As filed with the Securities and Exchange Commission on July 9, 1998
Registration No. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------
MONTEREY HOMES CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 86-0611231
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1531
--------------------
(Primary Standard Industrial
Classification Code Number)
-----------------
6613 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85250
(602) 998-8700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
Larry W. Seay
Vice President-Finance and Chief Financial Officer
Monterey Homes Corporation
6613 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85250
(602) 998-8700
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
-----------------
Copies to:
Steven D. Pidgeon
Snell & Wilmer L.L.P.
One Arizona Center
400 E. Van Buren
Phoenix, Arizona 85004-0001
(602) 382-6000
----------------
Approximate date of commencement of proposed sale to public: From time to time
after this Registration Statement becomes effective.
If the only securities being registered on the 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 of
1933 check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(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: [ ]
-------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
SECURITIES REGISTERED(1) MAXIMUM MAXIMUM REGISTRATION
TO BE REGISTERED OFFERING PRICE AGGREGATE FEE
PER SHARE OFFERING PRICE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 2,009,661 $17.625(2) $35,420,275(2) $10,448.98
- ------------------------------------------------------------------------------------------------------
Common Stock Issuable 500,001 $5.25(3) $2,625,005(3) $774.38
Upon Exercise of Options
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Total 2,509,662 38,045,280 $11,223.36
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</TABLE>
(1) In the event of any stock split, stock dividend, or similar transaction
involving the Company's Common Stock, in order to prevent dilution, the
number of shares registered shall be automatically increased to cover
the additional shares in accordance with Rule 416 (a) under the
Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on the last reported sale price of the
Common Stock on July 7, 1998, as reported on the New York Stock
Exchange.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g), based on the price at which the Options may be
exercised as of July 7, 1998.
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED JULY 9, 1998
PROSPECTUS
2,509,662 SHARES
MONTEREY HOMES CORPORATION
COMMON STOCK
This Prospectus relates to the offer and sale by William W. Cleverly,
Steven J. Hilton and John R. Landon (the "Selling Stockholders") of an aggregate
of 2,509,662 shares of Common Stock, $0.01 par value per share (the "Common
Stock"), of Monterey Homes Corporation, a Maryland corporation (the "Company").
The Company will not receive any portion of the proceeds from the sale of the
Common Stock offered hereby. The Selling Stockholders may elect to sell all, a
portion, or none of the shares of Common Stock registered hereby. The Common
Stock being registered under the Registration Statement of which this Prospectus
is a part may be offered for sale from time to time by or for the account of
such Selling Stockholders in the open market, on the New York Stock Exchange in
privately negotiated transactions, in an underwritten offering, or a combination
of such methods, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Common
Stock is intended to be sold through one or more broker-dealers or directly to
purchasers. Such broker-dealers may receive compensation in the form of
commissions, discounts or concessions from the Selling Stockholders and/or
purchasers of the Common Stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation as to a
particular broker-dealer may be in excess of customary concessions). The Selling
Stockholders and any broker-dealers who act in connection with the sale of the
Common Stock hereunder may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commissions received by them and proceeds of any
resale of the Common Stock may be deemed to be underwriting discounts and
commissions under the Securities Act. See "Selling Stockholders" and "Plan of
Distribution." All expenses of registration incurred in connection with this
Offering are being borne by the Company, but the Selling Stockholders will pay
any brokerage and other expenses of sale incurred by them. See "Plan of
Distribution."
The Company's Common Stock is traded on the New York Stock Exchange
under the symbol "MTH." On July 7, 1998, the closing sale price for the Common
Stock, as reported by NYSE, was $17.625 per share.
SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
EACH SELLING STOCKHOLDER AND ANY BROKER EXECUTING SELLING ORDERS ON BEHALF OF
THE SELLING STOCKHOLDERS MAY BE DEEMED TO BE AN "UNDERWRITER" WITHIN THE MEANING
OF THE SECURITIES ACT. COMMISSIONS RECEIVED BY ANY SUCH BROKER MAY BE DEEMED TO
BE UNDERWRITING COMMISSIONS UNDER THE SECURITIES ACT.
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.
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.
THE DATE OF THIS PROSPECTUS IS JULY __, 1998
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<PAGE>
AVAILABLE INFORMATION
The Company 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"). The reports,
proxy statements, and other information filed by the Company with the Commission
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
its regional offices located at 7 World Trade Center, 13th Floor, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web site on
the Internet (http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding registrants, such as the Company,
that file electronically with the Commission. In addition, the Company's Common
Stock is traded on the New York Stock Exchange. Reports, proxy statements, and
other information filed by the Company are also available for inspection at the
offices of the New York Stock Exchange at 20 Broad Street, 17th Floor, New York,
New York 10005.
This Prospectus constitutes a part of a registration statement on Form
S-3 (the "Registration Statement") that the Company has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information contained in the Registration Statement and the
exhibits thereto and reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
Common Stock offered hereby. Statements contained in this Prospectus as to the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete and, in each
instance, reference is made to the copy of such document as so filed. Each such
statement is qualified in its entirety by such reference.
No person is authorized to give any information or make any
representation other than those contained or incorporated by reference in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by the Company with the
Commission and are hereby incorporated by reference in this Prospectus: (i) the
Annual Report of the Company on Form 10-K for the fiscal year ended December 31,
1997, (ii) the Quarterly Report of the Company on Form 10-Q for the quarterly
period ended March 31, 1998, and (iii) the description of Monterey Homes'
capital stock contained in the Form 8-A of Emerald Mortgage Investments
Corporation (a predecessor of Monterey Homes) filed on July 7, 1988. All other
documents and reports filed by the Company with the Commission pursuant to
Sections 13, 14, or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be made a part hereof from
their respective dates of filing. Any statement contained 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 any other subsequently filed document that is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will cause to be furnished, without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in the document
which this Prospectus incorporates). Requests should be directed to Chief
Financial Officer, Monterey Homes Corporation, 6613 North Scottsdale Road, Suite
200, Phoenix, Arizona 85250; telephone: (602) 998-8700.
4
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the factors discussed below in
evaluating the Company and its business before purchasing any of the shares of
Common Stock offered hereby. This Prospectus contains forward-looking statements
which involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in the following risk
factors and elsewhere in this Prospectus. See "Disclosure Regarding
Forward-Looking Statements."
Homebuilding Industry Factors. The homebuilding industry is cyclical
and is significantly affected by changes in national and local economic and
other conditions, such as employment levels, availability of financing, interest
rates, consumer confidence and housing demand. Although the Company believes
that certain of its customers (particularly purchasers of luxury homes) are
somewhat less price sensitive than generally is the case for other homebuilders,
such uncertainties could adversely affect the Company's performance. In
addition, homebuilders are subject to various risks, many of which are outside
the control of the homebuilders, including delays in construction schedules,
cost overruns, changes in government regulations, increases in real estate taxes
and other local government fees, and availability and cost of land, materials,
and labor. Although the principal raw materials used in the homebuilding
industry generally are available from a variety of sources, such materials are
subject to periodic price fluctuations. There can be no assurance that the
occurrence of any of the foregoing will not have a material adverse effect on
the Company.
Customer demand for new housing also impacts the homebuilding industry.
Real estate analysts predict that in 1998 new home sales in the Phoenix
metropolitan area may slow and that sales in the Tucson metropolitan area may
remain relatively flat. Any such slowing in new home sales would have a material
adverse effect on the Company's business and operating results. In general, home
sales in the Texas market are expected to show moderate growth or remain
relatively flat.
The homebuilding industry is subject to the potential for significant
variability and fluctuations in real estate values, as evidenced by the changes
in real estate values in recent years in Arizona, Texas and Northern California.
Although the Company believes that its projects are currently reflected on its
balance sheet at appropriate values, no assurance can be given that write-downs
of some or all of the Company's projects will not occur if market conditions
deteriorate, or that such write-downs will not be material in amount.
Fluctuations in Operating Results. Monterey historically has
experienced, and in the future, the Company expects to continue to experience,
variability in home sales and net earnings on a quarterly basis. Factors
expected to contribute to this variability include, among others, (i) the timing
of home closings and land sales, (ii) the Company's ability to continue to
acquire additional land or options to acquire additional land on acceptable
terms, (iii) the condition of the real estate market and the general economy in
Arizona, Texas and Northern California, and in other areas into which the
Company may expand its operations, (iv) the cyclical nature of the homebuilding
industry and changes in prevailing interest rates and the availability of
mortgage financing, (v) costs or shortages of materials and labor, and (vi)
delays in construction schedules due to strikes, adverse weather conditions,
acts of God, the availability of subcontractors or governmental restrictions. As
a result of such variability, the Company's historical performance may not be a
meaningful indicator of future results.
Interest Rates and Mortgage Financing. The Company believes that
certain of its move-up and luxury home customers have been somewhat less
sensitive to interest rate fluctuation than many home buyers. However, many
purchasers of the Company's homes finance their acquisition through third-party
lenders providing mortgage financing. In general, housing demand is adversely
affected by increases in interest rates and housing costs, and the
unavailability of mortgage financing. If mortgage interest rates increase and
the ability of prospective buyers to finance home purchases is consequently
adversely affected, the Company's home sales, gross margins and net income may
be adversely impacted and such adverse impact may be material. In any event, the
Company's homebuilding activities are dependent upon the availability and costs
of mortgage financing for buyers of homes owned by potential customers so those
customers ("move-up buyers") can sell their homes and purchase a home from the
Company. Any limitations or restrictions on the availability of such financing
could adversely affect the Company's home sales. Furthermore, changes in federal
income tax laws may affect demand for new homes. From time to time, proposals
have been publicly discussed to limit mortgage interest deductions and to
eliminate or limit tax-free rollover treatment provided under current law where
the proceeds of the sale of a principal residence are reinvested in a new
principal residence. Enactment of such proposals may have an adverse effect on
the homebuilding industry in general, and on demand for the Company's products
in particular. No prediction can be made whether any such proposals will be
enacted and, if
5
<PAGE>
enacted, the particular form such laws would take.
Competition. The single-family residential housing industry is highly
competitive and fragmented. Homebuilders compete for desirable properties,
financing, raw materials, and skilled labor. The Company competes for
residential home sales with other developers and individual resales of existing
homes. Competitors include large homebuilding companies, some of which have
greater financial resources than the Company, and smaller homebuilders, who may
have lower costs than the Company. Competition is expected to continue and
become more intense, and there may be new entrants in the markets in which the
Company currently operates and in markets it may enter in the future.
Lack of Geographic Diversification. The Company's operations are
presently localized in the Phoenix and Tucson, Arizona and Dallas/Ft. Worth,
Austin and Houston, Texas metropolitan areas and in Northern California. In
addition, the Company currently operates in two primary market segments in
Arizona: the semi-custom, luxury market and move-up buyer market; and in two
primary market segments in Texas: the move-up buyer market and the entry-level
home market. Failure to be more geographically or economically diversified by
product line could have a material adverse impact on the Company if the
homebuilding market in Arizona, Texas or Northern California should decline,
because there may not be a balancing opportunity in a healthier market in other
geographic regions.
Additional Financing; Limitations. The homebuilding industry is capital
intensive and requires significant up-front expenditures to acquire land and
begin development. Accordingly, the Company incurs substantial indebtedness to
finance its homebuilding activities. At March 31, 1998, the Company's notes
payable totaled approximately $30.3 million. The Company may be required to seek
additional capital in the form of equity or debt financing from a variety of
potential sources, including bank financing and securities offerings. In
addition, lenders are increasingly requiring developers to invest significant
amounts of equity in a project both in connection with origination of new loans
as well as the extension of existing loans. If the Company is not successful in
obtaining sufficient capital to fund its planned capital or other expenditures,
new projects planned or begun may be delayed or abandoned. Any such delay or
abandonment could result in a reduction in home sales and may adversely affect
the Company's operating results. There can be no assurance that additional debt
or equity financing will be available in the future or on terms acceptable to
the Company.
In addition, the amount and types of indebtedness that the Company can
incur is limited by the terms and conditions of its current indebtedness. The
Company must comply with numerous operating and financial maintenance covenants
and there can be no assurance that the Company will be able to maintain
compliance with such financial and other covenants. Failure to comply with such
covenants would result in a default and resulting cross defaults under the
Company's other indebtedness, and could result in acceleration of all such
indebtedness. Any such acceleration would have a material adverse affect on the
Company.
Government Regulations; Environmental Conditions. The Company is
subject to local, state, and federal statutes and rules regulating certain
developmental matters, as well as building and site design. In addition, the
Company is subject to various fees and charges of governmental authorities
designed to defray the cost of providing certain governmental services and
improvements. The Company may be subject to additional costs and delays or may
be precluded entirely from building projects because of "no growth" or "slow
growth" initiatives, building permit ordinances, building moratoriums, or
similar government regulations that could be imposed in the future due to
health, safety, welfare, or environmental concerns. The Company must also obtain
licenses, permits, and approvals from government agencies to engage in certain
of its activities, the granting or receipt of which are beyond the Company's
control.
The Company and its competitors are also subject to a variety of local,
state, and federal statutes, ordinances, rules and regulations concerning the
protection of health and the environment. Environmental laws or permit
restrictions may result in project delays, may cause substantial compliance and
other costs, and may prohibit or severely restrict development in certain
environmentally sensitive regions or areas. Environmental regulations can also
have an adverse impact on the availability and price of certain raw materials
such as lumber.
Recent Expansion and Future Expansion. In 1997, the Company made a
significant expansion into the Texas market and recently completed an
acquisition pursuant to which it will begin operations in the Northern
California market. The Company may continue to consider growth in other areas of
the country. The magnitude, timing and nature of any future acquisitions will
depend on a number of factors, including suitable acquisition candidates, the
negotiation of acceptable terms, the Company's financial capabilities, and
general economic and business conditions. Acquisitions by the Company may result
in the incurrence of additional debt and/or amortization of expenses related to
goodwill and intangible assets that could adversely affect the Company's
profitability. Acquisitions could also result in potentially
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dilutive issuances of the Company's equity securities. In addition, acquisitions
involve numerous risks, including difficulties in the assimilation of operations
of the acquired company, the diversion of management's attention from other
business concerns, risks of entering markets in which the Company has had no or
only limited direct experience and the potential loss of key employees of the
acquired company. There can be no assurance that the Company will be able to
expand into new markets on a profitable basis or that it can successfully manage
its expansion into Texas, Northern California or any additional markets.
Dependence on Key Personnel. The Company's success is largely dependent
on the continuing services of certain key persons, including William W.
Cleverly, Steven J. Hilton and John R. Landon, and the ability of the Company to
attract new personnel required to continue the development of the Company. The
Company has entered into employment agreements with each of Messrs. Cleverly,
Hilton and Landon. A loss by the Company of the services of Messrs. Cleverly,
Hilton or Landon, or certain other key personnel, could have a material adverse
affect on the Company.
Dependence on Subcontractors. The Company conducts its business only as
a general contractor in connection with the design, development and construction
of its communities. Virtually all architectural and construction work is
performed by subcontractors of the Company. As a consequence, the Company is
dependent upon the continued availability and satisfactory performance by
unaffiliated third-party subcontractors in designing and building its homes.
There is no assurance that there will be sufficient availability and
satisfactory performance by unaffiliated third-party subcontractors in designing
and building its homes, and such a lack could have a material adverse affect on
the Company.
NOL Carryforward. The ability of the Company to use its net operating
loss carryforward (the "NOL Carryforward") to offset future taxable income would
be substantially limited under Section 382 of the Code if an "ownership change",
within the meaning of Section 382 of the Code, has occurred or occurs with
respect to the Company before expiration of the NOL Carryforward. The Company
believes that (i) there was not an "ownership change" of the Company prior to
the effective date of the Merger (defined below), (ii) the Merger did not cause
an "ownership change", and (iii) the Legacy Combination (defined below) did not
cause an "ownership change".
Pursuant to Section 384 of the Code, the Company may not be permitted
to use the NOL Carryforward to offset taxable income resulting from sales of
assets owned by the Monterey Entities (defined below) at the time of the Merger
(or to offset taxable income resulting from sales of certain assets acquired in
the Legacy Combination) to the extent that the fair market value of such assets
at the time of the Merger (or at the time of the Legacy Combination) exceeded
their tax basis as of the relevant date.
There is no assurance that the Company will have sufficient earnings in
the future to fully utilize the NOL Carryforward.
Disclosure Regarding Forward-Looking Statements. Certain statements
contained in this Prospectus, including all documents incorporated herein by
reference, may be forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995. These forward-looking statements may
include projections of revenue and net income and issues that may affect revenue
or net income; projections of capital expenditures; plans for future operations;
financing needs or plans; plans relating to the Company's products and services;
and assumptions relating to the foregoing. In particular, there can be no
assurance that the Company will be able to maintain listing of its Common Stock
and on the New York Stock Exchange. Forward-looking statements are inherently
subject to risks and uncertainties, some of which cannot be predicted or
quantified. Future events and actual results could differ materially from those
set forth in, contemplated by, or underlying the forward-looking statements.
Statements in this Prospectus, including those set forth above, describe
factors, among others, that could contribute to or cause such differences.
7
<PAGE>
USE OF PROCEEDS
The Selling Stockholders will receive all of the proceeds and the
Company will not receive any of the proceeds from the sale of the Common Stock
offered hereby.
SELLING STOCKHOLDERS
The Company was originally formed under the name Homeplex Mortgage
Investments Corporation to operate as a REIT, investing in mortgage-related
assets and selected real estate loans. On December 31, 1996, Homeplex Mortgage
Investments Corporation merged with Monterey Homes Arizona II, Inc. and Monterey
Homes Construction II, Inc. (collectively, the "Monterey Entities") (the
"Merger"). As a result of the Merger, the Company's status as a REIT was
terminated and its prior operations essentially discontinued, the Company's name
was changed to Monterey Homes Corporation, and its NYSE ticker symbol was
changed to MTH. As part of the Merger consideration, William W. Cleverly and
Steven J. Hilton (the "Monterey Stockholders") received 1,288,726 shares of
Company Common Stock (the "Exchange Shares"), of which 212,398 shares have been
registered pursuant to the Securities Act and reserved for issuance pursuant to
the exercise of the Company's outstanding warrants. Currently, Mr. Cleverly and
Mr. Hilton each beneficially own 538,164 reserved but not yet registered
Exchange Shares.
In addition to the Exchange Shares, the Company reserved for the
Monterey Stockholders 266,666 shares of common stock, issuable subject to the
achievement of certain stock price thresholds (the "Contingent Stock"), of which
43,946 shares have been reserved but not yet registered, pending the exercise of
the Company's outstanding warrants. As of September 5, 1997, all price
thresholds had been achieved, and on January 1, 1998, 44,942 shares of the
Contingent Stock were issued to the Monterey Stockholders. On January 1, 1999 or
as soon thereafter as practicable 88,888 shares of Contingent Stock will be
issued to the Monterey Stockholders and on January 1, 2000 or as soon thereafter
as practicable, 88,890 shares of Contingent Stock will be issued to the Monterey
Stockholders, but in each case only if the Monterey Stockholders remain employed
with the Company at such times.
In connection with the Merger, the Company entered into separate
employment agreements and stock option agreements (the "Stock Option
Agreements") with the Monterey Stockholders. The Stock Option Agreements provide
for the grant to each Monterey Stockholder of options to purchase an aggregate
of 166,667 shares of Common Stock per Monterey Stockholder at an exercise price
of $5.25 per share (the "Employment Options"). The Employment Options vest
annually over a three year period which began December 31, 1997.
On December 31, 1996, the Company entered into registration rights
agreements with each of the Monterey Stockholders with respect to the Exchange
Shares, the Contingent Stock and the Employment Options (the "Registration
Rights Agreements"), pursuant to which, subject to certain conditions and
limitations, the Monterey Stockholders may, at any time after December 31, 1997,
require the Company to register such shares under the Securities Act for resale
by the Monterey Stockholders. This Prospectus is a part of the Registration
Statement filed by the Company in order to satisfy this requirement.
On July 1, 1997, the Company combined with Legacy Homes, Ltd., Legacy
Enterprises, Inc. and Texas Home Mortgage Corporation (collectively "Legacy"), a
Texas-based homebuilder with related mortgage brokerage operations (the "Legacy
Combination"). In connection with the Legacy Combination, the Company issued
666,667 shares of Common Stock (the "Landon Shares") to John and Eleanor Landon
and/or entities controlled by John and Eleanor Landon (the "Landons"). In
addition, the Company entered into an employment agreement and related stock
option agreement with John Landon (the "Landon Option Agreement"). The Landon
Option Agreement grants John Landon the option to purchase 166,667 shares of
Common Stock at an exercise price of $5.25 per share (the "Option Shares"). The
Landon Options are exercisable annually over a three year period beginning July
1, 1998. In connection with the Legacy Combination, the Company entered into a
registration rights agreement with the Landons pursuant to which the Landons,
subject to certain conditions and limitations, may at any time after December
31, 1997, require the Company to register the Landon Shares and the Option
Shares under the Securities Act for resale by the Landons. This Prospectus is a
part of the Registration Statement filed by the Company in order to satisfy this
requirement.
8
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The following table provides certain information with respect to the
Common Stock owned or under option by the Selling Stockholders or which the
Selling Stockholders have the right to own as of July 7, 1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
No. of Shares
of Common Percentage of No. of Shares of Percentage of
Stock Owned Common Stock No. of Shares Common Stock Common Stock
Prior to the Owned Prior to of Common Owned After the Owned After
Selling Stockholder Offering the Offering(1) Stock Offered Offering(2) the Offering(2)
- ------------------- -------- --------------- ------------- ----------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William W. Cleverly 930,073 17.3% 838,164 91,909 1.7%
- ---------------------------------------------------------------------------------------------------------------------------
Steven J. Hilton 926,740 17.3% 838,164 88,576 1.7%
- ---------------------------------------------------------------------------------------------------------------------------
John Landon and
Eleanor Landon 833,334 15.5% 833,334 0 0.0%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes all shares of Common Stock beneficially owned by the Selling
Stockholders as a percentage of the 5,370,238 shares of Common Stock
outstanding at July 7, 1998. The figures above also include the
Employment Options and the Option Shares.
(2) Assumes that Selling Stockholders dispose of all the shares of Common
Stock covered by this Prospectus and do not acquire any additional shares
of Common Stock.
PLAN OF DISTRIBUTION
This Prospectus relates to the sale of 2,509,662 shares of Common Stock by the
Selling Stockholders. The Selling Stockholders may from time to time effect
sales of Common Stock in ordinary broker's transactions on the New York Stock
Exchange, at the price prevailing at the time of such sales, at prices relating
to such prevailing market prices, or at negotiated prices. In connection with
distributions of the Common Stock or otherwise, the Selling Stockholders may
enter into hedging transactions with broker-dealers. In connection with such
transactions, banks or broker-dealers may engage in short sales of the Common
Stock in the course of hedging the positions they assume with the Selling
Stockholders. The Selling Stockholders may also sell Common Stock short and
redeliver the Common Stock to close out such positions. The Selling Stockholders
may also enter into option or other transactions with banks or broker-dealers
which require the delivery to the bank or broker-dealer of the Common Stock
registered hereunder, which the bank or broker-dealer may resell or otherwise
transfer pursuant to this Prospectus. The Selling Stockholders may also lend or
pledge the Common Stock to a bank or broker-dealer and the bank or broker-dealer
may sell the Common Stock so loaned, or upon a default, the bank or
broker-dealer may effect sales of the pledged Common Stock pursuant to this
Prospectus. It is anticipated that any broker-dealers participating in such
sales of securities will receive the usual and customary selling commissions.
The Selling Stockholders and any dealers or agents participating in the
distribution of the shares may be deemed to be "underwriters" as defined in the
Securities Act and any profit on the sale of the share by them and any
discounts, commissions or concessions received by any such dealers or agents
might be deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Stockholders will be subject to the applicable
provisions of the Exchange Act and rules and regulations thereunder, including,
without limitation, Regulation M, which provision may limit the timing of
purchases and sales of any of the shares of Common Stock by the Selling
Stockholders.
It is not possible at the present time to determine the price to the public in
any sale of the shares by Selling Stockholders. Accordingly, the public offering
price and the amount of any applicable underwriting discounts and commissions
will be determined at the time of such sale by Selling Stockholders. The
aggregate proceeds to the Selling Stockholders from the sale of the shares will
be the purchase price of the shares sold less all applicable commissions and
underwriters' discounts, if any. The Company will pay all of the expenses
incident to the registration of the Common Stock offered hereby, other than
commissions and selling expenses with respect to the Common Stock being sold by
the Selling Stockholders.
9
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Venable, Baetjer & Howard LLP, Baltimore, Maryland.
EXPERTS
The consolidated financial statements of Monterey Homes Corporation and
Subsidiaries as of December 31, 1997 and 1996, and for the years then ended have
been incorporated by reference herein and in the Prospectus in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements of Monterey Homes Corporation and
Subsidiaries for the year ended December 31, 1995, have been incorporated by
reference herein and in the Prospectus in reliance upon the report of Ernst &
Young, LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
10
<PAGE>
================================================================================
No dealer, sales representative, or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company, the Selling Security Holders, or any
other person. This Prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a solicitation of
an offer to buy, to any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder and thereunder shall, under any circumstances, create any
implication that the information contained herein is correct as of anytime
subsequent to the date hereof.
----------------------
TABLE OF CONTENTS
Page
----
Available Information....................... 2
Information Incorporated by Reference...... 2
Risk Factors................................ 3
Use of Proceeds............................. 6
Selling Stockholders........................ 6
Plan of Distribution........................ 7
Legal Opinions.............................. 8
Experts..................................... 8
2,509,662 Shares of Common Stock
MONTEREY HOMES
CORPORATION
---------------
PROSPECTUS
---------------
July ____, 1998
================================================================================
11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses payable by the Company in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts and commissions), all of which are payable by the Company, are
estimated to be as follows:
Registration Fee....................... $ 11,223
Printing Fees.......................... 2,000
Legal Fees and Expenses................ 10,000
Accounting Fees and Expenses........... 8,000
Other Fees and Expenses................ 2,000
Total......................... $ 33,223
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the provisions of the Maryland General Corporation Law, a
corporation's articles may, with certain exceptions, include any provision
expanding or limiting the liability of its directors and officers to the
corporation or its stockholders for money damages, but may not include any
provision that restricts or limits the liability of its directors or officers to
the corporation or its stockholders to the extent that (i) it is proved that the
person 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) a judgment or other final adjudication adverse to the
person is entered in a proceeding based on a finding in the proceeding that the
person'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. The Company's charter contains a provision limiting the personal
liability of officers and directors to the Company and its stockholders to the
fullest extent permitted under Maryland law.
In addition, the provisions of the Maryland General Corporation Law permit a
corporation to indemnify its present and former directors and officers, among
others, against liability incurred, unless it is established that (i) the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty, or (ii) the director or officer actually received an
improper personal benefit in money, property, or services, or (iii) in the case
of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. The Company's charter provides
that it will indemnify its directors, officers, and others so designated by the
Board of Directors to the full extent allowed under Maryland law.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
<TABLE>
<CAPTION>
Exhibit Page or
Number Description Method of Filing
- ------ ----------- ----------------
<S> <C> <C>
3.1 Restated Articles of Incorporated by reference to Exhibit
Incorporation of the Company 3.1 of Post-Effective Amendment
No. 1 of the Form S-1 Registration
Statement No 33-29737 ("S-1/A
#33-29737").
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C>
3.3 Amended and Restated Filed herewith.
Bylaws of the Company
4.1 Specimen of Common Stock Certificate Incorporated by reference to
Exhibit 4 to the Form 10-K for
the year ended December 31, 1996.
5.1 Opinion of Venable, Baetjer & Howard, LLP Filed herewith
10.1 Stock Option Agreement between the Incorporated by reference to
Company and William W. Cleverly* Exhibit 10.12 to the Form 10-K
for the year ended December 31,
1996.
10.2 Stock Option Agreement between the Incorporated by reference to
Company and Steven J. Hilton* Exhibit 10.13 to the Form 10-K
for the year ended December 31,
1996.
10.3 Stock Option Agreement between Incorporated by reference to
the Company and John R. Landon* Exhibit C of the Form 8-K
filed on June 18, 1997
10.4 Registration Rights Agreement between the Incorporated by reference to
Company and William W. Cleverly* Exhibit 10.14 to the Form 10-K
for the year ended December 31,
1996.
10.5 Registration Rights Agreement between the Incorporated by reference to
Company and Steven J. Hilton* Exhibit 10.15 to the Form 10-K
for the year ended December 31,
1996.
10.6 Registration Rights Agreement between Incorporated by reference to
the Company and John R. Landon* Exhibit C of the Form 8-K
filed on June 18, 1997.
10.7 Escrow and Contingent Stock Agreement Incorporated by reference to
Exhibit 10.16 to the Form 10-K
for the year ended December 31,
1996.
10.8 Warrant Agreement dated as of October 17, Previously filed
1994 among Monterey and the Warrant
Agent
10.9 Assumption Agreement dated as of December Previously filed
31, 1996 modifying the Warrant Agreement
in certain respects, and relating to the
assumption of the Warrant Agreement by the
Company and certain other matters
23.1 Consent of KPMG Peat Marwick LLP Filed herewith
23.2 Consent of Ernst & Young LLP Filed herewith
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C>
23.3 Consent of Venable, Baetjer & Howard Included in Exhibit 5.1.
24 Powers of Attorney See signature page
</TABLE>
- ---------------------
* Indicates a management contract or compensation plan.
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) above do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and 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) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Act") 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 of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Phoenix, State of
Arizona, on July 9, 1998.
MONTEREY HOMES CORPORATION
By: /s/ Larry W. Seay
Larry W. Seay
Vice President - Finance and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William W. Cleverly, Steven J. Hilton, John R.
Landon and Larry W. Seay, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this registration statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, 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 and to all intents and purposes as he might or
could do in person hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ William W. Cleverly Managing Director July 7, 1998
- ------------------------------
William W. Cleverly
/s/ Steven J. Hilton Managing Director July 7, 1998
- ------------------------------
Steven J. Hilton
/s/ John R. Landon Managing Director July 7, 1998
- ------------------------------
John R. Landon
/s/ Larry W. Seay Vice President - Finance and Chief July 7, 1998
- ------------------------------ Financial Officer (Principal
Larry W. Seay Financial Officer and
Principal Accounting Officer)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Alan D. Hamberlin Director July 7, 1998
- ------------------------------
Alan D. Hamberlin
Director July 7, 1998
- ------------------------------
Robert G. Sarver
/s/ C. Timothy White Director July 7, 1998
- ------------------------------
C. Timothy White
Director July 7, 1998
- ------------------------------
Raymond Oppel
</TABLE>
16
AMENDED AND RESTATED
BYLAWS
OF
MONTEREY HOMES CORPORATION
A Maryland Corporation
<PAGE>
BYLAWS
OF
MONTEREY HOMES CORPORATION
ARTICLE I.
----------
Stockholders
------------
Section 1. Annual Meetings.
- --------------------------
The annual meeting of the stockholders of the Corporation
shall be held on such date within the month of June (or such other date within
each calendar year) as may be fixed from time to time by the Board of Directors.
Not less than ten nor more than 90 days' written or printed notice stating the
place, day and hour of each annual meeting shall be given in the manner provided
in Section 1 of Article IX hereof. The business to be transacted at the annual
meetings shall include the election of directors and any other business within
the power of the Corporation. All annual meetings shall be general meetings at
which any business may be considered without having been specified as a purpose
in the notice unless otherwise required by law.
Section 2. Special Meetings Called By Managing Director and Co-President or
- ---------------------------------------------------------------------------
Board of Directors.
- -------------------
At any time in the interval between annual meetings, special
meetings of stockholders may be called by a Managing Director and Co-President
or by the Board of Directors. Not less than ten days' nor more than 90 days'
written notice stating the place, day and hour of such meeting and the matters
proposed to be acted on thereat shall be given in the manner provided in Section
1 of Article IX. No business shall be transacted at any special meeting except
that specified in the notice.
Section 3. Special Meeting Called by Stockholders.
- --------------------------------------------------
Upon the request in writing delivered to the Secretary by the
stockholders entitled to cast at least 25% of all the votes entitled to be cast
at the meeting, it shall be the duty of the Secretary to call a special meeting
of the stockholders. Such request shall state the purpose of such meeting and
the matters proposed to be acted on thereat, but no such meeting shall be
required to be called for the election of directors except under the
circumstances set forth in Section 10 of Article I or Sections 7(b) or 7(c) of
Article II of these Bylaws. The Secretary shall inform such stockholders of the
reasonably estimated costs of preparing and mailing the notice of the meeting,
and upon payment to the Corporation of such costs, the Secretary shall give not
less than ten nor more than 90 days' notice of the time, place and purpose of
the meeting in the manner provided in Section 1 of Article IX. Unless requested
by stockholders entitled to cast a majority of all the votes entitled to be cast
at the meeting, a special meeting need not be called to consider any matter
which is substantially the
2
<PAGE>
same as a matter voted on at any special meeting of the stockholders held during
the preceding 12 months.
Section 4. Place of Meetings.
- -----------------------------
All meetings of stockholders shall be held at the principal
executive offices of the Corporation or at such other place within the United
States as may be fixed from time to time by the Board of Directors and
designated in the notice.
Section 5. Quorum.
- ------------------
At any meeting of stockholders the presence in person or by
proxy of stockholders entitled to cast a majority of the votes entitled to be
cast at the meeting shall constitute a quorum. In the absence of a quorum, the
Chairman (or other presiding officer) of the meeting, or the stockholders
present in person or by proxy acting by majority vote, may adjourn the meeting
from time to time without notice other than by announcement at the meeting, but
not for a period exceeding 120 days after the record date, until a quorum shall
attend. The stockholders present in person or by proxy at a duly organized
meeting may continue to conduct business, notwithstanding withdrawal of enough
stockholders to leave less than a quorum.
Section 6. Adjourned Meetings.
- ------------------------------
A meeting of stockholders convened on the date for which it
was called (or one adjourned to achieve a quorum as above provided in Section 5
of this Article) may be adjourned from time to time by the Chairman (or other
presiding officer) of the meeting, or by the stockholders present in person or
by proxy acting by majority vote, without further notice except by announcement
at the meeting, to a date not more than 120 days after the record date, and any
business may be transacted at any adjourned meeting which could have been
transacted at the meeting as originally called.
Section 7. Voting.
- ------------------
A plurality of all the votes cast at a meeting of stockholders
duly called and at which a quorum is present shall be sufficient to elect a
director. Each share of stock may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders, duly called
and at which a quorum is present, shall be sufficient to take or authorize
action upon any other matter which may properly come before the meeting, unless
more than a majority of votes cast is required by statute or by the Charter or
these Bylaws. The Board of Directors may fix the record date for the
determination of stockholders entitled to vote in the manner provided in Article
VIII, Section 3 of these Bylaws. Unless otherwise provided in the Charter, each
outstanding share of stock, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of stockholders.
3
<PAGE>
Section 8. Proxies.
- -------------------
A stockholder may vote the shares owned of record either in
person or by proxy executed in writing and signed by the stockholder or by duly
authorized attorney-in-fact. No proxy shall be valid after 11 months from its
date, unless otherwise provided in the proxy. In the case of stock held of
record by more than one person, any co-owner or co-fiduciary may execute the
proxy without the joinder of the co-owner(s) or co-fiduciary(ies), unless the
Secretary of the Corporation is notified in writing by any co-owner or
co-fiduciary that the joinder of more than one is to be required. At all
meetings of stockholders, the proxies shall be filed with and verified by the
Secretary of the Corporation, or, if the meeting shall so decide, by the
Secretary of the meeting.
Section 9. Order of Business.
- -----------------------------
At all meetings of stockholders, any stockholder present and
entitled to vote in person or by proxy shall be entitled to require, by written
request to the Chairman of the meeting, that the order of business shall be as
follows:
(1) Organization
(2) Proof of notice of meeting or of waivers thereof. (The
certificate of the Secretary of the Corporation, or the affidavit of any other
person who mailed or published the notice or caused the same to be mailed or
published, shall be proof of service of notice.)
(3) Submission by Secretary of the Corporation to the Chairman
(or other presiding officer) of the meeting of a list of the stockholders
entitled to vote, present in person or by proxy.
(4) A reading of unapproved minutes of preceding meetings of
stockholders and action thereon.
(5) Reports.
(6) If an annual meeting, or a special meeting called for that
purpose, the election of directors.
(7) Unfinished business.
(8) New business.
(9) Adjournment.
4
<PAGE>
Section 10. Removal of Directors.
- ---------------------------------
At any special meeting of the stockholders called in the
manner provided for by this Article, the stockholders, by the affirmative vote
of a majority of all the votes entitled to be cast for the election of
directors, may remove any director or directors from office, with or without
cause, and may elect a successor or successors to fill any resulting vacancies
for the remainder of the term.
Section 11. Informal Action by Stockholders.
- --------------------------------------------
Any action required or permitted to be taken at any meeting of
stockholders may be taken without a meeting if a consent in writing setting
forth such action is signed by all the stockholders entitled to vote thereon and
such consent is filed with the records of stockholders' meetings.
Section 12. Advance Notice of Matters to be Presented at an Annual Meeting of
- -----------------------------------------------------------------------------
Stockholders.
- -------------
At an annual meeting of the stockholders, commencing with the
annual meeting to be held in 1998, only such business shall be conducted as
shall have been properly brought before the meeting as set forth below. To be
properly brought before an annual meeting, such business must (1) be specified
in the notice of the meeting (or any supplement thereto) given by the
Corporation pursuant to Section 1 of Article IX of these bylaws, or (2) be
brought before the meeting by or under the direction of the Board of Directors
(or a Managing Director and Co-President), or (3) be properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, the
Stockholder must have given timely notice thereof in writing to the Secretary.
To be timely, such stockholder's notice must be delivered to or mailed and
received by the Secretary at the principal executive offices of the Corporation,
not less than 20 days nor more than 30 days prior to the meeting (or, with
respect to a proposal required to be included in the Company's proxy statement
pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, or its successor
provision, the earlier date such proposal was received); provided, however, that
in the event that less than 30 days' notice or prior public disclosure of the
date of the meeting is given or made by the Corporation, notice by the
stockholder to be timely must be so received by the Secretary not later than the
close of business on the 10th day following the earlier of the day on which the
Corporation's notice of the date of the annual meeting was mailed or the day on
which the Corporation's first public disclosure of the date of the annual
meeting was made. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting (ii)
the name and address of the stockholder proposing such business, (iii) the class
and number of share of the Corporation which are beneficially owned by the
stockholder, and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no
business shall be
5
<PAGE>
conducted at the annual meeting except in accordance with the procedures set
forth in this Section 12.
The Chairman (or other presiding officer) at the meeting shall
have the authority, if the facts warrant, to determine that business was not
properly brought before the meeting in accordance with the provisions of this
Section 12, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
Section 13. Advance Notice of Nominees for Directors.
- -----------------------------------------------------
Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors at any meeting
of stockholders held after the annual meeting in 1995. Nominations of persons
for election to the Board of Directors of the Corporation may be made at an
annual meeting of stockholders or at a special meeting of stockholders as to
which the notice of meeting provides for election of directors, by or under the
direction of the Board of Directors, or by any nominating committee or person
appointed by the Board of Directors, or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 13. Such nominations, other than
those made by or under the direction of the Board of Directors or by any
nominating committee appointed by the Board of Directors, shall be made pursuant
to timely notice in writing to the Secretary. To be timely, such stockholder's
notice shall be delivered to or mailed and received by the Secretary at the
principal executive offices of the Corporation not less than 20 days nor more
than 30 days prior to the meeting; provided, however, that in the event that
less than 30 days' notice or prior public disclosure of the date of the meeting
is given or made by the Corporation, notice by the stockholder to be timely must
be so received by the Secretary no later than the close of business on the 10th
day following the earlier of the day on which the Corporation s notice of the
date of the meeting was mailed or the day on which the Corporation's first
public disclosure of the date of the meeting was made. Such stockholder's notice
shall set forth: (a) as to each person whom the stockholder proposes lo nominate
for election or re-election as a director, (i) the name, age, business address
and residence address of the person, (ii) the principal occupation or employment
of the person, (ii) the class and number of shares of Stock of the Corporation
which are beneficially owned by the person, and (iv) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to Rule 14a under the Securities
Exchange Act of 1934 or any successor rule thereto; and (b) as to the
stockholder giving the notice, (i) the name and address o the stockholder and
(ii) the class and number of shares of the Corporation which are beneficially
owned by the stockholder. The Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the Corporation
to determine the eligibility of such proposed nominee to serve as a director of
the Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The Chairman (or other presiding officer) at the meeting shall
have the authority the facts warrant, to determine that a nomination was not
made in accordance with the foregoing procedure, and if he should so determine,
he shall so declare to the meeting and the defective
6
<PAGE>
nomination shall be disregarded.
ARTICLE II.
-----------
Directors
---------
Section 1. Powers.
- ------------------
The business and affairs of the Corporation shall be managed
under the direction of its Board of Directors. All powers of the Corporation may
be exercised by or under the authority of the Board of Directors except as
conferred on or reserved to the stockholders by law, by the Charter or by these
Bylaws. A director need not be a stockholder. The Board of Directors shall keep
minutes of its meetings and full and fair accounts of its transactions.
Section 2. Number; Term of Office; Removal.
- -------------------------------------------
The number of directors of the Corporation may be increased or
decreased from time to time by vote of a majority of the entire Board of
Directors to a number not less than five and not greater than nine. The
directors shall be divided into two classes designated Class I and Class II.
Each Class shall consist of one-half of the directors or as close thereto as
possible. Each director whose term shall have expired at an annual meeting of
stockholders shall be elected for a term running until the second annual meeting
of stockholders next succeeding his or her election and until his or her
successors shall have been duly elected an qualified. A director may be removed
from office as provided in Article I, Section 10 of these Bylaws.
Section 3. Annual Meeting; Regular Meetings.
- --------------------------------------------
As soon as practicable after each annual meeting of
stockholders, the Board of Directors shall meet for the purpose of organization
and the transaction of other business. No notice of the annual meeting of the
Board of Directors need be given if it is held immediately following the annual
meeting of stockholders and at the same place. Other regular meetings of the
Board of Directors may be held at such times and at such places, within or
without the State of Maryland, as shall be designated in the notice for such
meeting by the party making the call. All annual and regular meetings shall be
general meetings, and any business may be transacted thereat.
Section 4. Special Meetings.
- ----------------------------
Special meetings of the Board of Directors may be called by a
Managing Director and Co-President, or by two or more directors, or by a
majority of the members of the executive committee if one be constituted.
7
<PAGE>
Section 5. Quorum; Voting.
- --------------------------
A majority of the Board of Directors shall constitute a quorum
for the transaction of business at every meeting of the Board of Directors; but,
if at any meeting there be less than a quorum present, a majority of those
present may adjourn the meeting from time to time, but not for a period
exceeding ten days at any one time or 60 days in all, without notice other than
by announcement at the meeting, until a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally called.
Except as hereinafter provided or as otherwise provided by the Charter or by
law, directors shall act by a vote of a majority of those members in attendance
at a meeting at which a quorum is present.
Section 6. Notice of Meetings.
- ------------------------------
Except as provided in Section 3 of this Article, notice of the
time and place of every regular and special meeting of the Board of Directors
shall be given to each director in the manner provided in Section 2 of Article
IX hereof. Subsequent to each Board meeting, and as soon as practicable
thereafter, each director shall be furnished with a copy of the minutes of said
meeting. At least 24 hours notice shall be given at all meetings. The purpose of
any meeting of the Board of Directors need not be stated in the notice.
Section 7. Vacancies.
- ---------------------
(a) If the office of a director becomes vacant for any reason,
including increase in the size of the Board, such vacancy may be filled by the
Board by a vote of a majority of directors then in office, although such
majority is less than a quorum. If the Corporation seeks to remain qualified as
a real estate investment trust, then any replacement for an Independent Director
shall be nominated by a majority of any Independent Directors remaining on the
Board.
(b) If the vacancy occurs as a result of the removal of a
director by the stockholders, the stockholders may elect a successor at the
meeting at which the removal occurs. Failing such election, the vacancy may be
filed by the Board in the manner and by the vote provided for in subsection (a)
above.
(c) If the entire Board of Directors shall become vacant, any
stockholder may call a special meeting in the same manner that a Managing
Director and Co-President may call such meeting, and directors for the unexpired
term may be elected at such special meeting in the manner provided for their
election at annual meetings.
(d) A director appointed or elected to fill a vacancy shall
serve until the next annual meeting of stockholders and until a successor is
elected and qualifies.
Section 8. Rules and Regulations.
- ---------------------------------
The Board of Directors may adopt such rules and regulations
for the conduct of its
8
<PAGE>
meetings and the management of the affairs of the Corporation as it may deem
proper and not inconsistent with the laws of the State of Maryland or these
Bylaws or the Charter.
Section 9. Committees.
- ----------------------
The Board of Directors may appoint from among its members an
executive committee, an audit committee and other committees composed of three
or more directors. A majority of the members of any committee so appointed shall
be Independent Directors if the Corporation seeks to remain qualified as a real
estate investment trust, or to the extent required by applicable rules or
policies of any securities exchange or other similar facility. The Board of
Directors may delegate to any committee any of the powers of the Board of
Directors except those powers specifically denied by law. However, if the Board
of Directors has given general authorization for the issuance of stock, a
committee of the board, in accordance with a general formula or method specified
by the Board of Directors by resolution or by adoption of a stock option plan,
may fix the terms of stock subject to classification or reclassification and the
terms on which any stock may be issued.
Notice of committee meetings shall be given in the same manner
as notice for special meetings of the Board of Directors.
One-third (1/3), but not less than two (2), of the members of
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The Board
of Directors may designate a chairman of any committee and such chairman or any
two members of any committee may fix the time and place of its meetings unless
the Board shall otherwise provide. In the absence or disqualification of any
member of any such committee, the members thereof present at any meeting and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another director to act at the meeting in the place of such
absent or disqualified members; provided, however, that in the event of the
absence or disqualification of an Independent Director, such appointee shall be
an Independent Director.
Each committee shall keep minutes of its proceedings and shall
report the same to the Board of Directors at the meeting next succeeding, and
any action by the committees shall be subject to revision and alteration by the
Board of Directors, provided that no rights of third persons shall be affected
by any such revision or alteration. Action of a committee without a meeting may
be taken by unanimous written consent signed by all members of the committee.
Subject to the provisions hereof, the Board of Directors shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee.
9
<PAGE>
Section 10. Compensation.
- -------------------------
The directors may receive a stated salary for their services,
and/or a fixed sum and expenses of attendance may be allowed for attendance at
each regular or special meeting. The stated salary and attendance fee, if any,
shall be determined by resolution of the Board; provided, however, that nothing
herein contained shall be construed as precluding a director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 11. Place of Meetings.
- ------------------------------
Regular or special meetings of the Board may be held within or
without the State of Maryland, as the Board may from time to time determine. The
time and place of meeting may be fixed by the party making the call.
Section 12. Informal Action by the Directors.
- ---------------------------------------------
Any action required or permitted to be taken at any meeting of
the Board may be taken without a meeting, if a written consent to such action is
signed by all members of the Board and such consent is filed with the minutes of
the Board.
Section 13. Telephone Conference.
- ---------------------------------
Members of the Board of Directors or any committee thereof may
participate in a meeting of the Board or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at the meeting.
ARTICLE III.
------------
Officers
--------
Section 1. In General.
- ----------------------
The Board of Directors shall elect not more than three
Managing Directors who shall also serve as Co-Presidents, one or more Vice
Presidents, a Treasurer, a Secretary, and such Assistant Secretaries and
Assistant Treasurers as the Board may from time to time deem appropriate. All
officers shall hold office only during the pleasure of the Board or until their
successors are chosen and qualify. Any two of the above offices, except those of
a Co-President and Vice President, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity when such instrument is required to be executed, acknowledged or
verified by any two or more officers. The Board of Directors may from time to
time appoint such other agents and employees with such powers and duties as the
Board may deem proper. In its discretion, the Board of Directors may leave
unfilled any offices except those of Managing Director, Co-President, Treasurer
and Secretary.
10
<PAGE>
Section 2. Managing Director.
- -----------------------------
Each Managing Director shall have the responsibility for the
implementation of the policies determined by the Board of Directors and for the
administration of the business affairs of the Corporation. Each Managing
Director shall, if present, preside over the meetings of the Board and of the
stockholders on a rotating basis such that a Managing Director shall preside
over no more than one consecutive Board meeting or one consecutive stockholders
meeting.
Section 3. Co-President.
- ------------------------
Each Co-President shall have the responsibility for the active
management of the business and general supervision and direction of all of the
affairs of the Corporation. Each Co-President shall perform such other duties as
may be assigned by the Board of Directors or the Executive Committee. Each
Co-President shall have the authority on the Corporation's behalf to endorse
securities owned by the Corporation and to execute any documents requiring the
signature of an executive officer. Each Co-President shall perform such other
duties as the Board of Directors may direct.
Section 4. Vice Presidents.
- ---------------------------
The Vice Presidents, in the order of priority designated by
the Board of Directors, shall be vested with all the power and may perform all
the duties of a Co-President in the latter's absence. They may perform such
other duties as may be prescribed by the Board of Directors or the Executive
Committee or a Co-President.
Section 5. Treasurer.
- ---------------------
The Treasurer shall have general supervision over the finances
of the Corporation and shall perform such other duties as may be assigned by the
Board of Directors or a Co-President. If required by resolution of the Board,
the Treasurer shall furnish bond (which may be a blanket bond) with such surety
and in such penalty for the faithful performance of duty as the Board of
Directors may from time to time require, the cost of such bond to be defrayed by
the Corporation.
Section 6. Secretary.
- ---------------------
The Secretary shall keep the minutes of the meetings of the
stockholders and of the Board of Directors and shall attend to the giving and
serving of all notices of the Corporation required by law or these Bylaws. The
Secretary shall maintain at all times in the principal office of the Corporation
at least one copy of the Bylaws with all amendments to date, and shall make the
same, together with the minutes of the meetings of the stockholders, the annual
statement of affairs of the Corporation and any voting trust or other
stockholders agreement on file at the office of the Corporation, available for
inspection by any officer, director or stockholder during reasonable
11
<PAGE>
business hours. The Secretary shall perform such other duties as may be assigned
by the Board of Directors.
Section 7. Assistant Treasurer and Secretary.
- ---------------------------------------------
The Board of Directors may designate from time to time
Assistant Treasurers and Secretaries, who shall perform such duties as may from
time to time be assigned to them by the Board of Directors or a Co-President.
Section 8. Compensation; Removal; Vacancies.
- --------------------------------------------
The Board of Directors shall have power to fix the
compensation of all officers of the Corporation. It may authorize any committee
or officer, upon whom the power of appointing subordinate officers may have been
conferred, to fix the compensation of such subordinate officers. The Board of
Directors shall have the power at any regular or special meeting to remove any
officer, if in the judgment of the Board the best interests of the Corporation
will be served by such removal. The Board of Directors may authorize any officer
to remove subordinate officers. The Board of Directors may authorize the
Corporation's employment of an officer for a period in excess of the term of the
Board. The Board of Directors at any regular or special meeting shall have power
to fill a vacancy occurring in any office for the unexpired portion of the term.
Section 9. Substitutes.
- -----------------------
The Board of Directors may from time to time in the absence of
any one of its officers or at any other time, designate any other person or
persons, on behalf of the Corporation to sign any contracts, deeds, notes or
other instruments in the place or stead of any of such officers, and may
designate any person to fill any one of said offices, temporarily or for any
particular purpose; and any instruments so signed in accordance with a
resolution of the Board shall be the valid act of the Corporation as fully as if
executed by any regular officer.
ARTICLE IV.
-----------
Resignation
-----------
Any director or officer may resign from office at any time.
Such resignation shall be made in writing and shall take effect from the time of
its receipt by the Corporation, unless some time be fixed in the resignation,
and then from that date. The acceptance of a resignation shall not be required
to make it effective.
12
<PAGE>
ARTICLE V.
----------
Commercial Paper, Etc.
----------------------
All bills, notes, checks, drafts and commercial paper of all
kinds to be executed by the Corporation as maker, acceptor, endorser or
otherwise, and all assignments and transfers of stock, contracts, or written
obligations of the Corporation, and all negotiable instruments, shall be made in
the name of the Corporation and shall be signed by any one or more of the
following officers as the Board of Directors may from time to time designate,
i.e. a Managing Director, a Co-President, any Vice President, or the Treasurer,
or by such other person or persons as the Board of Directors or Executive
Committee may from time to time designate.
ARTICLE VI.
-----------
Fiscal Year
-----------
The fiscal year of the Corporation shall cover such period of
12 months as the Board of Directors may determine. In the absence of any such
determination, the accounts of the Corporation shall be kept on a calendar year
basis.
ARTICLE VII.
------------
Seal
----
The seal of the Corporation shall be in the form of two
concentric circles inscribed with the name of the Corporation and the year and
State in which it is incorporated. The Secretary or Treasurer, or any Assistant
Secretary or Assistant Treasurer, shall have the right and power to attest to
the corporate seal. In lieu of affixing the corporate seal to any document, it
shall be sufficient to meet the requirements of any law, rule or regulation
relating to a corporate seal to affix the word "(SEAL)" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII.
-------------
Stock
-----
Section 1. Issue.
- -----------------
Each stockholder shall be entitled to a certificate or
certificates which shall represent and certify the number and class of shares of
stock owned in the Corporation Each certificate shall be signed by a Managing
Director and Co-President or any Vice President, and countersigned by the
Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and sealed with the seal of the Corporation. The signatures of the
Corporation's officers and its corporate seal appearing on stock certificates
may be facsimiles if each such certificate is authenticated by the manual
signature of an officer of a duly authorized transfer agent. Stock certificates
shall be in such form not inconsistent with law or with the Charter, as shall be
approved by the Board of Directors. In case any officer of the Corporation who
has signed any certificate ceases to be an officer of the
13
<PAGE>
Corporation, whether by reason of death, resignation or otherwise, before such
certificate is issued, then the certificate may nevertheless be issued by the
Corporation with the same effect as if the officer had not ceased to be such
officer as of the date of such issuance.
Section 2. Transfers.
- ---------------------
The Board of Directors shall have power and authority to make
all such rules and regulations as the Board may deem expedient concerning the
issue, transfer and registration of stock certificates. The Board of Directors
may appoint one or more transfer agents and/or registrars for its outstanding
stock, and their duties may be combined. No transfer of stock shall be
recognized or binding upon the Corporation until recorded on the books of the
Corporation, or, as the case may be, of its transfer agent and/or of its
registrar, upon surrender and cancellation of a certificate or certificates for
a like number of shares.
Section 3. Record Dates for Dividends and Stockholders' Meeting.
- ----------------------------------------------------------------
The Board of Directors may fix a date not exceeding 90 days
preceding the date of any meeting of stockholders, any dividend payment date or
any date for the allotment of rights, as a record date for the determination of
the stockholders entitled to notice of and to vote at such meeting, or entitled
to receive such dividends or rights, as the case may be, and only stockholders
of record on such date shall be entitled to notice of and to vote at such
meeting or to receive such dividends or rights, as the case may be. In the case
of a meeting of stockholders, the record date shall be not less than ten days
prior to the date of the meeting.
Section 4. New Certificates.
- ----------------------------
In case any certificate of stock is lost, stolen, mutilated or
destroyed, the Board of Directors may authorize the issue of a new certificate
in place thereof upon indemnity to the Corporation against loss and upon such
other terms and conditions as it may deem advisable. The Board of Directors may
delegate such power to any officer or officers of the Corporation or to any
transfer agent or registrar of the Corporation; but the Board of Directors, such
officer or officers or such transfer agent or registrar may, in their
discretion, refuse to issue such new certificate save upon the order of some
court having jurisdiction in the premises.
ARTICLE IX.
-----------
Notice
------
Section 1. Notice to Stockholders.
- ----------------------------------
Whenever by law or these Bylaws notice is required to be given
to any stockholder, such notice shall be in writing and may be given to each
stockholder by leaving the same at his or her residence or usual place of
business, or by mailing it, postage prepaid, and addressed to such
14
<PAGE>
stockholder's address as it appears on the books of the Corporation or its
transfer agent. Such leaving or mailing of notice shall be deemed the time of
giving such notice.
Section 2. Notice to Directors and Officers.
- --------------------------------------------
Whenever by law or these Bylaws notice is required to be given
to any director or officer, such notice may be given in any one of the following
ways: by personal notice to such director or officer, by telephone communication
with such director or officer personally, by telecopy, by telegram, cablegram or
radiogram, or by leaving the notice at his residence or usual place of business,
or by mail. The time when such notice shall be consigned to a communication
company for delivery shall be deemed to be the time of the giving of such
notice, and four days after the time when such notice shall be mailed shall be
deemed to be the time of the giving of such notice by mail.
Section 3. Waiver of Notice.
- ----------------------------
Notice to any stockholder or director of the time, place
and/or purpose of any meeting of stockholders or directors required by these
Bylaws may be dispensed with if such stockholder shall either attend in person
or by proxy, or if such director shall attend in person, or if such absent
stockholder or director shall, in writing filed with the records of the meeting
either before or after the holding thereof, waive such notice.
ARTICLE X.
----------
Voting of Stock in Other Corporations
-------------------------------------
Any stock in other corporations, which may from time to time
be held by the Corporation, may be represented and voted at any meeting of
stockholders of such other corporations by a Co-President or a Vice-President or
by proxy or proxies appointed by a Co-President or a Vice-President, or
otherwise pursuant to authorization "hereunto given by a resolution of the Board
of Directors adopted by a vote of a majority of the directors.
ARTICLE XI.
-----------
Indemnification
---------------
Section 1. Directors and Officers, Third Party Actions.
- -------------------------------------------------------
The Corporation shall indemnify any director or officer of the
Corporation who was or is a party or is threatened to be made a party to any
threatened, pending or completed actions, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was serving as an
authorized representative of the Corporation (which, for the purposes of this
Article, shall mean service, at the Corporation's request, as a director,
officer, partner, trustee, employee or agent of another
15
<PAGE>
corporation, partnership, joint venture, trust or other enterprise or employee
benefit plan) against judgments, fines, amounts paid in settlement and expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with such action, suit or proceeding unless it is proved that the act
or omission of the director was material to the cause of action adjudicated in
the proceeding and: (a) was committed in bad faith; or (b) was the result of
active and deliberate dishonesty; or (c) the director actually received an
improper personal benefit in money, property or services, or, with respect to
any criminal action or proceeding, the director had reasonable cause to believe
his act or omission was unlawful. The termination of any action, suit or
proceeding by judgment, order or settlement shall not create a presumption that,
with respect to any criminal action or proceeding, the director had reasonable
cause to believe that his act or omission was unlawful. The termination of any
action, suit or proceeding by conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, creates a
rebuttable presumption that the director did not meet that standard of conduct
set forth in the immediately preceding sentence.
Section 2. Directors and Officers Actions by or in the Right of the Corporation.
- --------------------------------------------------------------------------------
The Corporation shall indemnify any director or officer of the
Corporation who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was an authorized representative of the Corporation, to the same extent set
forth in Section 1 of this Article, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation, unless and only to the extent that a
Court of appropriate jurisdiction determines upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity.
Section 3. Indemnification for Successful Defenses.
- ---------------------------------------------------
To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding of the type referred to in Section 1 or 2 of this
Article or in defense of any claim, issue or matter therein, he shall be
indemnified by the Corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith. Such a person
who is not a director or officer of the Corporation may, at the discretion of
the Corporation, be indemnified by the Corporation in any other circumstances to
any extent if the Corporation would be required by Section 1 or 2 of this
Article to indemnify such person in such circumstances to such extent if he were
or had been a director or officer of the Corporation.
Section 4. Procedure.
- ---------------------
Indemnification under Section 1 or 2 of this Article may be
made in a specific case upon a determination that indemnification of the
authorized representative is required or proper in
16
<PAGE>
the circumstances because he has met the applicable standard of conduct set
forth in Sections 1 or 2 of this Article. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a
quorum consisting of directors not, at the time, parties to the action, suit or
proceeding ("disinterested directors"), or if such a quorum cannot be obtained,
then by a majority vote of a committee of the Board consisting solely of two or
more disinterested directors designated to act in the matter by a majority vote
of the full Board (which may include directors who are parties to the action,
suit or proceeding); or
(b) By special legal counsel selected by the Board of
Directors or a committee of the Board by vote as set forth in (a) above, or if
the requisite quorum of the full Board cannot be obtained and the committee
cannot be established, by a majority vote of the full Board (which may include
directors who are parties to the action, suit or proceeding); or
(c) By the stockholders.
Section 5. Advancing Expenses.
- ------------------------------
Expenses (including attorneys fees) incurred by a director or
officer of the Corporation in connection with any civil or criminal action, suit
or proceeding of the type referred to in Section 1 or 2 of this Article shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding, upon receipt of (i) a written affirmation by the director or
officer of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation as required by Section 1 of this Article or
by law; and (ii) a written undertaking by or on behalf of a director or officer
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as required in this Article or
authorized by law. Such expenses incurred by an employee or agent who is not a
director or officer of the Corporation may be paid by the Corporation in advance
when authorized by the Board of Directors upon receipt of a similar undertaking.
The repayment obligation represented by an undertaking pursuant to this Section
need not be secured and may be accepted without reference to financial ability
to make the repayment.
Section 6. Scope of Article.
- ----------------------------
Each person who shall act as an authorized representative of
the Corporation shall be deemed to be doing so in reliance upon such rights of
indemnification as are provided in this Article.
The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any agreement, vote of stockholders or disinterested
directors, statute or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office or position, and
shall continue as toa person who has ceased to be an authorized representative
of the Corporation and shall inure to the benefit of the heirs, executors and
administrators of such a person.
17
<PAGE>
ARTICLE XII.
------------
Amendments
----------
These bylaws may be amended or replaced, or new bylaws may be
adopted, either (a) by the vote of the stockholders entitled to cast at least a
majority of the votes which all stockholders are entitled to cast thereon at any
duly organized annual or special meeting of stockholders; or (b) with respect to
those matters which are not by statute reserved exclusively to the stockholders,
by vote of a majority of the Board of Directors of the Corporation in office at
any regular or special meeting of directors. It shall not be necessary to set
forth such proposed amendment, repeal or new bylaws, or a summary thereof, in
any notice of such meeting, whether annual, regular or special.
Without prior approval of the shareholders, the board of directors will
not take any action or omit to take any action which would cause or result in
failure of the corporation to qualify as a real estate investment trust within
the meaning of the Internal Revenue Code of 1986, as amended (a "REIT"). The
board of directors shall cause the corporation to exercise all of its rights to
prevent transfer of shares, or to redeem shares, to cause the corporation not to
fail to qualify as a REIT. This Section may not be amended without the approval
of the shareholders in accordance with Article XII.
Secretary's Certificate
-----------------------
I, Larry W. Seay, Secretary of Monterey Homes Corporation (the
"Corporation"), do hereby certify that the foregoing is a true and correct copy
of the Corporation's Amended and Restated Bylaws as approved by the Board of
Directors of the Corporation on June 10, 1998.
IN WITNESS WHEREOF, I have hereunto set my hand on this 10th day of
June, 1998.
--------------------------
Larry W. Seay, Secretary
18
<PAGE>
RESOLVED, that the form of Amended and Restated Bylaws presented and reviewed by
each director is hereby approved and adopted and the Secretary of the
Corporation is authorized and directed to certify as to such adoption.
19
EXHIBIT 5
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
July 9, 1998
Monterey Homes Corporation
6613 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85250
Re: Registration Statement on Form S-3 relating to
2,509,660 Shares of the Common Stock of Monterey Homes Corporation
------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special Maryland law counsel to Monterey Homes
Corporation, a Maryland corporation (the "Company"), in connection with a
registration statement on Form S-3 of the Company (as the same may be amended
from time to time, the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933. The Registration Statement relates to an aggregate of 2,509,662
shares (the "Shares") of the Common Stock, par value $0.01 per share, of the
Company ("Common Stock") to be sold by certain stockholders (the "Selling
Stockholders"), as described in the Registration Statement. The Shares consist
of (i) 1,787,937 shares of Common Stock currently outstanding (the "Outstanding
Shares"); (ii) 43,946 shares of Common Stock underlying currently outstanding
warrants (the "Warrant Shares"); (iii) 177,778 shares of Common Stock which the
Company is contractually obligated to issue to the Selling Stockholders in two
installments on or as soon as practicable after January 1, 1999 (88,888 Shares)
and January 1, 2000 (88,890 Shares) (the "Contingent Shares"); and (iv) an
aggregate of 500,001 shares of Common Stock underlying stock options granted to
the Selling Shareholders (the "Option Shares").
In connection with the opinion set forth herein, we have considered
such questions of law as we have deemed necessary as a basis for the opinions
set forth below, and we have examined or otherwise are familiar with originals
or copies, certified or otherwise identified to our satisfaction, of the
following: (i) the Registration Statement; (ii) the Amended and Restated
Articles of Incorporation, as amended, of the Company, as currently in effect;
(iii) the Bylaws, as amended, of the Company, as currently in effect; (iv)
certain resolutions of the Board of Directors of the Company relating to the
Shares and Certificates of the Secretary of the Company relating to such
resolutions; and (v) such other documents as we have deemed necessary or
appropriate as a basis for such opinions. In our examination, we have assumed
without independent verification the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to
<PAGE>
us as certified or photostatic copies and the authenticity of the originals of
such copies. As to any facts material to this opinion that we did not
independently establish or verify, we have relied solely upon statements and
representations of officers and other representatives of the Company and others,
including, without limitation, the Secretary's Certificates referred to in
clause (iv) of the first sentence of this paragraph.
Based upon the foregoing, we are of the opinion that:
(1) The Outstanding Shares have been duly authorized and validly issued
and are fully paid and nonassessable.
(2) The Warrant Shares, when issued and paid for in accordance with the
terms of the Warrant Agreement filed as Exhibit 10.8 to the Registration
Statement and of the Assumption Agreement filed as Exhibit 10.9 to the
Registration Statement, will be validly issued, fully paid and nonassessable.
(3) The Contingent Shares, when issued in accordance with the Escrow
and Contingent Stock Agreement filed as Exhibit 10.7 to the Registration
Statement, will be validly issued, fully paid and nonassessable.
(4) The Option Shares, when issued and paid for in accordance with the
Stock Option Agreements filed as Exhibits 10.1, 10.2 and 10.3 to the
Registration Statement, as applicable, will be validly issued, fully paid and
nonassessable.
This letter is strictly limited to the matters expressly set forth
herein and no statements or opinions should be inferred beyond such matters.
This opinion is limited to the laws of the State of Maryland (without regard to
the principles of conflicts of laws thereof) and is based upon and limited to
such laws and regulations in effect as of the date hereof. We assume no
obligation to update the opinion set forth herein.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ VENABLE, BAETJER AND HOWARD, LLP
2
The Board of Directors
Monterey Homes Corporation:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
July 6, 1998
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 13, 1996, in the Registration Statement (Form
S-3) of Monterey Homes Corporation (formerly Homeplex Mortgage Investments
Corporation) for the registration of 2,509,662 shares of its common stock.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
July 6, 1998
