PROSPECTUS SUPPLEMENT
(To Prospectus dated May 8, 1996)
1,490,700 Shares
IRVINE APARTMENT COMMUNITIES, INC.
Common Stock
Irvine Apartment Communities, Inc. (the "Company") is a self-
administered equity real estate investment trust ("REIT") engaged in the
development and operation of apartment communities on the Irvine Ranch in
Orange County, California. At March 31, 1996, the Company owned a 45.4%
economic interest in Irvine Apartment Communities, L.P. (the "Operating
Partnership") and was its sole managing general partner. At such date, The
Irvine Company and certain of its subsidiaries held a 54.6% economic
interest in the Operating Partnership and were its only limited partners.
At March 31, 1996 the Operating Partnership owned and operated 11,334 units
in 43 apartment communities, and had 2,734 units in seven additional
apartment communities under construction or lease up, with 1,850 units
completed at March 31, 1996. Through July 2020, the Company holds the
exclusive right, but not the obligation, to acquire land from The Irvine
Company for development of additional rental apartment communities on the
Irvine Ranch.
The Irvine Company has committed, pursuant to its rights under the
partnership agreement, to purchase 1,490,700 partnership units ("OP Units")
in the Operating Partnership (the "Irvine Investment") at a price per OP
Unit equal to the public offering price of the Common Stock offered hereby
(the "Offering"). After completion of the Offering and the Irvine
Investment, the Company and The Irvine Company will own a 45.7% and 54.3%
economic interest, respectively, in the Operating Partnership.
The net cash proceeds to the Company from the Offering after deducting
estimated expenses, are expected to be approximately $30 million. The
Company will contribute the net proceeds of the Offering to the Operating
Partnership in exchange for 1,490,700 OP Units. Proceeds to the Operating
Partnership from the Irvine Investment are expected to be approximately $30
million. Approximately $40 million of the net proceeds from the Offering
and the Irvine Investment will be used by the Operating Partnership to
repay indebtedness under the Operating Partnership's revolving line of
credit (which had a balance as of March 31, 1996 of $30 million with an
average interest rate of 7.24%, and, as of July 3, 1996, is expected to
have a balance of $40 million). Such indebtedness was used to fund
development costs of communities under construction. The remaining net
proceeds of the Offering and the Irvine Investment will be used for general
corporate purposes, including the development of new apartment communities.
Pending such use, the remaining net proceeds of the Offering and the Irvine
Investment will be invested in short-term securities.
All of the shares of Common Stock offered hereby are being sold
directly by the Company to a group of institutional investors. The Common
Stock is listed on the New York Stock Exchange (the "NYSE") under the
symbol "IAC". On June 28, 1996, the last reported sale price of the Common
Stock on the NYSE was $20.125 per share. To ensure that the Company
maintains its qualification as a REIT, ownership of Common Stock by any
person (other than The Irvine Company and certain related persons) is, with
certain exceptions, limited to 7.4% of the outstanding shares. See
"Description of the Capital Stock - Common Stock - Restrictions on
Ownership and Transfer" in the accompanying Prospectus.
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 SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Proceeds to
Public Company(1)
-------- ------------
Per Share............. $20.125 $20.125
Total................. $30,000,338 $30,000,338
- -----------
(1) Before deducting expenses payable by the Company estimated at $20,000.
____________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
__________________
It is expected that delivery of the shares of Common Stock offered
hereby will be made in New York, New York on or about July 3, 1996.
_________________
The date of this Prospectus Supplement is June 28 1996.
PROSPECTUS
$ 160,731,250
IRVINE APARTMENT COMMUNITIES, INC.
Debt Securities, Preferred Stock, Common Stock
and
Warrants to Purchase the Above Securities
Irvine Apartment Communities, Inc. (the "Company") may offer and issue from
time to time (i) its debt securities (the "Debt Securities"), (ii) shares of
its Preferred Stock, par value $1.00 per share (the "Preferred Stock"), (iii)
shares of its Common Stock, par value $.01 per share (the "Common Stock"), or
(iv) warrants to purchase Debt Securities, Preferred Stock or Common Stock
(the "Warrants"). The Debt Securities, Preferred Stock, Common Stock and
Warrants are herein collectively referred to as the "Securities". The
Securities may be offered in one or more separate classes or series, in
amounts, at prices and on terms to be determined by market conditions at the
time of sale and to be set forth in a supplement or supplements to this
Prospectus (a "Prospectus Supplement"). Any Securities may be offered with
other Securities or separately. Debt Securities or Preferred Stock may be
convertible into shares of Common Stock. The aggregate offering price of the
Securities will not exceed $160,731,250.
Certain terms of any Debt Securities in respect of which this Prospectus is
being delivered will be set forth in the accompanying Prospectus Supplement
including, without limitation, the specific designation (including whether
such Debt Securities are senior or subordinated and whether such Debt
Securities are convertible), aggregate principal amount, purchase price,
maturity, interest rate (which may be fixed or variable) and time of payment of
interest (if any), terms (if any) for the subordination, redemption or
conversion thereof, listing (if any) on a securities exchange and any other
specific terms of the Debt Securities. Certain terms of any Preferred Stock in
respect of which this Prospectus is being delivered will be set forth in the
accompanying Prospectus Supplement including, without limitation, the
designation, number of shares, liquidation preference, purchase price,
dividends, voting, redemption and conversion provisions and any listing on a
securities exchange. Certain terms of any Warrants in respect of which this
Prospectus is being delivered will be set forth in the accompanying Prospectus
Supplement, including the specific designation, number, duration, purchase
price and terms thereof, any listing of the Warrants or the underlying
securities on a securities exchange and any other terms in connection with the
offering, sale and exercise of the Warrants, as well as the terms on which and
the securities for which such Warrants may be exercised. In addition, terms
of the Securities may include limitations on direct and beneficial ownership
and restrictions on transfer of the Securities, in each case as may be
appropriate to preserve the status of the Company as a real estate investment
trust for federal income tax purposes.
To ensure that the Company maintains its qualification as a real
estate investment trust ("REIT"), ownership of Common Stock by any person
(other than The Irvine Company and certain related persons) is, with certain
exceptions, limited to 7.4% of the outstanding shares. The Common Stock is
listed on the New York Stock Exchange and the Pacific Stock Exchange under the
trading symbol IAC.
See "Risk Factors" in the Prospectus Supplement for a description of
certain factors that should be considered by purchasers of the Securities
offered hereby.
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 ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Securities may be sold on a negotiated or competitive bid basis to or
through underwriters or dealers designated from time to time or to other
purchasers directly or through agents designated from time to time. Certain
terms of the offering and sale of the Securities, including, where applicable,
the names of the underwriters, dealers or agents, if any, the principal amount
or number of shares or Warrants to be purchased, the purchase price of the
Securities and the proceeds to the Company from such sale, and any applicable
commissions, discounts and other items constituting compensation of such
underwriters, dealers or agents, will also be set forth in the accompanying
Prospectus Supplement.
The date of this Prospectus is May 8, 1996
IN CONNECTION WITH AN OFFERING, THE UNDERWRITERS FOR SUCH OFFERING MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus or any Prospectus Supplement, and, if given or
made, such information or representation must not be relied upon as having
been authorized by the Company or by any underwriter, agent or dealer. This
Prospectus and any Prospectus Supplement shall 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
and any Prospectus Supplement nor any sale made thereunder shall, under any
circumstances, create any implication that the information therein is correct
as of any time subsequent to the date thereof.
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 and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and
other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at its Regional
Offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor,
New York, New York 10048, and copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is
listed on the New York Stock Exchange, Inc. (the "New York Stock Exchange") and
the Pacific Stock Exchange, Inc. (the "Pacific Stock Exchange"). In addition,
reports, proxy statements and other information concerning the Company can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005 and at the offices of the Pacific Stock Exchange at 301
Pine Street, San Francisco, California 94104.
This Prospectus constitutes a part of Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus omits certain of the
information set forth in such Registration Statement in accordance with the
rules and regulations of the Commission. Reference is hereby made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Securities. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and in each instance reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission for a more complete description of the matter involved. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed with the Commission, are
hereby incorporated by reference:
1. Annual Report on Form 10-K of the Company for the year ended
December 31, 1995; and
2. Description of the Company's Common Stock contained in a
Registration Statement of the Company on Form 8-B dated April 30,
1996 and declared effective as of May 2, 1996.
All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the termination of the offering of the Securities offered hereby, shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents. 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
which also is or is deemed to be incorporated by reference herein) modifies or
supersedes such statement. Any statements so modified or superseded shall be
deemed to constitute a part of this Prospectus, except as so modified or
superseded.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
or oral request of such person, a copy of any or all of the documents referred
to above which have been or may be incorporated by reference in this
Prospectus (other than certain exhibits to such documents). Requests for such
documents should be directed to Irvine Apartment Communities, Inc., 550
Newport Center Drive, Suite 300, Newport Beach, California 92660, Attention:
James E. Mead (Telephone: (714) 720-5500).
THE COMPANY
The Company is a self-administered equity real estate investment trust
engaged in the development and operation of apartment communities on the
Irvine Ranch in Orange County, California. The Company was formed in December
1993 to continue and expand the apartment community business of The Irvine
Company, a real estate and community development company. At March 31, 1996
the Company had a 45.4% general partnership interest in Irvine Apartment
Communities, L.P. (the "Operating Partnership") and was its sole managing
general partner. At such date, The Irvine Company and certain of its
subsidiaries held a 54.6% limited partnership interest in the Operating
Partnership and were its only limited partners. The Operating Partnership's
management and operating decisions are under the unilateral control of the
Company.
At March 31, 1996, the Operating Partnership owned and operated 11,334
units in 43 apartment communities. The units had an average economic
occupancy for the quarter ended March 31, 1996 of 93.4%. The Company also had
2,734 units in seven additional apartment communities under construction or
lease-up, with 1,850 units completed at March 31, 1996 (together with
completed communities, the "Properties"). All of the Properties are located
on the Irvine Ranch. Until July 31, 2020, the Company has the exclusive
right, but not the obligation, to acquire land from The Irvine Company for
development of additional apartment communities on the Irvine Ranch. The
developed portion of the Irvine Ranch, which borders approximately six miles
of the Pacific Ocean, includes significant parts of the cities of Irvine,
Newport Beach and Tustin. The Irvine Ranch has been developed over the past
30 years in accordance with an original master plan and is now one of the
major commercial, industrial, retail and residential centers in Southern
California.
The Company was originally incorporated in Delaware in 1993. On May 2,
1996 the Company reincorporated in Maryland. Such reincorporation did not
result in any change in the Company's business, assets or liabilities or have
any impact on the Company's status as a real estate investment trust. The
reincorporation was accounted for as a pooling of interests under generally
accepted accounting principles.
The Company's executive offices are located at 550 Newport Center Drive,
Newport Beach, California 92660 and its telephone number is (714) 720-5500.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement,
proceeds from the sale of the Securities will be used by the Company for
general corporate purposes, which may include the development of new apartment
communities and the repayment of existing indebtedness. Proceeds from the
sale of Securities initially may be temporarily invested in short-term
securities.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to
fixed charges for the Company and for the predecessor to the Company prior to
December 8, 1993.
Year Ended December 31,
1995 1994 1993 1992 1991
Ratio of Earnings to Fixed Charges . . . . . . . .1.44x1.25x.99x.96x.88x
For the purpose of calculating the ratio of earnings to fixed
charges, earnings consist of net earnings before income taxes, extraordinary
items, minority/predecessor interest income and fixed charges. Fixed charges
consist of interest expense, capitalized interest and amortization of deferred
financing costs.
Prior to completion of the Company's initial public offering in
December 1993, the predecessor of the Company operated in a highly leveraged
manner. As a result, although the Company and the predecessor have
historically generated positive net cash flow, the financial statements of the
predecessor show net losses for the periods prior to December 8, 1993.
Consequently, the computation of the ratio of earnings to fixed charges for
such periods indicate that earnings were inadequate to cover fixed charges by
approximately $0.6 million, $2.2 million and $5.8 million for the years ended
December 31, 1993, 1992 and 1991, respectively.
DESCRIPTION OF THE DEBT SECURITIES
The following sets forth certain general terms and provisions of the
indentures under which the Debt Securities are to be issued. The particular
terms of the Debt Securities will be set forth in a Prospectus Supplement
relating to such Debt Securities.
The Debt Securities will represent unsecured general obligations of
the Company, unless otherwise provided in the Prospectus Supplement. As
indicated in the applicable Prospectus Supplement, the Debt Securities will
either be senior debt, senior to all future subordinated indebtedness of the
Company and pari passu with other current and future unsecured, unsubordinated
indebtedness of the Company or, in the alternative, subordinated debt,
subordinate in right of payment to current and future senior debt and pari
passu with other future subordinated indebtedness of the Company. The Debt
Securities will be issued under one or more indentures to be executed by the
Company and one or more trustees (each a "Trustee"). The Indentures will be
in the form that has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part, subject to such amendments or supplements
as are adopted from time to time (each an "Indenture" and collectively, the
"Indentures"). The following summary of certain provisions of the Indentures
does not purport to be complete and is subject to, and qualified in its
entirety by, reference to all the provisions of the Indentures, including the
definitions therein of certain terms. Wherever particular sections or defined
terms of the Indentures are referred to, it is intended that such sections or
defined terms shall be incorporated herein by reference.
General
The Indentures will not limit the amount of Debt Securities which may
be issued thereunder. Reference is made to the Prospectus Supplement for the
following terms of the Debt Securities offered pursuant thereto: (i)
designation (including whether they are senior debt or subordinated debt and
whether such debt is convertible), aggregate principal amount, purchase price
and denomination; (ii) the date of maturity; (iii) interest rate or rates (or
method by which such rate will be determined), if any; (iv) the dates on which
any such interest will be payable; (v) the place or places where the principal
of and interest, if any, on the Debt Securities will be payable; (vi) any
redemption or sinking fund provisions; (vii) any rights of the holders of Debt
Securities (each a "Holder") to convert the Debt Securities into other
securities or property of the Company; (viii) the terms, if any, on which such
Debt Securities will be subordinate to other debt of the Company; (ix) if
other than the principal amount thereof, the portion of the principal amount
of the Debt Securities which will be payable upon declaration of acceleration
of the maturity thereof or provable in bankruptcy; (x) any Events of Default
in addition to or in lieu of those described herein and remedies therefor;
(xi) any trustees, authenticating or paying agents, transfer agents or
registrars or any other agents with respect to the Debt Securities; (xii)
listing (if any) on a securities exchange; (xiii) whether such Debt Securities
will be certificated or in book-entry form; and (xiv) any other specific terms
of the Debt Securities, including any additional events of default or
covenants provided for with respect to Debt Securities, and any terms which
may be required by or advisable under United States laws or regulations.
Debt Securities may be presented for exchange or transfer in the
manner, at the places and subject to the restrictions set forth in the Debt
Securities and the Prospectus Supplement. Such services will be provided
without charge, other than any tax or other governmental charge payable in
connection therewith, but subject to the limitations provided in the
Indentures.
Debt Securities will bear interest at a fixed rate or a floating
rate. Debt Securities bearing no interest or interest at a rate which, at the
time of issuance, is below the prevailing market rate, will be sold at a
discount below its stated principal amount. Special United States federal
income tax considerations applicable to any such discounted Debt Securities or
to any Debt Securities issued at par which is treated as having been issued at
a discount for United States income tax purposes will be described in the
relevant Prospectus Supplement.
The Indentures will not contain any covenant or other specific
provision affording protection to Holders of the Debt Securities in the event
of a highly leveraged transaction or a change in control of the Company,
except to the limited extent described under "Consolidation, Merger and Sale
of Assets". Restrictions on ownership and transfers of the Company's Common
Stock are designed to preserve its status as a REIT and, therefore, may act to
prevent or hinder a change of control. The Company's articles of
incorporation and by-laws also contain other provisions which may prevent or
limit a change of control. See, "Description of the Capital Stock".
Modification and Waiver
Each Indenture will provide that modifications and amendments of such
Indenture may be made by the Company and the applicable Trustee, with the
consent of the Holders of a majority in aggregate principal amount of the
outstanding Debt Securities issued under such Indenture which are affected by
the modification or amendment voting as one class; provided that no such
modification or amendment may, without the consent of the Holder of each such
Debt Security affected thereby, among other things: (a) extend the final
maturity of such Debt Securities, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or reduce
any amount payable on redemption thereof, or reduce the amount of the
principal of Debt Securities issued with original issue discount that would be
due and payable upon an acceleration of the maturity thereof or the amount
thereof provable in bankruptcy, or extend the time or reduce the amount of any
payment to any sinking fund or analogous obligation relating to such Debt
Securities, or materially and adversely affect any right to convert such Debt
Securities in accordance with such Indenture or impair or affect the right of
any Holder of Debt Securities to institute suit for the payment thereof or, if
such Debt Securities provide therefor, any right of repayment at the option of
the Holder, (b) reduce the aforesaid percentage of such Debt Securities of any
series, the consent of the Holders of which is required for any such
supplemental indenture, or (c) reduce the percentage of such Debt Securities
of any series necessary to consent to waive any past default under such
Indenture to less than a majority, or (d) modify any of the provisions of the
sections of such Indenture relating to supplemental indentures with the
consent of the Holders, except to increase any such percentage or to provide
that certain other provisions of such Indenture cannot be modified or waived
without the consent of each Holder affected thereby, provided, however, that
this clause shall not be deemed to require the consent of any Holder with
respect to changes in the references to "the Trustee" and concomitant changes
in such section or the deletion of this proviso. (Indenture Section 7.2)
Each Indenture will provide that a supplemental indenture which
changes or eliminates any covenant or other provision of such Indenture which
has expressly been included solely for the benefit of one or more particular
series of Debt Securities, or which modifies the rights of the Holders of such
series with respect to such covenant or other provision, shall be deemed not
to affect the rights under such Indenture of the Holders of Debt Securities of
any other series. (Indenture Section 7.2)
Each Indenture will provide that modifications and amendments of such
Indenture may be made by the Company and the applicable Trustee, without the
consent of the Holders of any series of Debt Securities issued thereunder:
(1) to secure any Debt Securities issued thereunder; (2) to evidence the
succession of another corporation to the Company and the assumption by any
such successor of the covenants, agreements and obligations of the Company, in
such Indenture and in the Debt Securities issued thereunder; (3) to add to the
covenants of the Company or to add any additional events of default; (4) to
cure any ambiguity, to correct or supplement any provision in such Indenture
that may be inconsistent with any other provision of such Indenture or to make
any other provisions with respect to matters or questions arising under such
Indenture, provided that such action shall not adversely affect the interests
of the Holders of any series of Debt Securities issued thereunder in any
material respect; (5) to establish the form and terms of Debt Securities
issued thereunder; (6) to evidence and provide for a successor trustee under
such Indenture with respect to one or more series of Debt Securities issued
thereunder or to provide for or facilitate the administration of the trusts
under such Indenture by more than one trustee; (7) to permit or facilitate the
issuance of Debt Securities in global form or bearer form or to provide for
uncertificated Debt Securities to be issued thereunder; (8) to change or
eliminate any provision of such Indenture, provided that any such change or
elimination shall become effective only when there are no Debt Securities
outstanding of any series created prior to the execution of such supplemental
indenture which are entitled to the benefit of such provision; or (9) to amend
or supplement any provision contained in such Indenture, which was required to
be contained in the Indenture in order for the Indenture to be qualified under
the Trust Indenture Act of 1939, if the Trust Indenture Act of 1939 or
regulations thereunder change what is so required to be included in qualified
indentures, in any manner not inconsistent with what then may be required for
such qualification. (Indenture Section 7.1)
Events of Default
The following will be events of default under each Indenture with
respect to each series of Debt Securities issued thereunder: (a) failure to
pay principal (or premium, if any) on any series of the Debt Securities
outstanding under such Indenture when due; (b) failure to pay any interest on
any series of the Debt Securities outstanding under such Indenture when due,
continued for 30 days; (c) default in the payment, if any, of any sinking fund
installment when due, payable by the terms of such series of Debt Securities;
(d) failure to perform any other covenant or warranty of the Company contained
in such Indenture or such Debt Securities continued for 90 days after written
notice; and (e) certain events of bankruptcy, insolvency or reorganization of
the Company. In case an event of default described in (a), (b) or (c) above
shall occur and be continuing with respect to any series of such Debt
Securities, the applicable Trustee or the Holders of not less than 25% in
aggregate principal amount of the Debt Securities of such series then
outstanding (each such series acting as a separate class) may declare the
principal (or, in the case of discounted Debt Securities, the amount specified
in the terms thereof) of such series to be due and payable. In case an event
of default described in (d) above shall occur and be continuing, the
applicable Trustee or the Holders of not less than 25% in aggregate principal
amount of all Debt Securities of each affected series then outstanding under
such Indenture (treated as one class) may declare the principal (or, in the
case of discounted Debt Securities, the amount specified in the terms thereof)
of all Debt Securities of all such series to be due and payable. If an event
of default described in (e) above shall occur and be continuing then the
principal amount (or, in the case of discounted Debt Securities, the amount
specified in the terms thereof) of all the Debt Securities outstanding shall
be and become due and payable immediately, without notice or other action by
any Holder or the applicable Trustee, to the full extent permitted by law.
Any event of default with respect to particular series of Debt Securities
under such Indenture may be waived by the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of such series (voting as
a class), except in each case a failure to pay principal of or premium, if
any, or interest on such Debt Securities or a default in respect of a covenant
or provision which cannot be modified or amended without the consent of each
Holder affected thereby. (Indenture Sections 4.1, 4.10)
Each Indenture will provide that the applicable Trustee may withhold
notice to the Holders of any default with respect to any series of Debt
Securities (except in payment of principal of or interest or premium on, or
sinking fund payment in respect of, the Debt Securities) if the applicable
Trustee considers it in the interest of Holders to do so. (Indenture Section
4.11)
The Company will be required to furnish to each Trustee annually a
statement as to its compliance with all conditions and covenants in the
applicable Indenture. (Indenture Section 3.5)
Each Indenture will contain a provision entitling the applicable
Trustee to be indemnified by the Holders before proceeding to exercise any
trust or power under such Indenture at the request of such Holders (Indenture
Section 5.2). Each Indenture will provide that the Holders of a majority in
aggregate principal amount of the then outstanding Debt Securities of any
series may direct the time, method and place of conducting any proceedings for
any remedy available to the applicable Trustee or of exercising any trust or
power conferred upon the applicable Trustee with respect to the Debt
Securities of such series, provided, however, that the applicable Trustee may
decline to follow any such direction if, among other reasons, the applicable
Trustee, determines in good faith that the actions or proceedings as directed
may not lawfully be taken, would involve the applicable Trustee in personal
liability or would be unduly prejudicial to the Holders of the Debt Securities
of such series not joining in such direction (Indenture Section 4.9). The
right of a Holder to institute a proceeding with respect to the applicable
Indenture will be subject to certain conditions precedent including, without
limitation, that the Holders of not less than 25% in aggregate principal
amount of the Debt Securities of such series then outstanding under such
Indenture make a written request upon the applicable Trustee to exercise its
powers under such Indenture, indemnify the applicable Trustee and afford the
applicable Trustee reasonable opportunity to act, but the Holder has an
absolute right to receipt of the principal of, premium, if any, and interest
when due on the Debt Securities, to require conversion of Debt Securities if
such Indenture provides for convertibility at the option of the Holder and to
institute suit for the enforcement thereof (Indenture Sections 4.6,
4.7).
Consolidation, Merger and Sale of Assets
Each Indenture will provide that the Company may not consolidate
with, merge into or sell, convey or lease all or substantially all of its
assets to any Person unless the Company is the surviving corporation or the
successor Person is a corporation organized under the laws of any domestic
jurisdiction and assumes the Company's obligations on the Debt Securities
issued thereunder, and under such Indenture, and after giving effect thereto
no event of default, and no event which, after notice or lapse of time or
both, would become an event of default shall have occurred and be continuing,
and that certain other conditions are met. (Indenture Sections 8.1,8.2)
Conversion Rights
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the conversion price (or
manner of calculation thereof), the conversion period, provisions as to
whether conversion will be at the option of the Holders or the Company, the
events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of redemption of such Debt Securities and
any restrictions on conversion, including restrictions directed at maintaining
the Company's REIT status.
Discharge, Defeasance and Covenant Defeasance
Each Indenture will provide with respect to each series of Debt
Securities issued thereunder that the Company may terminate its obligations
under such Debt Securities of a series and such Indenture with respect to Debt
Securities of such series if: (i) all Debt Securities of such series
previously authenticated and delivered, with certain exceptions, have been
delivered to the applicable Trustee for cancellation and the Company has paid
all sums payable by it under the Indenture; or (ii) (A) the Debt Securities of
such series mature within one year or all of them are to be called for
redemption within one year under arrangements satisfactory to the applicable
Trustee for giving the notice of redemption, (B) the Company irrevocably
deposits in trust with the applicable Trustee, as trust funds solely for the
benefit of the Holders of such Debt Securities, for that purpose, money or
U.S. Government Obligations or a combination thereof sufficient (unless such
funds consist solely of money, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the applicable Trustee), without consideration of any
reinvestment, to pay principal of and interest on the Debt Securities of such
series to maturity or redemption, as the case may be, and to pay all other
sums payable by it under such Indenture, and (C) the Company delivers to the
applicable Trustee an officers' certificate and an opinion of counsel, in each
case stating that all conditions precedent provided for in such Indenture
relating to the satisfaction and discharge of such Indenture with respect to
the Debt Securities of such series have been complied with. With respect to
the foregoing clause (i), only the Company's obligations to compensate and
indemnify the applicable Trustee under the Indenture shall survive. With
respect to the foregoing clause (ii) only the Company's obligations to execute
and deliver Debt Securities of such series for authentication, to maintain an
office or agency in respect of the Debt Securities of such series, to have
moneys held for payment in trust, to register the transfer or exchange of Debt
Securities of such series, to deliver Debt Securities of such series for
replacement or to be cancelled, to compensate and indemnify the applicable
Trustee and to appoint a successor trustee, and its right to recover excess
money held by the applicable Trustee shall survive until such Debt Securities
are no longer outstanding. Thereafter, only the Company's obligations to
compensate and indemnify the applicable Trustee, and its right to recover
excess money held by the applicable Trustee shall survive. (Indenture Section
9.1)
Each Indenture will provide that the Company (i) will be deemed to
have paid and will be discharged from any and all obligations in respect of
the Debt Securities issued thereunder of any series, and the provisions of
such Indenture will, except as noted below, no longer be in effect with
respect to the Debt Securities of such series ("legal defeasance") and (ii)
may omit to comply with any term, provision, covenant or condition of such
Indenture, and such omission shall be deemed not to be an Event of Default
under clause (d) of the first paragraph of "--Events of Default" with respect
to the outstanding Debt Securities of such series ("covenant defeasance");
provided that the following conditions shall have been satisfied: (A) the
Company has irrevocably deposited in trust with the applicable Trustee as
trust funds solely for the benefit of the Holders of the Debt Securities of
such series, for payment of the principal of and interest of the Debt
Securities of such series, money or U.S. Government Obligations or a
combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the applicable
Trustee) without consideration of any reinvestment and after payment of all
federal, state and local taxes or other charges and assessments in respect
thereof payable by the applicable Trustee, to pay and discharge the principal
of and accrued interest on the outstanding Debt Securities of such series to
maturity or earlier redemption (irrevocably provided for under arrangements
satisfactory to the applicable Trustee), as the case may be; (B) such deposit
will not result in a breach or violation of, or constitute a default under,
such Indenture or any other material agreement or instrument to which the
Company is a party or by which it is bound; (C) no default with respect to
such Debt Securities of such series shall have occurred and be continuing on
the date of such deposit; (D) the Company shall have delivered to such Trustee
an opinion of counsel that (1) the Holders of the Debt Securities of such
series will not recognize income, gain or loss for federal income tax purposes
as a result of the Company's exercise of its option under this provision of
such Indenture and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred and (2) the Holders of the Debt
Securities of such series have a valid security interest in the trust funds
subject to no prior liens under the Uniform Commercial Code, and (E) the
Company has delivered to the applicable Trustee an officers' certificate and
an opinion of counsel, in each case stating that all conditions precedent
provided for in such Indenture relating to the defeasance contemplated have
been complied with. In the case of legal defeasance under clause (i) above,
the opinion of counsel referred to in clause (D)(1) above may be replaced by a
ruling directed to the applicable Trustee received from the Internal Revenue
Service to the same effect. Subsequent to a legal defeasance under clause (i)
above, the Company's obligations to execute and deliver Debt Securities of
such series for authentication, to maintain an office or agency in respect of
the Debt Securities of such series, to have moneys held for payment in trust,
to register the transfer or exchange of Debt Securities of such series, to
deliver Debt Securities of such series for replacement or to be cancelled, to
compensate and indemnify the applicable Trustee and to appoint a successor
trustee, and its right to recover excess money held by the applicable Trustee
shall survive until such Debt Securities are no longer outstanding. After
such Debt Securities are no longer outstanding, in the case of legal defeasance
under clause (i) above, only the Company's obligations to compensate and
indemnity the applicable Trustee and its right to recover excess money held by
the applicable Trustee shall survive. (Indenture Sections 9.2 and 9.3)
Applicable Law
The Indentures will provide that the Debt Securities and the
Indentures will be governed by and construed in accordance with the laws of
the State of New York. (Indenture Section 10.8)
DESCRIPTION OF THE CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000,000
shares of common stock, par value $0.01 per share ("Common Stock"), 10,000,000
shares of preferred stock, par value $1.00 per share ("Preferred Stock") and
160,000,000 shares of excess stock, par value $0.01 per share ("Excess
Stock"), of which 150,000,000 shares are designated Excess Common Stock and
10,000,000 shares are designated Excess Preferred Stock. As of March 31, 1996,
there were issued and outstanding 16,985,000 shares of Common Stock and the
Company had no Preferred Stock or Excess Stock outstanding.
The following summary does not purport to be complete and is
qualified in its entirety by reference to the applicable provisions of
Maryland law and the Company's Articles of Amendment and Restatement (the
"Articles of Incorporation") and Amended By-Laws (the "By-Laws").
Common Stock
Subject to such preferential rights as may be granted by the Board of
Directors of the Company (the "Board of Directors") in connection with the
future issuance of Preferred Stock (and any related series of Excess Preferred
Stock as described under "Preferred Stock" below), holders of shares of Common
Stock are entitled to one vote per share on all matters to be voted on by
shareholders and are entitled to receive ratably such dividends as may be
declared on the Common Stock by the Board of Directors in its discretion from
funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the Company, after payment of all debts and other
liabilities and any liquidation preference of the holders of Preferred Stock
(and any related series of Excess Preferred Stock as described under
"Preferred Stock" below), each holder of shares of Common Stock is entitled to
receive, ratably with each other holder of Common Stock, $1.00 per share out
of the net assets of the Company available for distribution to its
stockholders, and after such payment, holders of shares of Common Stock are
entitled to share ratably with holders of Excess Common Stock (see
"Restrictions on Ownership and Transfer" below) in all remaining assets of the
Company available for distribution to its stockholders increased in the case
of the Common Stock by any amounts that result from the limitation of the
liquidation rights of Excess Common Stock. See "Restrictions on Ownership and
Transfer -- Ownership Limit Provisions." Holders of Common Stock have no
subscription, redemption, conversion or preemptive rights. See "Participation
Rights." Matters submitted for shareholder approval generally require a
majority vote of the shares of Common Stock present and voting thereon. The
outstanding shares of Common Stock are fully paid and nonassessable.
Preferred Stock
The Board of Directors is empowered by the Company's Articles of
Incorporation to designate and issue from time to time, without stockholder
approval, Preferred Stock in one or more series. The Board of Directors may
affix and determine the relative rights, preferences and privileges of each
series of Preferred Stock so issued, including, but not limited to ownership
limit restrictions. Because the Board of Directors has the power to establish
the preferences and rights of each series of Preferred Stock, it may afford
the holders in any series of Preferred Stock preferences, powers and rights,
voting or otherwise, senior to the rights of holders of Common Stock and
Excess Common Stock. The issuance of Preferred Stock could have the effect of
delaying or preventing a change in control of the Company. At such time as
the Board of Directors authorizes a series of Preferred Stock, without any
further or separate action of the Board of Directors, there shall be deemed to
be authorized a series of Excess Preferred Stock consisting of the number of
shares included in the series of Preferred Stock and having terms, rights,
restrictions and qualifications identical thereto, except to the extent that
the Articles of Incorporation require different terms.
The applicable Prospectus Supplement will describe the following
terms of any Preferred Stock in respect of which this Prospectus is being
delivered (to the extent applicable to such Preferred Stock): (1) the specific
designation, number of shares, seniority and purchase price; (2) any
liquidation preference per share; (3) any date of maturity; (4) any
redemption, repayment or sinking fund provisions; (5) any dividend rate or
rates and the dates on which any such dividends will be payable (or the method
by which such rates or dates will be determined); (6) any voting rights; (7)
whether the Preferred Stock is convertible and, if so, the securities or
rights into which such Preferred Stock is convertible (which may include other
Preferred Stock) and the terms and conditions upon which such conversions will
be effected including the initial conversion prices or rates, the conversion
period and any other related provisions; (8) the place or places where
dividends and other payments on the Preferred Stock will be payable; (9) any
ownership limit restrictions applicable to such Preferred Stock; and (10) any
additional voting, dividend, liquidation, redemption and other rights,
preferences, privileges, limitations and restrictions, including restrictions
directed at maintaining the Company's REIT status. The shares of Preferred
Stock offered hereby will, when issued, be fully paid and nonassessable.
Charter and Bylaw Provisions
Certain provisions of the Articles of Incorporation and the Bylaws
which are summarized below, may make it more difficult to change the
composition of the Board of Directors and may discourage or make more
difficult any attempt by a person or group to obtain control of the Company.
Staggered Board of Directors. The Articles of Incorporation and
Bylaws provide that the Board of Directors is divided into three classes of
directors serving staggered terms. Each class holds office until the third
annual meeting for election of directors following the election of such class.
Number of Directors; Removal; Filling Vacancies. The Articles of
Incorporation provide that, subject to any rights of holders of Preferred
Stock (and any related series of Excess Preferred Stock) to elect additional
directors under specified circumstances, the number of directors will be fixed
by the Board of Directors, but must consist of not more than ten nor less than
three directors. The Articles of Incorporation provide that all vacancies on
the Board of Directors resulting from death or resignation may be filled
solely by a majority of the directors then in office. In accordance with the
Maryland General Corporation Law (the "MGCL"), the Articles of Incorporation
provide that vacancies resulting from removal by the stockholders may be
filled by such stockholders and vacancies resulting from an increase in the
number of directors may be filled by a majority of the entire Board of
Directors. If a director is elected by the Board of Directors to fill a
vacancy, such director shall serve only until the next annual meeting of the
stockholders. The Articles of Incorporation and Bylaws do not provide for a
stockholder vote to fill vacancies unless a vacancy results from the removal
of a director. The Articles of Incorporation provide that, subject to the
rights of holders of Preferred Stock (and any related series of Excess
Preferred Stock) to elect additional directors under specified circumstances,
directors may not be removed by the stockholders except for cause with the
affirmative vote of holders of not less than 66 2/3% of the total voting power
of all outstanding securities then entitled to vote generally for the election
of directors, voting together as a single class.
Pursuant to the Company's Articles of Incorporation and Bylaws, a
majority of the directors of the Company must be persons who are not (i)
affiliates, or an officer, director or employee, of The Irvine Company or (ii)
the spouse, ancestor or lineal descendant or brother or sister of Mr. Donald
Bren, the majority stockholder of The Irvine Company and the Chairman of the
Board of Directors of the Company.
Board Quorum and Special Voting Requirements. The Articles of
Incorporation provide that a majority of the entire Board of Directors of the
Company, including at least one director who was nominated for election as a
director by The Irvine Company (see "Provisions of the Miscellaneous Rights
Agreement Included in Bylaws" below) shall constitute a quorum for the
transaction of business at any annual or special meeting of the Board of
Directors and, except as provided below, that the affirmative vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. Notwithstanding the foregoing,
the approval of more than 75% of the entire Board of Directors (the "Required
Directors") shall be required to approve the following: (i) a Change of
Control (as defined below) of the Company or the Operating Partnership, (ii)
any amendment to the Company's Articles of Incorporation or Bylaws, or any
amendment to the agreement of limited partnership of the Operating Partnership
(the "Partnership Agreement"); (iii) any waiver or modification of any
applicable Ownership Limit Provision (as defined under "Restrictions on
Ownership and Transfer -- Ownership Limit Provisions"); (iv) any merger,
consolidation, statutory share exchange or sale of all or substantially all of
the assets of the Company or the Operating Partnership; (v) the issuance of
any equity securities of the Company or any securities convertible into, or
exchangeable or exercisable for, any equity securities of the Company,
provided that the affirmative vote of the Required Directors shall not be
required with respect to the issuance of equity securities (excluding for
purposes of this proviso, equity securities (other than Common Stock) having
any voting rights other than voting rights required under Maryland law or by
the rules of the New York Stock Exchange or the Pacific Stock Exchange) (a)
pursuant to any stock incentive plan adopted by the Company, (b) in connection
with The Irvine Company's exercise of the Exchange Rights or the Cash Tender
Rights (each as defined below) provided for in the Partnership Agreement, (c)
in connection with the acquisition of certain land sites on the Irvine Ranch
for Common Stock pursuant to the land rights and non-competition agreement
between the Company, the Operating Partnership, The Irvine Company and Donald
Bren (the "Land Rights Agreement") or (d) in a bona fide underwritten public
offering managed by one or more nationally recognized investment banking
firms; (vi) for the Company to take title to assets (other than temporarily in
connection with an acquisition prior to contributing such assets to the
Operating Partnership) or to conduct business other than through the Operating
Partnership, or for the Company or the Operating Partnership to engage in any
business other than the ownership, construction, development and operation of
multifamily rental apartment communities; (vii) for the Company or the
Operating Partnership to make a general assignment for the benefit of
creditors or to institute any proceedings in bankruptcy or for the
liquidation, dissolution, reorganization or winding up of the Company or the
Operating Partnership or to consent to the taking of any such action against
the Company or the Operating Partnership; and (viii) to terminate the
Company's status as a real estate investment trust for federal income tax
purposes. A Change of Control of the Company or the Operating Partnership
will generally be deemed to have occurred if any person or group acquires 20%
or more of the combined voting power of the Company or the Operating
Partnership, as the case may be.
Special Meetings of Stockholders. Under the Bylaws, a special
meeting of stockholders may be called by the Chairman of the Board or the
President or by a majority of the Board of Directors, and by the holders of
shares entitled to cast such percentage of all votes entitled to be cast at
the meeting which represents the maximum percentage as may be permitted for
such purpose under the MGCL, as amended from time to time; however, a special
meeting need not be held to consider any matter which is substantially the
same as a matter voted upon at a special meeting within the last 12 months
unless requested by a majority of the shares entitled to vote at such special
meeting.
Action by Written Consent of Stockholders. The MGCL provides that
any action that may be taken at a stockholders meeting may be taken without a
meeting only if (i) a unanimous written consent setting forth the matter is
signed by each stockholder entitled to vote on the matter and (ii) a written
waiver of any right to dissent is signed by each stockholder entitled to
notice of the meeting but not entitled to vote at it.
Advance Notice of Director Nominations and New Business. The Bylaws
provide that with respect to an annual meeting of stockholders, the proposal
of business to be considered by stockholders may be made only (i) by or at the
direction of the Board of Directors, or (ii) by a stockholder who is entitled
to vote at the meeting and has complied with the advance notice procedures set
forth in the Bylaws. In addition, with respect to any meeting of stockholders,
nominations of persons for election to the Board of Directors may be made only
(i) by or at the direction of the Board of Directors or (ii) by any
stockholder of the Company who is entitled to vote at the meeting and has
complied with the advance notice provisions. The advance notice provisions
are not applicable to The Irvine Company.
The advance notice provisions of the Bylaws could have the effect of
discouraging a takeover or other transaction in which holders of some, or a
majority, of the shares of Common Stock might receive a premium for their
shares over the then prevailing market price or which such holders might
believe to be otherwise in their best interests.
Provisions of the Miscellaneous Rights Agreement Included in Bylaws.
The Bylaws provide that the provisions of the Miscellaneous Rights Agreement
(the "Miscellaneous Rights Agreement") among the Company, the Operating
Partnership and The Irvine Company with respect to matters relating to the
governance of the Company (including the right to designate nominees for
election as a director, to designate persons to fill vacancies on the Board of
Directors and limitations on increasing or decreasing the size of the Board of
Directors) (the "Miscellaneous Rights") will have the same effect as bylaws of
the Company. This provision of the Bylaws further provides that in the event
of any inconsistency between any Miscellaneous Right and any other provision
of the Bylaws, the Miscellaneous Right shall control (except with respect to
any Bylaw adopted by stockholder vote prior to the execution and delivery of
any amendment to the Miscellaneous Rights Agreement creating such
Miscellaneous Right). This Bylaw provision is intended to enhance The Irvine
Company's ability to enforce the Miscellaneous Rights and to ensure that the
general public is aware of the existence of the Miscellaneous Rights.
Pursuant to the Miscellaneous Rights Agreement, The Irvine Company
has the right, and will continue to have the right so long as it, its
shareholders or its affiliates beneficially own at least 20% of the
outstanding Common Stock (including for this purpose Common Stock issuable
upon exchange of its limited partnership interests ("L.P. Units") in the
Operating Partnership), to nominate three persons for election to the Board of
Directors of the Company. In the event this ownership falls below 20% but is
at least 15%, The Irvine Company will have the right to nominate two persons
for election to the Board of Directors; and if this ownership falls below 15%
but is at least 10%, The Irvine Company will have the right to nominate one
person for election to the Board of Directors.
Maryland Business Combination Law
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and an "Interested Stockholder" or an affiliate thereof are
prohibited for five years after the most recent date on which the Interested
Stockholder becomes an Interested Stockholder. An Interested Stockholder is
any person who beneficially owns 10% or more of the voting power of the
corporation's shares or an affiliate or associate of the corporation who, at
any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting stock of the corporation. After the five year period, any such
business combination must be recommended by the board of directors of the
corporation and approved by the affirmative vote of at least (i) 80% of the
votes entitled to be cast by holders of outstanding voting shares of the
corporation and (ii) two-thirds of the votes entitled to be cast by holders of
outstanding voting shares of the corporation other than shares held by the
Interested Stockholder with whom (or with whose affiliate) the business
combination is to be effected, unless, among other conditions, the
corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Stockholder for its shares.
These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The Articles of Incorporation and resolutions adopted
by the Board of Directors have exempted from these provisions of the MGCL any
business combination with The Irvine Company, or any affiliates of The Irvine
Company or Mr. Bren, or any members of the immediate family of Mr. Bren and
any other person acting in concert or as a group with any of the foregoing.
All other stockholders are subject to the business combination statute.
Business Combinations
The Articles of Incorporation require that, except in certain
circumstances, Business Combinations involving the Company be approved by the
affirmative vote of the holders of at least 66 2/3% of the outstanding voting
stock of the Company. A Business Combination is defined in the Articles of
Incorporation as (i) any merger or consolidation or statutory share exchange
of the Company in which (a) the Company fails to survive that involves all or
any "Substantial Part" (as defined) of the assets of the Company or (b) more
than 20% of the voting control of the Company is transferred, (ii) any sale,
exchange, transfer or other disposition of all or substantially all of the
assets of the Company and (iii) the execution of any agreement, contract or
other arrangement providing for any of the transactions described in the
definition of Business Combination. The term "Substantial Part" means more
than 25% of the total market capitalization of the Company (including
outstanding shares of Common Stock and L.P. Units that are exchangeable for
shares of Common Stock plus total debt) as of the end of the most recent
quarter or fiscal year ending prior to the time the determination is being
made.
Control Share Acquisitions
The MGCL provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on
the matter, excluding shares of stock owned by the acquiror or by officers or
directors who are employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquiror, or in respect of which the acquiror is
able to exercise or direct the exercise of voting power except solely by
virtue of a revocable proxy, would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third; (ii) one-third or more
but less than a majority; or (iii) a majority of all voting power. Control
shares do not include shares the acquiring person is entitled to vote as a
result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions (including an undertaking
to pay expenses and delivery of an "acquiring person statement"), may compel
the corporation's board of directors to call a special meeting of stockholders
to be held within 50 days of demand to consider the voting rights of the
shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders' meeting.
Unless the corporation's articles of incorporation or bylaws provide
otherwise, if voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement within ten
(10) days following a control share acquisition then, subject to certain
conditions and limitations, the corporation may redeem any or all of the
control shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to the absence of voting
rights for the control shares, as of the date of the last control share
acquisition or of any meeting of stockholders at which the voting rights of
such shares are considered and not approved. Moreover, unless the
corporation's articles of incorporation or bylaws provide otherwise, if voting
rights for control shares are approved at a stockholders' meeting and the
acquiror becomes entitled to exercise or direct the exercise of a majority or
more of all voting power other stockholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of such appraisal
rights may not be less than the highest price per share paid by the acquiror
in the control share acquisition.
The control share acquisition statute does not apply to shares
acquired in a merger, consolidation or share exchange if the corporation is a
party to the transaction, or to acquisitions approved or exempted by the
articles of incorporation or bylaws of the corporation.
The Articles of Incorporation and resolutions adopted by the Board of
Directors have exempted control share acquisitions involving The Irvine
Company, or any affiliates of The Irvine Company or Mr. Bren, or any members
of the immediate family of Mr. Bren and any other person acting in concert or
as a group with any of the foregoing. All other stockholders are subject to
the control share acquisition statute.
Participation Rights
In the event that the Company issues (whether for cash or property)
any shares of Common Stock or securities convertible into, or exchangeable or
exercisable for, shares of Common Stock, The Irvine Company, subject to
certain limited exceptions, including the issuance of Common Stock pursuant to
any stock incentive plan adopted by the Company or pursuant to The Irvine
Company's exercise of the Exchange Rights or the Cash Tender Rights described
below under "Exchange Rights" and "Cash Tender Rights," will have the right to
purchase Common Stock, L.P. Units or such securities at a purchase price equal
to the purchase price in the transaction giving rise to the participation
rights in order to maintain its interest in the Company and the Operating
Partnership on a consolidated basis. However, other stockholders of the
Company would have no participation rights to purchase shares of Common Stock
or such securities and any such issuance might cause a dilution of a
stockholder's investment in the Company.
Limitation of Directors' and Officers' Liability; Indemnification
Pursuant to the MGCL and the Articles of Incorporation, the liability
of directors of the Company to the Company or to any stockholder of the
Company for money damages has been eliminated except (i) to the extent that it
is established that such directors 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 and (ii) to the extent that a
judgment or other final adjudication adverse to such directors is entered in a
proceeding based on a finding in the proceeding that such directors' 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. Maryland law
also extends the right to limit the liability of officers of a corporation.
The Articles of Incorporation utilize this extension, limiting the liability
of officers to the same extent directors' liability is limited.
The Articles of Incorporation provide indemnification to directors
and officers, including the advance of legal expenses, to the full extent
authorized by applicable law and allow the Board of Directors to extend such
indemnification to other employees and agents as the Board of Directors shall
determine to be appropriate. Under the MGCL, a director of a corporation may
be indemnified (including in connection with a derivative action so long as
the director has not been found liable) unless it is established that (a) the
act or omission of the director was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active
and deliberate dishonesty; (b) the director actually received an improper
personal benefit in money, property, or services; or (c) in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. The Articles of Incorporation extend this right of
indemnification to officers and otherwise grant the Board of Directors the
authority to indemnify other employees and agents.
Restrictions on Ownership and Transfer
Ownership Limit Provisions. The Articles of Incorporation contain
certain restrictions on the number of shares of Common Stock that individual
shareholders may own. For the Company to qualify as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended (the
"Code"), no more than 50% in number of its outstanding shares of Common Stock
may be owned, directly or indirectly, by five or fewer individuals (as defined
in the Code to include certain entities) during the last half of a taxable
year (other than the first year) or during a proportionate share of a shorter
taxable year (the "Five or Fewer Test"). The Common Stock must also be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year or during a proportionate part of a shorter taxable year.
Because the Company expects to continue to qualify as a REIT, the Articles of
Incorporation contain restrictions on the acquisition of Common Stock intended
to ensure compliance with these requirements.
Subject to certain exceptions specified in the Articles of
Incorporation, no holder other than The Irvine Company, certain related
parties and certain look-through entities may own, or be deemed to own by
virtue of the attribution provisions of the Code, more than 7.4% (the
"Ownership Limit") of the issued and outstanding shares of Common Stock. The
ownership limit for The Irvine Company and certain related persons will be 20%
of the issued and outstanding Common Stock in the aggregate (the "Related
Party Limit"). In addition, the ownership limit applicable to certain of the
types of entities that are looked-through for purposes of the Five or Fewer
Test under the Code will be 15% of the outstanding Common Stock (the
"Look-Through Ownership Limit" and, together with the Ownership Limit and the
Related Party Limit, the "Ownership Limit Provisions"). Generally, under the
Articles of Incorporation certain pension trusts qualifying under Section
401(a) of the Code and United States investment companies registered under the
Investment Act of 1940 will be subject to the Look-Through Ownership Limit.
Any shares held in excess of the Related Party Limit or Look-Through Ownership
Limit will be subject to all of the terms, conditions and restrictions under
the Articles of Incorporation on any shares held in excess of the Ownership
Limit. The Board of Directors may, with a ruling from the Internal Revenue
Service or an opinion of counsel satisfactory to it, waive the Ownership Limit
with respect to a holder if such holder's ownership will not then or in the
future jeopardize the Company's status as a REIT.
If shares of Common Stock in excess of the Ownership Limit, Related
Party Limit or Look-Through Ownership Limit are issued or transferred to any
person, or shares which would cause the Company to be beneficially owned by
fewer than 100 persons are transferred to any person, such issuance or
transfer shall be null and void and the intended transferee will acquire no
rights to the stock.
In addition, shares of Common Stock owned, or deemed to be owned, or
transferred to a stockholder in excess of the applicable Ownership Limit
Provision will automatically be exchanged for shares of Excess Common Stock
that shall be deemed to have been transferred to a person as trustee of a
trust for the exclusive benefit of one or more qualifying charitable
organizations designated by the Company. While shares of Excess Common Stock
are held in trust, the trustee of the trust will be deemed to hold the shares
of Excess Common Stock for the exclusive benefit of the charitable
beneficiary, the intended original transferee-stockholder will acquire no
rights to such stock, except as described below, and the trustee of the trust
will have all voting and dividend rights pertaining to the transferred shares.
Subject to such preferential rights as may be granted by the Board of
Directors in connection with the future issuance of Preferred Stock (and the
related series of Excess Preferred Stock) and the $1.00 preferential right of
the Common Stock referred to under "Common Stock" above, in liquidation, the
intended original transferee-stockholder of shares of Excess Common Stock
shall be entitled to share ratably with holders of Common Stock and Excess
Common Stock in all remaining assets of the Company available for distribution
to its stockholders, provided that the original transferee-stockholder's
ratable share of the Company's assets would be limited to the price paid by the
original transferee-stockholder for the Common Stock in the purported transfer
that resulted in the Excess Common Stock or, if no value was given, a price
per share equal to the closing market price on the date of the purported
transfer that resulted in the Excess Common Stock.
Excess Common Stock is not transferable except as hereinafter
described. The original transferee-stockholder may, at any time the shares of
Excess Common Stock are held in trust, transfer the Excess Common Stock to any
person whose ownership of such shares would be permitted under the Ownership
Limit Provisions, at a price per share not in excess of the lesser of (i) the
price per share paid by the original transferee-stockholder for the shares of
Common Stock in the purported transfer that resulted in the Excess Common
Stock or, if no value was given, the price per share equal to the closing
market price on the date of the purported transfer that resulted in the Excess
Common Stock or (ii) the price per share received by the original
transferee-stockholder in the transfer to the person whose ownership of such
shares would be permitted under the Ownership Limit Provisions. Immediately
upon transfer to such permitted transferee, the shares of Excess Common Stock
will automatically be exchanged for Common Stock. In addition, the Company
would have the right, for a period of 90 days during the time the Excess
Common Stock is held in trust, to purchase all or any portion of the Excess
Common Stock from the original transferee-stockholder at a price per share
equal to the lesser of (i) the price per share paid by the original
transferee-stockholder in the transaction that created such Excess Common
Stock (or, in the case of a devise or gift, the closing market price at the
time of such devise or gift) and (ii) the closing market price for the stock
on the date the Company exercises its option to purchase. The 90-day period
begins on the date of the violative transfer if the original
transferee-stockholder gives notice to the Company of the transfer or (if no
such notice is given) the date the Board of Directors determines that a
violative transfer has been made.
The Ownership Limit Provisions will not be automatically removed even
if the REIT provisions of the Code are changed so as to no longer contain any
ownership concentration limitation or if the ownership concentration
limitation is increased. In addition to preserving the Company's status as a
REIT, the effect of the Ownership Limit Provisions is to prevent any person
from acquiring unilateral control of the Company. Any change in the Ownership
Limit Provisions would require an amendment to the Articles of Incorporation.
Such an amendment to the Articles of Incorporation would require the approval
of the Required Directors and the affirmative vote of holders owning not less
than 66 2/3% of the outstanding Common Stock.
All certificates representing shares of Common Stock will bear a
legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution
provisions of the Code, more than 0.5% (or such other percentage between 0.5%
and 5.0%, as determined by the Board of Directors) of the outstanding Common
Stock must file an affidavit with the Company containing the information
specified in the Articles of Incorporation within 30 days after January 1 of
each year. In addition, each stockholder shall upon demand be required to
disclose to the Company in writing such information with respect to the
direct, indirect and constructive ownership of shares as the Board of
Directors deems necessary to comply with the provisions of the Code applicable
to a REIT or to comply with the requirements of any taxing authority or
governmental agency.
If the Company authorizes the issuance of any series of Preferred
Stock in the future, the Board of Directors will at the time of authorization
establish ownership limits applicable to such series to ensure compliance with
the REIT qualification provisions of the Code. Such ownership limit
restrictions will be described in the applicable Prospectus Supplement.
Amendments to Articles of Incorporation and Bylaws; Termination of REIT Status
In general, the Articles of Incorporation may not be amended without
the affirmative vote of at least a majority of the total number of shares of
all classes outstanding and entitled to vote thereon. The provisions of the
Articles of Incorporation under the captions "Charter and Bylaw Provisions --
Staggered Board of Directors"; "--Number of Directors; Removal; Filling
Vacancies"; "-- Board Quorum and Special Voting Requirements"; "Business
Combinations"; "Limitation of Directors' and Officers' Liability;
Indemnification"; and "Restrictions on Ownership and Transfer" and the
exclusion of The Irvine Company and certain other persons from the provisions
of the Maryland business combination statute and control share acquisition
statute as described under the captions "Maryland Business Combination Law"
and "Control Share Acquisitions," may be amended only upon the vote of the
holders of at least 66 2/3% of the capital stock entitled to vote generally in
the election of directors, voting as a single group. The Bylaws may be
amended by either the affirmative vote of holders of 66 2/3% of all shares
outstanding and entitled to vote generally in the election of directors,
voting as a single group, unless a greater percentage is specified with
respect to a specific Bylaw provision, or by an affirmative vote of the
Required Directors. In addition, the affirmative vote of holders of at least
66 2/3% of the capital stock entitled to vote generally in the election of
directors, voting as a single group, is required to terminate the Company's
status as a real estate investment trust for federal tax purposes.
Limitations on Changes in Control
The provisions of the Articles of Incorporation and the Bylaws
providing for ownership limitations, a staggered Board of Directors,
authorizing the Board of Directors to issue Preferred Stock without
stockholder approval, requiring the affirmative vote of 66 2/3% of the
Company's stockholders to engage in certain Business Combinations, and the
business combination and control share provisions of the MGCL could have the
effect of delaying, deferring or preventing a change in control of the Company
or the removal of existing management, and as a result could prevent the
stockholders of the Company from being paid a premium for their shares of
Common Stock.
Exchange Rights
The Irvine Company and certain related persons will have the right
(subject to the applicable Ownership Limit Provision), exercisable once in
each twelve-month period, to exchange up to one-third of the number of L.P.
Units owned by them for shares of Common Stock or if The Irvine Company and
certain related persons own 6,149,000 L.P. Units or less, then they may,
subject to the applicable Ownership Limit Provision, exchange all of their L.P.
Units for shares of Common Stock. As of the date of this Prospectus, The
Irvine Company and its subsidiaries own [20,425,162] L.P. Units in the
aggregate. The exchange ratio shall be one share of Common Stock for each
L.P. Unit, subject to adjustment in certain events, including the Company
paying a dividend or making a distribution on the Common Stock in shares of
Common Stock and subdivisions and combinations of the Common Stock. L.P.
Units that are acquired by the Company pursuant to the exercise of Exchange
Rights will be converted automatically into units of general partnership
interest in the Operating Partnership.
The exercise of Exchange Rights is subject to (i) the expiration or
termination of the applicable waiting period, if any, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, and (ii) the
satisfaction of the Ownership Limit or the Related Party Limit, as applicable,
after giving effect to the exchange. The Related Party Limit applicable to
The Irvine Company and certain related persons will be 20% of the issued and
outstanding shares of Common Stock in the aggregate; however, certain persons
who will have the right to exchange L.P. Units for Common Stock pursuant to
the Exchange Rights, will be subject to the 7.4% Ownership Limit. For
purposes of determining the number of L.P. Units which may be exchanged for
shares of Common Stock pursuant to the Exchange Rights at any point in time,
there shall be taken into account the number of issued and outstanding shares
of Common Stock which are beneficially owned by The Irvine Company and its
affiliates at such time. Accordingly, beneficial ownership of shares of
Common Stock reduces the number of L.P. Units which may be exchanged pursuant
to the Exchange Rights at any point in time.
Cash Tender Rights
The Irvine Company and certain related persons have the right,
exercisable once in any twelve-month period, subject to certain limitations,
to sell to the Company for cash up to one-third of the number of L.P. Units
owned by them or if The Irvine Company and certain related persons own
6,149,000 L.P. Units or less, then they may tender all of their L.P. Units to
the Company. L.P. Units that are acquired by the Company as a result of the
exercise of Cash Tender Rights will be converted automatically into units of
general partnership interest in the Operating Partnership.
The Company will have to pay for such L.P. Units solely out of the
proceeds of a registered offering of newly issued shares of Common Stock. The
price payable for an L.P. Unit tendered will be equal to the average of the
daily market prices for the Common Stock for the 10 consecutive trading days
immediately preceding the date of receipt by the Company of a notice of cash
tender (each L.P. Unit being equivalent to one share of Common Stock, subject
to adjustment as described above), except that the purchase price for such
L.P. Units will be reduced by any decrease in the price of the Common Stock
that occurs between the exercise date and the pricing of the Common Stock
being sold pursuant to the registered offering and underwriting discounts and
commissions. The Irvine Company will thus bear the risk of any such
reduction, subject to certain withdrawal rights. Any proceeds in excess of
the purchase price will be for the sole benefit of the Company. The Company
shall be required to promptly file with the Commission a registration
statement with respect to any registered offering.
After an exercise of Cash Tender Rights, The Irvine Company may not
exercise its Cash Tender Rights until 90 days after the completion of the
registered offering of shares of Common Stock, if applicable.
Registration Rights
The Company has granted certain "demand" and "piggyback" registration
rights with respect to shares of Common Stock owned by The Irvine Company or
any of its affiliates, whether acquired pursuant to the Exchange Rights, in
connection with the Land Rights Agreement, in the open market or otherwise.
Transfer Agent
The transfer agent and registrar for the Company's Common Stock is
The First National Bank of Boston.
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase Debt Securities (the "Debt
Warrants"), Preferred Stock (the "Preferred Stock Warrants") or Common Stock
(the "Common Stock Warrants", collectively with the Debt Warrants and the
Preferred Stock Warrants the "Warrants"). Warrants may be issued
independently or together with any Securities and may be attached to or
separate from such Securities. The Warrants are to be issued under warrant
agreements (each a "Warrant Agreement") to be entered into between the Company
and a bank or trust company, as warrant agent (the "Warrant Agent"), all as
shall be set forth in the Prospectus Supplement relating to the Warrants being
offered pursuant thereto.
Debt Warrants
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the debt warrant certificates representing such Debt Warrants, including
the following: (1) the title of such Debt Warrants; (2) the aggregate number
of such Debt Warrants; (3) the price or prices at which such Debt Warrants
will be issued; (4) the designation, aggregate principal amount and terms of
the Debt Securities purchasable upon exercise of such Debt Warrants, and the
procedures and conditions relating to the exercise of such Debt Warrants; (5)
the designation and terms of any related Debt Securities with which such Debt
Warrants are issued, and the number of such Debt Warrants issued with each
such security; (6) the date, if any, on and after which such Debt Warrants and
the related Debt Securities will be separately transferable; (7) the principal
amount of Debt Securities purchasable upon exercise of each Debt Warrant, and
the price at which such principal amount of Debt Securities may be purchased
upon such exercise; (8) the date on which the right to exercise such Debt
Warrants shall commence, and the date on which such right shall expire; (9)
the maximum or minimum number of such Debt Warrants which may be exercised at
any time; (10) a discussion of material federal income tax considerations, if
any; and (11) any other terms of such Debt Warrants and terms, procedures and
limitations relating to the exercise of such Debt Warrants.
Debt Warrant certificates will be exchangeable for new Debt Warrant
certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated
in the Prospectus Supplement. Prior to the exercise of their Debt Warrants,
holders of Debt Warrants will not have any of the rights of holders of the
securities purchasable upon such exercise and will not be entitled to payments
of principal of (or premium, if any) or interest, if any, on the securities
purchasable upon such exercise.
Other Warrants
The applicable Prospectus Supplement will describe the following
terms of Preferred Stock Warrants and Common Stock Warrants in respect of
which this Prospectus is being delivered: (1) the title of such Warrants; (2)
the Securities for which such Warrants are exercisable; (3) the price or
prices at which such Warrants will be issued; (4) the number of such Warrants
issued with each share of Preferred Stock or Common Stock; (5) any provisions
for adjustment of the number or amount of shares of Preferred Stock or Common
Stock receivable upon exercise of such Warrants or the exercise price of such
Warrants; (6) if applicable, the date on and after which such Warrants and the
related Preferred Stock or Common Stock will be separately transferable; (7)
if applicable, a discussion of material federal income tax considerations; (8)
any other terms of such Warrants, including terms, procedures and limitations
relating to the exchange and exercise of such Warrants; (9) the date on which
the right to exercise such Warrants shall commence, and the date on which such
right shall expire; (10) the maximum or minimum number of such Warrants which
may be exercised at any time.
Exercise of Warrants
Each Warrant will entitle the holder of Warrants to purchase for cash
such principal amount of Debt Securities or shares of Preferred Stock or
Common Stock at such exercise price as shall in each case be set forth in, or
be determinable as set forth in, the Prospectus Supplement relating to the
Warrants offered thereby. Warrants may be exercised at any time up to the
close of business on the expiration date set forth in the Prospectus
Supplement relating to the Warrants offered thereby. After the close of
business on the expiration date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Warrants offered thereby. Upon receipt of payment and the
warrant certificate properly completed and duly executed at the corporate
trust office of the Warrant Agent or any other office indicated in the
Prospectus Supplement, the Company will, as soon as practicable, forward the
Debt Securities or shares of Preferred Stock or Common Stock purchasable upon
such exercise. If less than all of the Warrants represented by such warrant
certificate are exercised, a new warrant certificate will be issued for the
remaining Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief and general summary of certain provisions
that currently govern the federal income tax treatment of the Company and its
stockholders.
The Company believes it has operated, and the Company intends to
continue to operate, in such a manner as to qualify as a REIT under the Code,
but no assurance can be given that it will at all times so qualify. The
provisions of the Code pertaining to REITs are highly technical and complex.
For the particular provisions that govern the federal income tax treatment of
the Company and its stockholders, reference is made to Sections 856 through
860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a
REIT generally will not be subject to federal income tax with respect to
income that it distributes to its stockholders. If the Company fails to
qualify during any taxable year as a REIT, unless certain relief provisions
are available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could
have a material adverse effect upon its stockholders.
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends will be taxed as long-term capital gain income to the stockholders.
To the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the stockholders'
Securities with respect to which the distribution is paid and, to the extent
that they exceed such basis, will be taxed in the same manner as gain from the
sale of those Securities.
Investors are urged to consult their own tax advisors with respect to
the appropriateness of an investment in the Securities and with respect to the
tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning (i) income taxes on
effectively connected income, (ii) withholding taxes on dividends or interest,
(iii) branch profits taxes, (iv) taxes imposed under the Foreign Investment in
Real Property Tax Act, and (v) other tax consequences that may arise under
federal, state or local law.
PLAN OF DISTRIBUTION
The Securities may be sold (i) through agents, (ii) through
underwriters, (iii) through dealers or (iv) directly to purchasers (through a
specific bidding or auction process or otherwise). The distribution of
Securities may be effected from time to time in one or more transactions at
a fixed price or prices, which may be changed, or at market prices prevailing
at the time of sale, at prices relating to such prevailing market prices or at
negotiated prices.
Offers to purchase the Securities may be solicited by agents
designated by the Company from time to time. Any such agent involved in the
offer or sale of the Securities will be named, and any commissions payable by
the Company to such agent will be set forth in the Prospectus Supplement.
Unless otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment. Any such
agent may be deemed to be an underwriter, as that term is defined in the
Securities Act, of the Securities so offered and sold.
If an underwriter or underwriters are utilized in the sale of
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transactions, including
compensation of the underwriters and dealers, if any, will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales
of the Securities.
If a dealer is utilized in the sale of the Securities, the Company
will sell such Securities to the dealer, as principal. The dealer may then
resell such Securities to the public at varying prices to be determined by
such dealer at the time of resale. The name of the dealer and the terms of
the transactions will be set forth in the Prospectus Supplement relating
thereto.
Offers to purchase the Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to institutional
investors or others. The terms of any such sales, including the terms of any
bidding or auction process, if utilized, will be described in the Prospectus
Supplement relating thereto.
Agents, underwriters and dealers may be entitled under agreements
which may be entered into with the Company to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act,
and any such agents, underwriters or dealers, or their affiliates may be
customers of, engage in transactions with or perform services for the Company
in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will
authorize agents and underwriters to solicit offers by certain institutions to
purchase Debt Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date stated in the
Prospectus Supplement. Such Contracts will be subject to only those
conditions set forth in the Prospectus Supplement. A commission indicated in
the Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Debt Securities pursuant to Contracts accepted by the Company.
EXPERTS
The consolidated and combined financial statements of the Company
included in the Annual Report on Form 10-K of the Company for the year ended
December 31, 1995 have been audited by Ernst & Young LLP, independent
auditors, as stated in its report dated January 31, 1996 and are incorporated
herein by reference in reliance upon the report of such firm, which report is
given upon their authority as experts in accounting and auditing.
Any financial statements and schedules hereafter incorporated by
reference in the registration statement of which this prospectus is a part
that have been audited and are the subject of a report by independent auditors
will be incorporated herein by reference in reliance upon such reports and
upon the authority of such firms as experts in accounting and auditing to the
extent covered by consents filed with the Commission.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for
the Company by Davis Polk & Wardwell, New York, New York. Davis Polk &
Wardwell will rely as to matters of Maryland law on Piper & Marbury LLP,
Baltimore, Maryland.
