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: FOLEY
FOLEY & LARDNER LLP
ATTORNEYS AT LAW
One Independent Drive, Suite 1300
January 5, 2005 Jacksonville, FL 32202-5017
P. O. Box 240
Jacksonville, FL 32201-0240
904.359.2000 TEL
904.359.8700 FAX
www.foley.com
WRITER'S DIRECT LINE
904.359.8713
lkelso@foley.com EMAIL
CLIENT/MATTER NUMBER
040521-0109
VIA EDGAR
Ms. Christina Chalk, Special Counsel
Securities and Exchange Commission
Division of Corporation Finance
Office of Mergers and Acquisitions
450 Fifth Street, N.W.
Washington, DC 20549
Re: Regency Centers Corporation
Schedule TO-I filed December 10, 2004
SEC File No. 5-42731
Dear Ms. Chalk:
On behalf of Regency Centers Corporation, we submit the
following responses to comments of the staff of the Securities and Exchange
Commission received December 27, 2004 concerning Regency's Schedule TO filed on
December 10, 2004. Contemporaneously herewith, Regency is filing Amendment No. 1
to Schedule TO, including the First Supplement to Offer to Exchange Reload
Rights for New Options or Stock Rights Awards.
All terms used herein and not otherwise defined have the
meaning ascribed thereto in the Offer to Exchange.
Offer to Exchange
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General
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1. We note that the subject security for purposes of this exchange offer
as you describe it in the offer materials is technically only the
"reload right," not the existing option and associated reload right.
Moreover, you disclose that the reason for the exchange offer is to
avoid expensing stock options under new Financial Standards Board rules
that go into effect in July 2005. Although you state that the offer is
structured so as to "motivate and compensate our employees by giving
them an equity stake in Regency," that appears to refer to the reason
for the structure of the offer, but not the reason for making the
offer. As you are aware, the global exemptive order issued in
connection with option exchange offers (March 21, 2001) applies to
offers where (i) the subject security is an option; (ii) the exchange
offer is conducted for compensatory reasons; and (iii) the issuer is
eligible to use Form S-8, the options subject to the exchange offer
were issued under an employee benefit plan as defined in Rule 405 under
the Securities Act, and the securities offered will also be issued
under such an employee benefit plan. We assume you are attempting to
Ms. Christina Chalk
January 5, 2005
Page 2
rely on that order, since you are excluding from participation in this
exchange offer certain option holders who are not employees. Please
provide an analysis supplementally as to why you believe your offer
conforms to the conditions applicable for reliance on the global
exemptive order.
For the reasons set forth below, the exchange offer conforms
to the conditions for reliance on the global exemptive order issued in
connection with option exchange offers.
(i) The subject security is an option.
---------------------------------
The exchange offer is the functional equivalent of tendering
for all outstanding options with reload rights, in exchange for options with
identical terms (including exercise price and expiration date) other than the
reload feature. For ease of documentation, Regency has chosen not to cancel the
existing options in their entirety, but instead to include a provision in the
new award agreement which cancels the reload rights contained in the old
options.
We also note that amending the provisions of a security can
result in the de facto issuance of a new security in exchange for the old
security. See e.g., Western Air Lines, Inc. v. Sobieski, 191 Cal. App. 2d
(1961)(change in voting rights constituted sale of a new security). Similarly,
we understand that under GAAP, the exchange will be treated as the cancellation
of the old options and the issuance of new awards in their place. Substance
should prevail over form.
We also note that the reload rights in themselves could be
deemed a "subject security" under the global exemptive order. A stock option is
the right to acquire a security and is included in the definition of "security"
in Section 2(a)(1) of the Securities Act. The reload right is the right to
acquire a new option in exchange for paying the exercise price of the related
option with shares that the optionee has held for at least six months.
(ii) The exchange offer is being conducted for compensatory
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reasons.
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The offer is being conducted for compensatory reasons as well
as because of the concern about the unpredictable accounting impact (and
consequence stock price impact) of the future issuance of reload options under
the new FASB rule. If Regency were concerned only about the accounting
consequences, it would have chosen to cash out the reload rights. Instead, it
is" killing two birds with one stone." Besides reducing the future accounting
expense of reload option issuances, it is offering new stock-based award
agreements designed to provide significant compensatory benefits. The restricted
stock awards will provide immediate compensation upon vesting. The new stock
options will provide greater potential for long-term appreciation because they
will extend over a longer term than the existing reload rights. Moreover,
reducing the potential earnings charges for reload options also has the purpose
of enhancing the benefit of Regency's stock based compensation by enhancing the
potential value of Regency's common stock.
Ms. Christina Chalk
January 5, 2005
Page 3
(iii) Regency meets the other conditions of the exemptive
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order.
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(1) Regency is eligible to use Form S-8, (2) the options
subject to the exchange offer all were issued under Regency's Long-Term Omnibus
Plan (an employee benefit plan as defined in Rule 405 under the Securities Act),
and (3) the new awards to be issued in exchange for the subject securities will
all be issued under that plan.
Summary Term Sheet
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2. In the introductory paragraph, please modify your statement that the
"summary is not complete." While the summary is necessarily more
abbreviated than the complete disclosure document that follows, it
should represent a complete description of the most material features
of the offer to exchange. See Item 1001 of Regulation M-A.
We have amended the second sentence of the introductory
paragraph in the Summary Term Sheet section on page 1 in its entirety to read as
follows:
"You should carefully read (1) this entire offer to exchange,
(2) the accompanying individualized letter specifying the
estimated present value of your reload rights and (3) the
election form."
3. Consider defining the term "nonqualified" used in the Summary Term
Sheet section. Your definition should focus on the impact of that term
to participating employees.
We have added a definition of the term "nonqualified" by
amending the first bullet contained in Section A9 on page 3 of the Summary Term
Sheet in its entirety to read as follows:
o "be nonqualified, therefore requiring you to
recognize ordinary income for federal income tax
purposes (and allowing us to take a corresponding
deduction) upon exercise in the amount of the spread,
i.e., the excess of the fair market value of our
common stock on the date of exercise over the option
exercise price."
4. Please clarify here and elsewhere in the offer materials that even an
option holder who elects to participate in this exchange offer will
keep his or her existing option, and will forfeit only the reload
component. In addition, clarify that the new option that would be
issued pursuant to the reload feature of the existing options itself
includes a reload component.
To clarify that an option holder who elects to participate in
this exchange offer will keep his or her existing option and will forfeit only
the reload component, we have added the following additional sentence to A1 on
page 1 of the Summary Term Sheet:
"If you elect to participate in the reload exchange program,
you will not forfeit any of your current options, however all
of your options will be amended to remove the reload right
feature."
Ms. Christina Chalk
January 5, 2005
Page 4
Additionally, the following additional two sentences have been
added to the end of the Introduction Section located on page 12 of the Offer:
"Only reload rights will be forfeited. All employees
participating in the exchange offer will keep their existing
options."
To clarify that the new options that would be issued pursuant
to the reload feature of the existing options itself includes a reload
component, we have amended the second sentence contained in the second bullet of
Section A2 on page 1 of the Summary Term Sheet in its entirety to read as
follows:
o "The new option has the same expiration date as the
options you exercised, an exercise price equal to the
then market price of the shares and a reload
feature."
Additionally, the section "Reload Feature" under the column
"Reload Options" which is contained in the table in the "Comparison of Terms of
Reload Options, New Options and Stock Rights Awards" section on page 15 of the
Offer has been amended in its entirety to read as follows:
"Yes, all new options issued upon exercise of a reload option
also contain a reload feature."
Dispute Resolution, page 17
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5. We note in your disclosure that all disputes, claims or controversies
between Regency and the holder of new options or stock rights awards
must be settled by binding arbitration conducted in Jacksonville,
Florida within a year of the time when the complaining party knew or
should have known of the facts giving rise to the complaint. As to
claims arising under the federal securities laws, we object to such an
attempt to limit securityholders' judicial remedies as against public
policy. Please remove or limit the language accordingly.
We have added the requested limitation and amended the second
sentence in the "Dispute Resolution" section of the Offer on page 17 in its
entirety to read as follows:
"In addition, arbitration must be initiated within one year
after the complaining party first knew of should have known of
the facts giving rise to the complaint. These provisions are
identical to mandatory arbitration provisions in many award
agreements for existing stock options.
Claims under federal securities laws may not be subject to
mandatory arbitration within such one-year period, as the
courts and the Securities and Exchange Commission may deem the
attempt to limit judicial remedies to be against public policy
and therefore unenforceable."
Ms. Christina Chalk
January 5, 2005
Page 5
6. See comment 5 above. With respect to claims arising other than under
the federal securities laws, we believe that the existing disclosure in
the offer materials does not adequately describe the potential effect
of this clause. For example, the reference to "[a]ny dispute,
controversy or claim" appears to cover employment-related and other
matters that may arise between an employee and the company. Please
revise the offer documents generally to fully discuss this aspect of
the implications of participation in the offer. For example, the Risk
Factors section and the Summary Term Sheet should highlight this effect
and discuss the impact for participating option holders.
In order to clarify that only disputes arising out of or
relating to the new stock option or stock rights award agreements must be
settled by binding arbitration, the first sentence of the sole paragraph in the
"Dispute Resolution" section of the Offer on page 17 has been amended in its
entirety as follows:
"Disputes, controversies or claims between Regency and the
holder of the new options or stock rights award arising out of
or relating to an award agreement will be settled by binding
arbitration conducted in Jacksonville, Florida."
Because the arbitration provision is narrower in scope than
the original shorthanded language suggested and because an identical provision
is contained in many of the award agreements covering existing options, we have
not included references to it in the Summary Term Sheet or Risk Factors
sections.
Conditions of the Offer, page 20
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7. You may terminate the offer if its consummation would result in an
accounting charge to Regency of more than $6.8 million. Briefly
describe the circumstances under which this could occur. For example,
at what level of participation would this offer condition be
"triggered"?
The accounting charge will depend on two variables: (1) the
estimated present value of the reload rights given up, and (2) our stock price
on the date of grant of the replacement awards. We have provided a brief
explanation of this fact by amending the fourth bullet in the "Conditions of the
Offer" section on page 20 of the Offer to read as follows:
o "the consummation of the offer will result in an
accounting charge to Regency in excess of $6.8 million,
which will depend on the estimated present value of the
reload rights exchanged for new awards and our stock
price on the date that we grant the new awards. The
accounting charge will increase as more reload rights
are exchanged and if our stock price increases between
now and the date that we grant the new awards. The
accounting charge would be more than $6.8 million if all
holders of reload rights as of January 5, 2005 elect to
participate in the exchange, and (2) our stock price is
at least $58 per share on the date that we grant the new
awards."
Ms. Christina Chalk
January 5, 2005
Page 6
Extension of Offer, Termination and Amendment, page 24
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8. Refer to the first full paragraph on page 25. Clarify your reference to
"termination" there. In addition, briefly describe the circumstances
under which you believe you could "postpone" acceptance and
cancellation of reload rights in a situation where an offer condition
has not occurred.
We have deleted the second paragraph of the "Extension of
Offer; Termination and Amendment" section on page 25 of the Offer.
Financial Statements, page 26
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9. We note that you have incorporated by reference Regency's financial
statements in its annual report on Form 10-K for the year ended
December 31, 2003 and the unaudited financial statements included in
its quarterly report on Form 10-Q for the quarter ended September 30,
2004. Where you incorporate by reference financial statements found in
other documents filed with the SEC, we require you to include in the
document disseminated to options holders the summary financial
statements required by Item 1010(c) of Regulation M-A. See Instruction
6 to Schedule TO and Q&A 7 in Section I.H of the Division of
Corporation Finance's Manual of Publicly Available Telephone
Interpretations (July 2001). Please revise to include the summary
financial statements in your offer materials. Advise how this new
information will be disseminated to option holders.
Additional financial data is contained in the First Supplement
to Offer to Exchange under the section "Selected Financial Data."
Regency is disseminating the First Supplement to all option
holders with reload rights via its internal inter-office mail system.
Attached to this letter is an executed written statement from
Regency pursuant to your request in the "Closing Comments" section of the
comment letter.
If you have any questions, please do not hesitate to contact
the undersigned at 904-359-2000.
Very truly yours,
/s/ Linda Y. Kelso
Linda Y. Kelso
LYK/bmj
cc: Mr. J. Christian Leavitt
Mr. Brian Fraser
Ms. Jamie Fegan Conroy
Ms. Celia Paulk
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Regency Centers Corporation
121 W. Forsyth Street, Suite 200
Jacksonville, Florida 32202
January 5, 2005
Ms. Christina Chalk, Special Counsel
Securities and Exchange Commission
Division of Corporation Finance
Office of Mergers and Acquisitions
450 Fifth Street, N.W.
Washington, DC 20549
Re: Regency Centers Corporation
Schedule TO-I filed December 10, 2004
SEC File No. 5-42731
Dear Ms. Chalk:
On behalf of Regency Centers Corporation, I acknowledge the
following:
o Regency is responsible for the adequacy and accuracy of the disclosure
filings;
o Staff comments or changes to the disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to our filings; and
o Regency may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
/s/ J. Christian Leavitt
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J. Christian Leavitt
Senior Vice President and Principal
Accounting Officer