the Operating Partnership Agreement.
ITEM 16. EXHIBITS.
**1.1 Form of Underwriting Agreement for Debt Securities.
**1.2 Form of Underwriting Agreement for Preferred Stock.
**1.3 Form of Underwriting Agreement for Common Stock.
**1.4 Form of Underwriting Agreement for Warrants.
**4.1 Form of Senior Debt Securities Indenture (including form of
Note).
**4.2 Form of Senior Subordinated Debt Securities Indenture
(including form of Note).
**4.3 Form of Subordinated Debt Securities Indenture (including
form of Note).
**4.4 Form of Warrant Agreement (including form of Warrant
Certificate).
**4.5 Form of Preferred Stock Certificate.
***4.6 Specimen certificate for Common Stock.
**5.1 Opinion of Piper & Marbury L.L.P. regarding the validity of
the securities offered hereby.
**8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax
matters.
**12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of Ernst & Young LLP.
**23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
their opinion filed as Exhibit 8.1).
**23.3 Consent of Piper & Marbury L.L.P. (included in their
opinion filed as Exhibit 5.1).
24 Power of Attorney (included on page II-5).
**25.1 Statement of Eligibility and Qualification of Trustee under
the Senior Debt Securities Indenture.
**25.2 Statement of Eligibility and Qualification of Trustee under
the Senior Subordinated Debt Securities Indenture.
**25.3 Statement of Eligibility and Qualification of Trustee under
the Subordinated Debt Securities Indenture.
---------
* Filed previously.
** To be filed by amendment or incorporated by reference prior to
the offering of Securities.
*** Incorporated by reference from AIC's Annual Report on Form 10-K filed
on December 31, 1988.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) shall not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee
to act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Securities Act.
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Terry Considine and David M. Becker his or her true and lawful
attorney-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, each acting alone, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his or her substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on this Registration Statement on
Form S-3 and has duly caused this Registration Statement to be signed on
its behalf by the undersigned, there unto duly authorized, in the City of
Denver, State of Colorado, on the 28th day of September, 1998.
ASSET INVESTORS CORPORATION
By:/s/ David M. Becker
_________________________________
Name: David M. Becker
Title: Chief Financial
Officer and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Terry Considine
_________________________
Terry Considine Chairman of the Board of September 28, 1998
Directors and Chief
Executive Officer
/s/ Thomas L. Rhodes
_________________________
Thomas L. Rhodes Vice Chairman of the Board September 28, 1998
of Directors
/s/ Bruce E. Moore
_________________________
Bruce E. Moore President, Chief Operating September 28, 1998
Officer and Director
/s/ David M. Becker
_________________________
David M. Becker Chief Financial Officer and September 28, 1998
Secretary
/s/ Elliot H. Kline
_________________________
Elliot H. Kline Director September 28, 1998
_________________________
Richard L. Robinson Director September 28, 1998
_________________________
Tim Shultz Director September 28, 1998
/s/ Bruce D. Benson
________________________
Bruce D. Benson Director September 28, 1998
_________________________
William J. White Director September 28, 1998
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 33- ) and related Prospectus of Asset
Investors Corporation for the registration of debt securities, preferred
stock, common stock and warrants and to the incorporation by reference
therein of our reports (a) dated February 6, 1998, with respect to the
consolidated financial statements and schedules of Asset Investors
Corporation and (b) dated February 6, 1998 with respect to the financial
statements of Commercial Assets, Inc., both of which are included in the
Asset Investors Corporation Annual Report (Form 10-K) for the year ended
December 31, 1997, filed with the Securities and Exchange Commission. In
addition, we consent to the incorporation by reference of (a) our report
dated April 16, 1998 with respect to the Statement of Excess of Revenues
Over Specific Operating Expenses of The Salem Farms Manufactured Home
Community and (b) our report dated April 16, 1998 with respect to the
Statement of Excess of Revenues Over Specific Operating Expenses of The
Mullica Woods Adult Community, both of which are included in Amendment No.
1 to Asset Investors Corporation's Current Report on Form 8-K dated May
13, 1998 filed with the Securities and Exchange Commission; (c) our report
dated June 9, 1998 with respect to the Statement of Excess of Revenues
Over Specific Operating Expenses of The Brentwood West Manufactured Home
Community and (d) our report dated June 9, 1998 with respect to the
Statement of Excess of Revenues Over Specific Operating Expenses of The
Serendipity Manufactured Home Community, both of which are included in
Amendment No. 1 to Asset Investors Corporation's Current Report on Form
8-K dated July 29, 1998, filed with the Securities and Exchange
Commission; and (e) our report dated September 25, 1998 with respect to
the Statement of Excess of Revenues Over Specific Operating Expenses of
The Gulfstream Harbor Manufactured Home Communities included in Amendment
No. 1 to Asset Investors Corporation's Current Report on Form 8-K dated
September 28, 1998, filed with the Securities and Exchange Commission.
Ernst & Young
September 29, 1998
Denver, Colorado
