<PAGE>   1
                                                                     EXHIBIT 4.4


                               ------------------


                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                                IAC CAPITAL TRUST


                          Dated as of January 20, 1998


                               ------------------


<PAGE>   2
                               TABLE OF CONTENTS*


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                                    ARTICLE I

                                  DEFINITIONS

SECTION 1.1  Definitions..............................................................2

     Affiliate........................................................................2
     Appointment Event................................................................2
     Banking Institution..............................................................2
     Beneficial Ownership.............................................................3
     Book Entry Interest..............................................................3
     Business Day.....................................................................3
     Business Trust Act...............................................................3
     Capital Securities...............................................................3
     Certificate......................................................................3
     Certificate of Terms.............................................................3
     Certificate of Trust.............................................................3
     Charitable Beneficiary...........................................................3
     Charitable Trust.................................................................3
     Charitable Trustee...............................................................4
     Clearing Agency..................................................................4
     Clearing Agency Participant......................................................4
     Closing Price....................................................................4
     Code.............................................................................4
     Commission.......................................................................4
     Common Security..................................................................4
     Common Security Certificate......................................................4
     Covered Person...................................................................4
     Creditor.........................................................................5
     Definitive Preferred Security Certificates.......................................5
     Delaware Trustee.................................................................5
     Depositary Agreement.............................................................5
     Distribution.....................................................................5
     DTC..............................................................................5
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--------

*     This Table of Contents does not constitute part of the Amended and
      Restated Declaration of Trust and should not have any bearing upon the
      interpretation of any of its terms or provisions.


                                       i
<PAGE>   3
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     Excess Preferred Securities......................................................5
     Exchange Act.....................................................................5
     Execution Date...................................................................5
     Fiscal Year......................................................................5
     Global Certificate...............................................................5
     Holder...........................................................................5
     IAC, Inc.........................................................................5
     Indemnified Person...............................................................5
     Investment Company...............................................................6
     Investment Company Act...........................................................6
     Legal Action.....................................................................6
     Liquidation Distribution.........................................................6
     Majority in aggregate liquidation amount of the Securities.......................6
     Market Price.....................................................................6
     NASD.............................................................................6
     NYSE.............................................................................6
     Original Declaration.............................................................6
     Outstanding..................................................................... 6
     Ownership Limit..................................................................6
     Partnership Agreement............................................................7
     Paying Agent.....................................................................7
     Person...........................................................................7
     Preferred L.P. Units.............................................................7
     Preferred Security...............................................................7
     Preferred Security Certificate...................................................7
     Preferred Security Distribution Payment Date.....................................7
     Preferred Security Indirect Owner................................................7
     Property Account.................................................................7
     Property Trustee.................................................................7
     Purported Beneficial Transferee..................................................8
     Purported Record Transferee......................................................8
     Quorum...........................................................................8
     REIT.............................................................................8
     Registration Statement...........................................................8
     Regular Trustee..................................................................8
     Resignation Request..............................................................8
     Responsible Officer..............................................................8
     Rule 3a-7........................................................................9
     SEC..............................................................................9
     Securities.......................................................................9
     Securities Act...................................................................9
     66-2/3% in liquidation amount of the Securities..................................9
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                                       ii
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     Special Event....................................................................9
     Special Regular Trustee..........................................................9
     Successor Delaware Trustee.......................................................9
     Successor Property Trustee.......................................................9
     Successor Securities.............................................................9
     Trading Day......................................................................9
     Transfer........................................................................10
     Treasury Regulations............................................................10
     Trustee or Trustees ............................................................10

                                   ARTICLE II

                                  ORGANIZATION

SECTION 2.1   Name...................................................................10
SECTION 2.2   Office.................................................................10
SECTION 2.3   Purpose................................................................11
SECTION 2.4   Authority..............................................................11
SECTION 2.5   Title to Property of the Trust.........................................12
SECTION 2.6   Powers and Duties of the Regular Trustees..............................12
SECTION 2.7   Prohibition of Actions by Trust and Trustees...........................15
SECTION 2.8   Powers and Duties of the Property Trustee..............................15
SECTION 2.9   Delaware Trustee.......................................................18
SECTION 2.10  Certain Rights and Duties of the Property Trustee......................18
SECTION 2.11  Registration Statement and Related Matters.............................21
SECTION 2.12  Filing of Amendments to Certificate of Trust...........................22
SECTION 2.13  Execution of Documents by Regular Trustees.............................22
SECTION 2.14  Trustees Not Responsible for Recitals or Issuance of Securities........22
SECTION 2.15  Duration of Trust......................................................22

                                   ARTICLE III

                                     SPONSOR

SECTION 3.1   Purchase of Common Securities by IAC, Inc. and Management..............22
SECTION 3.2   Expenses...............................................................23
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                                       iii
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                                   ARTICLE IV

                                    TRUSTEES

SECTION 4.1   Number of Trustees; Qualifications.....................................24
SECTION 4.2   Appointment, Removal and Resignation of Trustees.......................26
SECTION 4.3   Vacancies Among Trustees...............................................29
SECTION 4.4   Effect of Vacancies....................................................29
SECTION 4.5   Meetings...............................................................30
SECTION 4.6   Delegation of Power....................................................30

                                    ARTICLE V

                                  DISTRIBUTIONS

SECTION 5.1   Distributions..........................................................31

                                   ARTICLE VI

                             ISSUANCE OF SECURITIES

SECTION 6.1   General Provisions Regarding Securities................................31

                                   ARTICLE VII

                              TERMINATION OF TRUST

SECTION 7.1   Termination of Trust...................................................34

                                  ARTICLE VIII

                              TRANSFER OF INTERESTS

SECTION 8.1   General................................................................35
SECTION 8.2   Restriction on Ownership and Transfers of Preferred Securities;
              Exchange for Excess Preferred Securities...............................35
SECTION 8.3   Excess Preferred Securities............................................39
SECTION 8.4   Settlement.............................................................42
SECTION 8.5   Remedies Not Limited...................................................43
SECTION 8.6   Ambiguity..............................................................43
SECTION 8.7   Severability...........................................................43
SECTION 8.8   Regular Trustees Discretion............................................43
SECTION 8.9   Transfer of Certificates...............................................43
SECTION 8.10  Deemed Security Holders................................................44
SECTION 8.11  Book Entry Interests...................................................44
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                                       iv
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SECTION 8.12  Notices to Holders of Certificates.....................................45
SECTION 8.13  Appointment of Successor Clearing Agency...............................45
SECTION 8.14  Definitive Preferred Securities Certificates...........................45
SECTION 8.15  Mutilated, Destroyed, Lost or Stolen Certificates......................46

                                      ARTICLE IX

                       LIMITATION OF LIABILITY; INDEMNIFICATION

SECTION 9.1   Exculpation............................................................46
SECTION 9.2   Indemnification........................................................47

                                       ARTICLE X

                                      ACCOUNTING

SECTION 10.1  Fiscal Year............................................................47
SECTION 10.2  Certain Accounting Matters.............................................47
SECTION 10.3  Banking................................................................48
SECTION 10.4  Withholding............................................................48

                                      ARTICLE XI

                                AMENDMENTS AND MEETINGS

SECTION 11.1  Amendments.............................................................49
SECTION 11.2  Meetings of the Holders of Securities; Action by Written Consent.......50

                                   ARTICLE XII

                       REPRESENTATIONS OF PROPERTY TRUSTEE
                              AND DELAWARE TRUSTEE

SECTION 12.1  Representations and Warranties of Property Trustee and
              Delaware Trustee.......................................................52

                                  ARTICLE XIII

                                     MERGER

SECTION 13.1  No Merger, Consolidation or Amalgamation of Trust......................53
</TABLE>

                                        v
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SECTION 13.2  Merger, Consolidation or Amalgamation of Trust.........................53

                                      ARTICLE XIV

                                     MISCELLANEOUS

SECTION 14.1  Notices................................................................54
SECTION 14.2  Undertaking for Costs..................................................56
SECTION 14.3  Governing Law..........................................................56
SECTION 14.4  Headings...............................................................56
SECTION 14.5  Partial Enforceability.................................................56
SECTION 14.6  Counterparts...........................................................57
SECTION 14.7  Intention of the Parties...............................................57
SECTION 14.8  Successors and Assigns.................................................57
SECTION 14.9  Personal Liability.....................................................57


EXHIBIT A - Certificate of Trust of IAC Capital Trust...............................A-1
EXHIBIT B - Initial Purchasers of Common Securities.................................B-1
ANNEX I - Form of Common Securities Certificate.....................................1-1
ANNEX II - Form of Preferred Securities Certificate................................II-1
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                                       vi
<PAGE>   8
                              AMENDED AND RESTATED
                              DECLARATION OF TRUST
                                       OF
                                IAC CAPITAL TRUST

                                January 20, 1998


      AMENDED AND RESTATED DECLARATION OF TRUST dated and effective as of
January 20, 1998 by the undersigned trustees (together with all other Persons
from time to time duly appointed and serving as trustees in accordance with the
provisions of this Declaration, the "Trustees"), Irvine Apartment Communities,
L.P., a Delaware limited partnership ("IAC, L.P."), as the trust sponsor, the
sole general partner of which is Irvine Apartment Communities, Inc., a Maryland
corporation ("IAC, Inc."), IAC, Inc. and by the holders, from time to time, of
undivided beneficial interests in the assets of the Trust, subject to the
priority and payment terms of each class or series of Securities (as defined
herein) to be issued pursuant to this Amended and Restated Declaration of Trust.

      WHEREAS, IAC, Inc., IAC, L.P. and the Trustees entered into a Declaration
of Trust dated as of October 31, 1997 (the "Original Declaration") in order to
establish a statutory business trust (the "Trust") under the Business Trust Act
(as hereinafter defined);

      WHEREAS, the Certificate of Trust of the Trust (the "Certificate of
Trust") was filed with the office of the Secretary of State of the State of
Delaware on October 31, 1997;

      WHEREAS, the Trustees, IAC, L.P. and IAC, Inc. desire to continue the
Trust pursuant to the Business Trust Act for the purpose of (i) issuing and
selling Preferred Securities (as defined herein) representing, subject to the
priority and payment terms of each class or series of Securities, undivided
beneficial interests in the assets of the Trust for cash and investing the
proceeds thereof in Preferred L.P. Units (as hereinafter defined) of IAC, L.P.
to be held as assets of the Trust and (ii) issuing and selling Common Securities
(as defined herein) representing, subject to the priority and payment terms of
each class or series of Securities, undivided beneficial interests in the assets
of the Trust, to IAC, Inc. and to certain members of management of IAC, Inc. in
exchange for cash and investing the proceeds thereof in an interest bearing
account in, or certificate of deposit of, a Banking Institution (as defined
herein); and

      NOW, THEREFORE, it being the intention of the parties hereto that the
Trust constitute a business trust under the Business Trust Act, that the
Original Declaration be amended and restated in its entirety as provided herein
and that this Amended and Restated Declaration of Trust, as amended, modified or
supplemented as


                                       1
<PAGE>   9
provided herein, constitute the governing instrument of such business trust, the
Trustees declare that all assets referred to in clauses (i) and (ii) of the
previous Whereas clause purchased by the Trust will be held in trust for the
benefit of the Holders (as defined herein) of the Securities representing
undivided beneficial interests in the assets of the Trust, subject to the
priority and payment terms of each class or series of Securities, issued
hereunder, subject to the provisions of this Amended and Restated Declaration of
Trust, as amended, modified or supplemented as provided herein.


                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.1 Definitions.

      (a)   Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;

      (b)   a term defined anywhere in this Declaration has the same meaning
throughout;

      (c)   all references to "the Declaration" or "this Declaration" are to
this Amended and Restated Declaration of Trust (including Exhibits (the
"Exhibits") and Annexes hereto (the "Annexes") and the Certificate of Terms of
each series of Preferred Securities (the "Certificates of Terms")), as modified,
supplemented or amended from time to time;

      (d)   all references in this Declaration to Articles and Sections and
Exhibits and Annexes are to Articles and Sections of and Exhibits and Annexes to
this Declaration unless otherwise specified; and

      (e)   a reference to the singular includes the plural and vice versa.

      "Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.

      "Appointment Event" means, with respect to a series of Preferred
Securities, any events defined as an Appointment Event in the Certificate of
Terms for such series of Preferred Securities.

      "Banking Institution" means a banking institution whose long-term
unsecured indebtedness is rated by a "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act, at least equal to (but in no event less than "A" or the
equivalent) the highest rating


                                       2
<PAGE>   10
assigned to any outstanding series of Preferred Securities by a nationally
recognized statistical rating organization.

      "Beneficial Ownership" means, with respect to any Person, ownership of
securities of a series of Preferred Securities equal to the sum of (i) the
securities of such series of Preferred Securities directly owned by such Person,
(ii) the number of securities of such series of Preferred Securities indirectly
owned by such Person, (if such Person is an "individual" as defined in section
542(a)(2) of the Code) taking into account the constructive ownership rules of
section 544 of the Code, as modified by section 856(h) of the Code, and (iii)
the number of Preferred Securities of such series which such Person is deemed to
beneficially own pursuant to Rule 13d-3 under the Exchange Act or which is
attributed to such Person pursuant to section 318 of the Code, as modified by
section 856(d)(5) of the Code; provided that no security shall be included more
than once in calculating Beneficial Ownership. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have the correlative
meanings.

      "Book Entry Interest" means a beneficial interest in a Global Certificate
registered in the name of a Clearing Agency or a nominee thereof, ownership and
transfers of which shall be maintained and made through book entries by such
Clearing Agency as described in Section 8.11.

      "Business Day" means any day other than Saturday, Sunday or any other day
on which commercial banks in New York, New York and Los Angeles, California are
authorized or required by applicable law to close.

      "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code ' 3801 et seq., as it may be amended from time to time.

      "Capital Securities" means the Common Securities and the Preferred
Securities of the Trust.

      "Certificate" means a Common Security Certificate or a Preferred Security
Certificate.

      "Certificate of Terms" has the meaning set forth in Section 1.1(c).

      "Certificate of Trust" has the meaning set forth in the second Whereas
clause above.

      "Charitable Beneficiary" means the beneficiary of the Charitable Trust as
determined pursuant to Section 8.3(a).

      "Charitable Trust" means the applicable trust created pursuant to Section
8.3(a).


                                       3
<PAGE>   11
      "Charitable Trustee" means the trustee for the Charitable Trust, and any
successor trustee appointed by a majority of the Regular Trustees, meeting the
requirements of Sections 8.3(a)

      "Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for a
series of Preferred Securities and in whose name or in the name of a nominee of
that organization, shall be registered a Global Certificate and which shall
undertake to effect book entry transfers and pledges of the Preferred Securities
of such series.

      "Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.

      "Closing Price" means, on any date, the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid and
ask prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the NYSE or, if the Preferred Securities of a series are
not listed or admitted to trading on the NYSE, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Preferred Securities on
such series are listed or admitted to trading or, if the Preferred Securities of
a series are not listed or admitted to trading on any national securities
exchange, the last quoted price, or if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System or,
if such system is no longer in use, the principal other automated quotations
system that may then be in use, or if the Preferred Securities of a series are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Preferred Securities of such series selected by a majority of the Regular
Trustees.

      "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation as interpreted by any applicable Treasury
Regulations or other administrative pronouncements as in effect from time to
time.

      "Commission" means the Securities and Exchange Commission.

      "Common Security" has the meaning specified in Section 6.1(b).

      "Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Annex I.

      "Covered Person" means (i) any officer, director, shareholder, partner,
member, representative, employee or agent of the Trust or its Affiliates, (ii)
any officer,


                                       4
<PAGE>   12
director, shareholder, partner, member, representative, employee or agent of
IAC, Inc. or its Affiliates and (iii) the Holders from time to time of the
Securities.

      "Creditor" has the meaning specified in Section 3.2(d).

      "Definitive Preferred Security Certificates" has the meaning set forth in
Section 8.11.

      "Delaware Trustee" has the meaning set forth in Section 4.1(a)(3).

      "Depositary Agreement" means, with respect to a series of Preferred
Securities, the agreement among the Trust, the Property Trustee and DTC with
respect to such series as the same may be amended or supplemented from time to
time.

      "Distribution" has the meaning set forth in Section 5.1.

      "DTC" means The Depository Trust Company, the initial Clearing Agency.

      "Excess Preferred Securities" means Excess Preferred Securities that
would, under Section 8.3(e), automatically be exchanged for Preferred Securities
upon a transfer of an interest in the Charitable Trust in which such Excess
Preferred Securities are held.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time or any successor legislation.

      "Execution Date" means the date of execution and delivery of this
Declaration.

      "Fiscal Year" has the meaning specified in Section 10.1.

      "Global Certificate" has the meaning set forth in Section 8.11.

      "Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.

      "IAC, Inc." means Irvine Apartment Communities, Inc.

      "Indemnified Person" means any Trustee, any Affiliate of any Trustee, any
officers, directors, shareholders, members, partners, employees, representatives
or agents of any Trustee, or any employee or agent of the Trust or its
Affiliates.


                                       5
<PAGE>   13
      "Investment Company" means an investment company as defined in the
Investment Company Act.

      "Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time or any successor legislation.

      "Legal Action" has the meaning specified in Section 2.6(i). "Liquidation
Distribution" has the meaning set forth in the Certificate of Terms of each
series of the Preferred Securities.

      "Majority in aggregate liquidation amount of the Securities" means, except
as provided in the Certificate of Terms of each series of the Preferred
Securities, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holder(s) of outstanding Preferred
Securities or Common Securities voting separately as a class, or as the context
may require, Holder(s) of one or more outstanding series of Preferred Securities
voting together as a class, who are the record owners of the relevant class or
series of Securities whose aggregate liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) represents more than 50% of the liquidation amount of all
outstanding Securities of such class or series.

      "Market Price" on any date means the Closing Price on the Trading Day
immediately preceding such date.

      "NASD" means the National Association of Securities Dealers, Inc.

      "NYSE" means the New York Stock Exchange, Inc.

      "Original Declaration" has the meaning set forth in the first WHEREAS
clause above.

      "Outstanding" means the issued and outstanding shares of a series of
Preferred Securities of the Trust, provided that for purposes of the application
of the applicable Ownership Limit to any Person, the term "Outstanding" shall be
deemed to include the number of securities of the applicable series of Preferred
Securities that such Person alone could acquire pursuant to any options or
convertible securities.

      "Ownership Limit" means with respect to any series of Preferred
Securities, such percentage or percentages of the Outstanding securities of such
series of Preferred Securities as shall be established by a majority of the
Regular Trustees at the time they authorize such series of Preferred Securities
pursuant to Section 6.1(d) and set forth in the related Certificate of Terms for
such series.


                                       6
<PAGE>   14
      "Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of IAC, L.P. dated as of January 20, 1998, as such agreement
may be amended, modified, supplemented or restated from time to time. A copy of
the Partnership Agreement shall be available for inspection at the office of the
secretary at the corporate headquarters of IAC, Inc.

      "Paying Agent" has the meaning specified in Section 2.8(i).

      "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature;
provided that for purposes of Article VIII, "Person" means (a) an individual,
corporation, partnership, estate, trust (including a trust qualified under
section 401(a) or 501(c)(17), of the Code), a portion of a trust permanently set
aside for or to be used exclusively for the purposes described in section 642(c)
of the Code, association, private foundation within the meaning of 509(a) of the
Code, joint stock company or other entity and (b) also includes a group as that
term is used for purposes of Section 13(d)(3) of the Exchange Act.

      "Preferred L.P. Units" means the Preferred Limited Partner Interests (as
defined in the Partnership Agreement) in IAC, L.P.

      "Preferred Security" has the meaning specified in Section 6.1(b).

      "Preferred Security Certificate" means a definitive certificate in fully
registered form representing a Preferred Security substantially in the form of
Annex II or in the form attached as an exhibit to a Certificate of Terms for a
series of Preferred Securities.

      "Preferred Security Distribution Payment Date" means, with respect to a
series of Preferred Securities, the date on which a Distribution on such series
is to be paid as provided in the Certificate of Terms for such series.

      "Preferred Security Indirect Owner" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).

      "Property Account" has the meaning specified in Section 2.8(c)(i).

      "Property Trustee" means the Trustee meeting the eligibility requirements
set forth in Section 4.1(c) and having the duties set forth for the Property
Trustee herein.


                                       7
<PAGE>   15
      "Purported Beneficial Transferee" means, with respect to any purported
Transfer of Preferred Securities which results in Excess Preferred Securities,
the purported beneficial transferee for whom the Purported Record Transferee
would have acquired shares of Preferred Securities, if such Transfer had not
resulted in an exchange for such Excess Preferred Securities pursuant to Section
8.2(c) (or in the event the provisions of Sections 8.2(a)(ii) and (iii) are in
effect, had been valid under Section 8.2(a)).

      "Purported Record Transferee" means, with respect to any purported
Transfer of Preferred Securities which results in Excess Preferred Securities,
the holder of the Preferred Securities if such Transfer had not resulted in an
exchange for such Excess Preferred Securities pursuant to Section 8.2(c) (or in
the event the provisions of Sections 8.2(a)(ii) and (iii) are in effect, had
been valid under Section 8.2(a)).

      "Quorum" means a majority of the Regular Trustees or, if there are only
two Regular Trustees, both such Regular Trustees and if there is only one
Regular Trustee, such Regular Trustee.

      "REIT" means a Real Estate Investment Trust defined in section 856 of the
Code.

      "Registration Statement" means a Registration Statement relating to the
registration of the Trust's Preferred Securities filed under the Securities Act.

      "Regular Trustee" means, except for the Property Trustee, the Delaware
Trustee and a Special Regular Trustee, any Trustee who is an individual and an
officer or director of IAC, Inc. A "majority of the Regular Trustees" means, if
there are three or more Regular Trustees, a majority, if there are only two
Regular Trustees, both such Regular Trustees, and if there is only one Regular
Trustee, such Regular Trustee. In addition, when any action is required to be
taken under this Declaration by the Regular Trustees, an affirmative vote by a
majority of the Regular Trustees shall constitute proper authorization of such
action.

      "Resignation Request" has the meaning specified in Section 4.2(d).

      "Responsible Officer" means, with respect to the Property Trustee, the
chairman of the board of directors, the president, any vice-president, any
assistant vice-president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or assistant trust officer or any
other officer of the Property Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.


                                       8
<PAGE>   16
      "Rule 3a-7" means Rule 3a-7 under the Investment Company Act or any
successor rule thereunder.

      "SEC" means the Securities and Exchange Commission.

      "Securities" means the Common Securities, the Preferred Securities and the
Excess Preferred Securities.

      "Securities Act" means the Securities Act of 1933, as amended from time to
time or any successor legislation.

      "66-2/3% in liquidation amount of the Securities" means, except as
provided in the penultimate paragraph of Paragraph 6 of the Certificate of Terms
of each series of the Preferred Securities, Holder(s) of outstanding Securities
voting together as a single class or, as the context may require, Holder(s) of
outstanding Preferred Securities or Common Securities, voting separately as a
class, or as the context may require, Holder(s) of one or more outstanding
series of Preferred Securities voting together as a class, who are the record
owners of the relevant class or series of Securities whose liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) represents 66-2/3% or more of the liquidation
amount of all outstanding Securities of such class or series.

      "Special Event" means any event(s) defined as a Special Event in a
Certificate of Terms for a series of Preferred Securities.

      "Special Regular Trustee" means a Regular Trustee appointed in accordance
with Section 4.2(a)(ii)(B) if the Certificate of Terms of a series of Preferred
Securities provides for the appointment of a Special Regular Trustee upon the
occurrence of certain events.

      "Successor Delaware Trustee" has the meaning specified in Section
4.2(b)(ii).

      "Successor Property Trustee" means a successor Trustee possessing the
qualifications to act as Property Trustee under Section 4.1(c).

      "Successor Securities" has the meaning specified in Section 13.2.

      "Trading Day" means a day on which the principal national securities
exchange or interdealer quotation system on which the Preferred Securities of a
series are listed or admitted to trading is open for the transaction of business
or, if the Preferred Securities of such series are not listed or admitted to
trading on any national securities exchange or interdealer quotation system,
shall mean any day other than a Saturday, a


                                       9
<PAGE>   17
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.

      "Transfer" means with respect to the Preferred Securities, any sale,
transfer, gift, assignment, devise or other disposition of Preferred Securities
(including (i) the granting of any option (including, but not limited to, an
option to acquire an option or any series of such options) or entering into any
agreement for the sale, transfer or other disposition of Preferred Securities or
(ii) the sale, transfer, assignment or other disposition of any securities or
rights convertible into or exchangeable for Preferred Securities), whether
voluntary or involuntary, whether of record or Beneficial Ownership, and whether
by operation of law or otherwise (including, but not limited to, any transfer of
an interest in other entities which results in a change in the Beneficial
Ownership of Preferred Securities). The terms "Transfers" and "Transferred"
shall have correlative meaning.

      "Treasury Regulations" means the income tax regulations including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

      "Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.


                                   ARTICLE II

                                  ORGANIZATION

SECTION 2.1 Name.

      The Trust continued by this Declaration is named "IAC Capital Trust" as
such name may be modified from time to time by the Regular Trustees following
written notice to the Holders of Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Regular Trustees.

SECTION 2.2 Office.

      The address of the principal office of the Trust is c/o Irvine Apartment
Communities, Inc., 550 Newport Center Drive, Suite 300, Newport Beach,
California 92660. Upon ten days' written notice to the Holders, the Regular
Trustees may change


                                       10
<PAGE>   18
the location of the Trust's principal office. The name of the registered agent
and office of the Trust in the State of Delaware is The Bank of New York
(Delaware), White Clay Center, Route 273, Newark, Delaware 19711, Attention:
Corporate Trust Administration. At any time, the Regular Trustees may designate
another registered agent and/or registered office. The books and records of the
Trust will be maintained at the principal office of the Trust and will be open
for inspection by a Holder of Preferred Securities or its representatives for
any purpose reasonably related to its interest in the Trust during normal
business hours.

SECTION 2.3 Purpose.

      The exclusive purposes and functions of the Trust are: (a) to issue and
sell the Preferred Securities in one or more series for cash (and in accordance
with this Declaration to issue Excess Preferred Securities); (b) to issue and
sell the Common Securities for cash and invest the proceeds of such sale in an
interest bearing account in, or certificate of deposit of, a Banking
Institution; (c) to invest the proceeds of the sale of each series of Preferred
Securities in a series of Preferred L.P. Units of IAC, L.P. with economic terms
substantially similar to the series of Preferred Securities; (d) to enter into
such agreements and arrangements as may be necessary in connection with the sale
of Preferred Securities and to take all action, and exercise such discretion, as
may be necessary or desirable in connection therewith and to file such
registration statements or make such other filings under the Securities Act, the
Exchange Act or state securities or "Blue Sky" laws and to file with any stock
exchange or interdealer quotation system any listing applications, as may be
necessary or desirable in connection therewith and the issuance of the Preferred
Securities; and (e) except as otherwise limited herein, to engage in only those
other activities necessary, convenient or incidental thereto.

SECTION 2.4 Authority.

      Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. Any
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee in accordance with its powers shall constitute the act of and
serve to bind the Trust. In dealing with the Trustees acting on behalf of the
Trust, no Person shall be required to inquire into the authority of the Trustees
to bind the Trust. Persons dealing with the Trust are entitled to rely
conclusively on the power and authority of the Trustees as set forth in this
Declaration.


                                       11
<PAGE>   19
SECTION 2.5 Title to Property of the Trust.

      Except as provided in Section 2.8 with respect to the Preferred L.P. Units
and the Property Account or unless otherwise provided in this Declaration, legal
title to all assets of the Trust shall be vested in the Trust. The Holders shall
not have legal title to any part of the assets of the Trust, but shall have an
undivided beneficial interest in the assets of the Trust subject to the priority
and payment terms of each class or series of Securities.

SECTION 2.6 Powers and Duties of the Regular Trustees.

      A majority of the Regular Trustees shall have the exclusive power,
authority and duty to cause the Trust, and shall cause the Trust, to engage in
the following activities:

      (a)   to issue and sell Preferred Securities and Common Securities from
time to time and to issue Excess Preferred Securities, in each case in
accordance with this Declaration including establishing the terms of each series
of Preferred Securities by amending the Declaration as set forth in Section
6.1(d); provided however, that there shall be no interests in the Trust other
than the Securities;

      (b)   in connection with the issuance of the Preferred Securities, at the
direction of IAC, L.P., to effect or cause to be effected the filings, and to
execute or cause to be executed, the documents, set forth in Section 2.11 and to
execute, deliver and perform on behalf of the Trust each Depositary Agreement;

      (c)   to invest the proceeds of the sale of each series of Preferred
Securities in a series of Preferred L.P. Units of IAC, L.P. with economic terms
substantially similar to the series of Preferred Securities so issued and sold;
provided, however, that the Regular Trustees shall cause legal title to all of
the Preferred L.P. Units to be vested in, the Preferred L.P. Units to be held of
record in the name of and a certificate or certificates representing any
Preferred L.P. Units to be issued in the name of, the Property Trustee for the
benefit of the Holders of the Preferred Securities;

      (d)   to invest the proceeds from the sale of the Common Securities in an
interest bearing account in, or certificate of deposit of, a Banking
Institution;

      (e)   to cause the Trust to enter into underwriting or purchase agreements
and such other agreements and arrangements as may be necessary or desirable in
connection with the sale of any series of Preferred Securities, and to take all
action, and exercise all discretion, as may be necessary or desirable in
connection with the consummation thereof;

      (f)   to give prompt written notice to the Property Trustee, the Holders
of


                                       12
<PAGE>   20
the Common Securities and the Holders of any applicable series of Preferred
Securities of the occurrence of a Special Event;

      (g)   to declare Distributions on the Securities out of funds legally
available therefor at such times and in such amounts in accordance with the
terms of the Securities; and to establish a record date with respect to all
actions to be taken hereunder that require a record date be established,
including Distributions, voting rights and redemptions, and to issue relevant
notices to Holders of the Preferred Securities and Common Securities as to such
actions and applicable record dates;

      (h)   to determine in their absolute discretion the series of Preferred
Securities to be redeemed, to redeem the Preferred Securities in accordance with
the provisions of this Declaration and to take all actions, perform such duties
and make such determinations as may be necessary or incidental to the foregoing;

      (i)   to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 2.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;

      (j)   to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors and
consultants and pay reasonable compensation for such services;

      (k)   to incur expenses which are necessary, convenient or incidental to
carrying out any of the purposes of the Trust;

      (l)   to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities; the Regular Trustees hereby initially
appointing the Property Trustee for such purposes with respect to the Preferred
Securities;

      (m)   to take all actions, perform such duties and make such
determinations as may be required or permitted of the Regular Trustees pursuant
to this Declaration (including, without limitation, those specified in Articles
VI and VIII hereof and any ministerial actions taken in connection with a
Special Event) and the terms of the Securities;

      (n)   to take all action which may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Securities or
to enable the Trust to effect the purposes for which the Trust has been created;


                                       13
<PAGE>   21
      (o)   to take all actions, not inconsistent with this Declaration or with
applicable law, which the Regular Trustees determine in their sole discretion to
be reasonable and necessary or desirable in carrying out the activities of the
Trust as set out in this Section 2.6, in order that:

            (i)   the Trust will not be deemed to be an Investment Company
      required to be registered under the Investment Company Act; and

            (ii)  the Trust will be treated as a REIT for United States federal
      income tax purposes;

provided that such actions do not materially and adversely affect the interests
of Holders; and provided further that Section 2.6(o)(ii) shall be effective so
long as the Trust has elected (or reelected) REIT status for United States
federal income tax purposes and not terminated such election (or reelection)
under Section 11.1(c) hereof;

      (p)   to take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the Trust
to be duly prepared and filed by the Regular Trustees, on behalf of the Trust,
including providing to the Holders of the Common Securities, if necessary, a
power of attorney on IRS Form 2848;

      (q)   subject to the requirements of Rule 3a-7 to appoint one or more
Paying Agents in addition to the Property Trustee;

      (r)   to determine on which stock exchange or interdealer quotation
system, if any, the Preferred Securities of a series will be listed;

      (s)   to prepare or cause to be prepared, execute and file or cause to be
filed such reports and other information on behalf of the Trust with the
Commission and any stock exchange or interdealer quotation system on which the
Preferred Securities of a series may be listed as may be required under the
Exchange Act and the rules and regulations of the Commission thereunder or under
the rules of any such stock exchange or interdealer quotation system;

      (t)   to act as attorney-in-fact on behalf of each Holder of Common
Securities, if so appointed, and to take any and all acts and to execute and
deliver in the name of such Holder any and all documents, as authorized by such
power of attorney; and

      (u)   to execute all documents or instruments, perform all duties and
powers and do all things for and on behalf of the Trust in all matters necessary
or incidental to the foregoing.

      The Regular Trustees must exercise the powers set forth in this Section
2.6


                                       14
<PAGE>   22
in a manner which is consistent with the purposes and functions of the Trust set
out in Section 2.3 and the Regular Trustees shall not take any action which is
inconsistent with the purposes and functions of the Trust set forth in Section
2.3.

      Subject to this Section 2.6, the Regular Trustees shall have none of the
powers nor any of the authority of the Property Trustee set forth in Section
2.8.

SECTION 2.7 Prohibition of Actions by Trust and Trustees.

      The Trust shall not, and the Trustees (including the Property Trustee)
shall cause the Trust not to, engage in any activity other than as required or
authorized by this Declaration. In particular, the Trust shall not and the
Trustees (including the Property Trustee) shall not:

      (a)   invest any amounts received by the Trust from holding the Preferred
L.P. Units purchased by the Trust but shall promptly deposit such funds in the
Property Account;

      (b)   acquire any assets other than as expressly provided herein;

      (c)   possess Trust property for other than a Trust purpose;

      (d)   make any loans or investments, other than investments represented by
the Preferred L.P. Units and in connection with the investment of the proceeds
of the sale of the Common Securities;

      (e)   issue any securities or other evidences of beneficial ownership of,
or beneficial interests in, the Trust other than the Securities; or

      (f)   incur any indebtedness for borrowed money.

SECTION 2.8 Powers and Duties of the Property Trustee.

      (a)   The legal title to the Preferred L.P. Units shall be owned by and
held of record in the name of the Property Trustee in trust for the benefit of
the Holders of the Securities. The right, title and interest of the Property
Trustee to the Preferred L.P. Units shall vest automatically in each Person who
may hereafter be appointed as Property Trustee in accordance with Article IV.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.

      (b)   The Property Trustee shall not transfer its right, title and
interest in the Preferred L.P. Units to the Regular Trustees or, if the Property
Trustee does not also act as the Delaware Trustee, the Delaware Trustee.


                                       15
<PAGE>   23
      (c)   The Property Trustee shall:

            (i)   establish and maintain one or more segregated non-interest
      bearing bank accounts (collectively, the "Property Account") in the name
      of and under the exclusive control of the Property Trustee on behalf of
      the Holders of the Preferred Securities and, on the receipt of payments of
      funds made in respect of the Preferred L.P. Units purchased by the Trust,
      deposit all such payments into the Property Account. Funds in the Property
      Account shall be held uninvested, and without liability for interest
      thereon, until disbursed in accordance with this Declaration. The Property
      Account shall be an account which is maintained with a Banking
      Institution;

            (ii)  if, as and when the Regular Trustees declare a Distribution
      with respect to a series of Preferred Securities, the Property Trustee
      shall, subject to the priority and payment terms of each class or series
      of Securities but without any further act of the Property Trustee or the
      Regular Trustees, on the applicable Preferred Security Distribution Date
      pay, in accordance with Section 5.1, such Distribution to the Holders of
      such series of Preferred Securities out of funds deposited in the Property
      Account and the terms of such series of Preferred Securities;

            (iii) if the Preferred Securities of a series are called for
      redemption or are to be repaid upon their stated maturity or upon
      liquidation, dissolution, winding up or termination of the Trust, the
      Property Trustee shall, subject to the priority and payment terms of each
      class or series of Securities but without any further act of the Property
      Trustee or the Regular Trustees, on the applicable redemption or repayment
      date pay to the Holders of such series of Preferred Securities out of
      funds deposited in the Property Account the amount specified in the terms
      of such series of Preferred Securities to be paid on such date in
      accordance with Section 5.1 and the terms of such series of Preferred
      Securities, any such redemption payment to be made solely out of funds
      deposited in the Property Account from the redemption of Preferred L.P.
      Units.

            (iv)  engage in such ministerial activities as shall be necessary or
      appropriate to effect promptly the redemption of any series of the
      Preferred Securities;

            (v)   upon notice of a Distribution issued by the Regular Trustees
      in accordance with the terms of the Preferred Securities of a series,
      engage in such ministerial activities as shall be necessary or appropriate
      to effect promptly the Distribution pursuant to the terms of


                                       16
<PAGE>   24
      such series of Preferred Securities to Holders thereof; and

            (vi)  have the legal power to exercise all of the rights, powers and
      privileges of a holder of the Preferred L.P. Units.

      (d)   The Property Trustee shall take all actions and perform such duties
as may be specifically required of the Property Trustee pursuant to the terms of
the Preferred Securities set forth in any Certificate of Terms.

      (e)   The Property Trustee shall take any Legal Action which arises out of
or in connection with the holding of Preferred L.P. Units or the Property
Trustee's duties and obligations under this Declaration or the Business Trust
Act.

      (f)   All moneys deposited in the Property Account, and all Preferred L.P.
Units held by the Property Trustee for the benefit of the Holders of the
Securities, will not be subject to any right, charge, security interest, lien or
claim of any kind in favor of, or for the benefit of, the Property Trustee or
its agents or their creditors.

      (g)   The Property Trustee shall, within 90 days after the occurrence of
any event which could lead to Legal Action as set forth in (e) above, transmit
by mail, first class postage prepaid, to the Holders of the Securities, as their
names and addresses appear upon the register, notice of any such event known to
the Property Trustee, unless such event which could lead to Legal Action has
been remedied before the giving of such notice; provided, that, the Property
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers, of the Property Trustee in good faith determine
that the withholding of such notice is in the interests of the Holders of the
Securities. The Property Trustee shall not be deemed to have knowledge of any
such event, except (i) a default in the payment of a Distribution declared by
the Regular Trustees on a series of Preferred Securities, (ii) a default in the
payment of a Distribution declared by IAC, L.P. on the Preferred L.P. Units, or
(iii) any event as to which the Property Trustee shall have received written
notice or a Responsible Officer charged with the administration of this
Declaration shall have obtained written notice.

      (h)   The Property Trustee shall not resign as a Trustee unless either:

            (i)   the Trust has been completely liquidated and the proceeds
thereof distributed to the Holders of Securities in accordance with the priority
and payment terms of each class or series of Securities and this Declaration; or

            (ii)  a Successor Property Trustee has been appointed and accepted
that appointment in accordance with Article IV.


                                       17
<PAGE>   25
      (i)   The Property Trustee shall act as paying agent in respect of the
Common Securities and, if the Preferred Securities are not in book entry only
form, the Preferred Securities (and, if applicable, Excess Preferred Securities)
and, subject to Section 2.6(p), may authorize one or more Persons (each, a
"Paying Agent") to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to the Preferred Securities and any
Excess Preferred Securities. Any Paying Agent may be removed by the Property
Trustee, after consultation with the Regular Trustees, at any time and a
successor Paying Agent or additional Paying Agents may be appointed at any time
by the Property Trustee, subject to Section 2.6(q).

      (j)   Subject to this Section 2.8, the Property Trustee shall have none of
the powers or the authority of the Regular Trustees set forth in Section 2.6.

      (k)   The Property Trustee shall exercise the powers, duties and rights
set forth in this Section 2.8 and Section 2.10 in a manner which is consistent
with the purposes and functions of the Trust set out in Section 2.3, and the
Property Trustee shall not take any action which is inconsistent with the
purposes and functions of the Trust set forth in Section 2.3.

SECTION 2.9 Delaware Trustee.

      Notwithstanding any other provision of this Declaration other than Section
4.1(a)(3), the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Regular Trustees and the Property Trustee described in this Declaration.
Except as set forth in Section 4.1(a)(3), the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Business Trust Act. No implied covenants or obligations
shall be read into this Declaration against the Delaware Trustee.

SECTION 2.10 Certain Rights and Duties of the Property Trustee.

      (a)   The Property Trustee undertakes to perform only such duties as are
specifically set forth in this Declaration and shall exercise the same degree of
care as a prudent individual would exercise under the circumstances in the
conduct of his or her own affairs, and no implied covenants shall be read into
this Declaration against the Property Trustee.

      (b)   If the Property Trustee fails to take Legal Action for or on behalf
of a series of Preferred Securities as provided in Section 2.8(e) hereof, a
Majority in aggregate liquidation amount of such series of the Preferred
Securities may direct the Property Trustee to take such Legal Action on behalf
of such series. If the Property Trustee fails to enforce its rights under the
Partnership Agreement with respect to a series of Preferred L.P. Units, any
Holder of Preferred Securities that is adversely affected thereby may institute
a legal proceeding directly against IAC, L.P. to enforce such rights, without
first


                                       18
<PAGE>   26
instituting a legal proceeding against the Property Trustee or any other person.

      (c)   No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

            (i)   the duties and obligations of the Property Trustee shall be
      determined solely by the express provisions of this Declaration, and the
      Property Trustee shall not be liable except for the performance of such
      duties and obligations as are specifically set forth in this Declaration,
      and no implied covenants or obligations shall be read into this
      Declaration against the Property Trustee;

            (ii)  in the absence of bad faith on the part of the Property
      Trustee, the Property Trustee may conclusively rely, as to the truth of
      the statements and the correctness of the opinions expressed therein, upon
      any certificates or opinions furnished to the Property Trustee; but in the
      case of any such certificates or opinions that by any provision hereof are
      specifically required to be furnished to the Property Trustee, the
      Property Trustee shall be under a duty to examine the same to determine
      whether or not they conform to the requirements of this Declaration;

            (iii) the Property Trustee shall not be liable for any error of
      judgment made in good faith by a Responsible Officer of the Property
      Trustee, unless it shall be proved that the Property Trustee was negligent
      in ascertaining the pertinent facts;

            (iv)  the Property Trustee shall not be liable with respect to any
      action taken or omitted to be taken by it in good faith in accordance with
      the direction of the Holders as provided in Section 2.10(b) hereof, or
      exercising any trust or power conferred upon the Property Trustee under
      this Declaration; and

            (v)   no provision of this Declaration shall require the Property
      Trustee to expend or risk its own funds or otherwise incur personal
      financial liability in the performance of any of its duties or in the
      exercise of any of its rights or powers, if it shall have reasonable
      ground for believing that the repayment of such funds or liability is not
      reasonably assured to it under the terms of this Declaration or adequate
      indemnity against such risk or liability is not reasonably assured to it.

      (d)   Subject to the provisions of Section 2.10(a) and (c):

            (i)   whenever in the administration of this Declaration, the


                                       19
<PAGE>   27
      Property Trustee shall deem it desirable that a matter be proved or
      established prior to taking, suffering or omitting any action hereunder,
      the Property Trustee (unless other evidence is herein specifically
      prescribed) may, in the absence of bad faith on its part and, if the Trust
      is excluded from the definition of Investment Company solely by means of
      Rule 3a-7, subject to the requirements of Rule 3a-7, request and rely upon
      a certificate, signed by a majority of the Regular Trustees or by an
      authorized officer of IAC, L.P., as the case may be;

            (ii)  The Property Trustee (A) may consult with counsel (which may
      be counsel to IAC, L.P. or any of its Affiliates and may include any of
      its employees) selected by it in good faith and with due care and the
      written advice or opinion of such counsel with respect to legal matters
      shall be full and complete authorization and protection in respect of any
      action taken, suffered or omitted by it hereunder in good faith and in
      reliance thereon and in accordance with such advice and opinion and (B)
      shall have the right at any time to seek instructions concerning the
      administration of this Declaration from any court of competent
      jurisdiction;

            (iii) The Property Trustee may execute any of the trusts or powers
      hereunder or perform any duties hereunder either directly or by or through
      agents or attorneys and the Property Trustee shall not be responsible for
      any misconduct or negligence on the part of any agent or attorney
      appointed by it in good faith and with due care;

            (iv)  The Property Trustee shall be under no obligation to exercise
      any of the rights or powers vested in it by this Declaration at the
      request or direction of any Holders, unless such Holders shall have
      offered to the Property Trustee reasonable security and indemnity against
      the costs, expenses (including attorneys' fees and expenses) and
      liabilities that might be incurred by it in complying with such request or
      direction; and

            (v)   Any action taken by the Property Trustee or its agents
      hereunder shall bind the Holders of the Securities and the signature of
      the Property Trustee or its agents alone shall be sufficient and effective
      to perform any such action; and no third party shall be required to
      inquire as to the authority of the Property Trustee to so act, or as to
      its compliance with any of the terms and provisions of this Declaration,
      both of which shall be conclusively evidenced by the Property Trustee's or
      its agent's taking such action.


                                       20
<PAGE>   28
SECTION 2.11 Registration Statement and Related Matters.

      IAC, Inc., IAC, L.P. and the Trustees hereby authorize and direct IAC,
L.P., as the sponsor of the Trust, (i) to file with the Commission and execute,
in each case on behalf of the Trust, (a) registration statements on Form S-11 or
other appropriate form, including any amendments to such registration
statements, relating to the registration under the Securities Act of any
Preferred Securities of the Trust and (b) registration statements on Form 8-A or
other appropriate form (including all amendments thereto) relating to the
registration of any Preferred Securities of the Trust under Section 12(b) of the
Exchange Act; (ii) to file with any stock exchange or interdealer quotation
system and execute on behalf of the Trust listing applications and all other
applications, statements, certificates, agreements and other instruments as
shall be necessary or desirable to cause any Preferred Securities to be listed
on a stock exchange or interdealer quotation system; (iii) to file and execute
on behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers and
documents as shall be necessary or desirable to register any Securities under
the securities or "Blue Sky" laws of such jurisdictions as IAC, L.P. on behalf
of the Trust, may deem necessary or desirable, (iv) to prepare and execute
letters or documents to or instruments with, the Depository Trust Company
relating to any series of Preferred Securities or Excess Preferred Securities,
(v) to execute on behalf of the Trust such underwriting or purchase agreements
as may be necessary or desirable in connection with sale of any Securities to
any initial purchasers thereof and (vi) to incur (or cause IAC, L.P. to incur)
expenses, execute documents and to take any and other actions as shall be
necessary or desirable in offering any series of Preferred Securities. In the
event that any filing referred to in clauses (i)-(iii) above is required by the
rules and regulations of the Commission, any stock exchange or interdealer
quotation system or state securities or blue sky laws, to be executed on behalf
of the Trust by the Trustees, the Regular Trustees, in their capacities as
Trustees of the Trust, are hereby authorized and directed to join in any such
filing and to execute on behalf of the Trust any and all of the foregoing, it
being understood that the Property Trustee and the Delaware Trustee, in their
capacities as Trustees of the Trust, shall not be required to join in any such
filing or execute on behalf of the Trust any such document unless required by
the rules and regulations of the Commission, any stock exchange or interdealer
quotation system or state securities or blue sky laws. In connection with all of
the foregoing, IAC, L.P. and each Trustee, solely in its capacity as Trustee of
the Trust, hereby constitute and appoint James E. Mead, Shawn Howie, Jeffrey
Small and James M. Lurie and each of them, as his, her or its, as the case may
be, true and lawful attorneys-in-fact, and agents, with full power of
substitution and resubstitution, for IAC, L.P. or such Trustee or in IAC, L.P.'s
or such Trustee's name, place and stead, in any and all capacities, to sign any
and all documents referred to in clauses (i) - (vi) above and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as IAC,
L.P. or such Trustee might or could do in person, hereby


                                       21
<PAGE>   29
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his or her substitute or substitutes, shall do or cause to be
done by virtue hereof.

SECTION 2.12 Filing of Amendments to Certificate of Trust.

      The Certificate of Trust as filed with the Secretary of State of the State
of Delaware on October 31, 1997 is attached hereto as Exhibit A. On or after the
date of execution of this Declaration, the Trustees shall cause the filing with
the Secretary of State of the State of Delaware of such amendments to the
Certificate of Trust as the Regular Trustees shall deem necessary or desirable.

SECTION 2.13 Execution of Documents by Regular Trustees.

      Unless otherwise determined by the Regular Trustees and except as
otherwise required by the Business Trust Act with respect to the Certificate of
Trust or otherwise, a majority of the Regular Trustees are authorized to execute
and deliver on behalf of the Trust any documents which the Regular Trustees have
the power and authority to execute or deliver pursuant to this Declaration.

SECTION 2.14 Trustees Not Responsible for Recitals or Issuance of Securities.

      The recitals contained in this Declaration and the Securities shall be
taken as the statements of IAC, L.P., as sponsor of the Trust, and the Trustees
do not assume any responsibility for their correctness. The Trustees make no
representations as to the value or condition of the property of the Trust or any
part thereof. The Trustees make no representations as to the validity or
sufficiency of this Declaration or the Securities.

SECTION 2.15 Duration of Trust.

      The Trust, absent termination pursuant to the provisions of Article VII
hereof, shall have existence until December 31, 2092.

                                   ARTICLE III

                                     SPONSOR

SECTION 3.1 Purchase of Common Securities by IAC, Inc. and Management.

      On the Execution Date, IAC, Inc. and certain members of management of IAC,
Inc. set forth in Exhibit B hereto will purchase the number of Common Securities
issued by the Trust as are set forth opposite the name of such Person in Exhibit
B hereto, at $25.00 per Common Security, for an aggregate purchase price of
$5,000.00. The Regular Trustees are hereby authorized to issue and sell
additional Common Securities to


                                       22
<PAGE>   30
IAC, Inc. or members of management of IAC, Inc. at such times and for such
consideration as the Regular Trustees in their sole discretion may deem
advisable.

SECTION 3.2 Expenses.

      (a)   IAC, L.P. shall be responsible for and shall pay for all debts and
obligations (other than with respect to the Securities) and all costs and
expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization, formation and initial capitalization of the Trust,
all costs and expenses of the Trust being a public company, including costs of
filings with the Commission, reports and other distributions to the Holders of
Preferred Securities issued by the Trust, Commission and NASD fees payable with
respect to any Registration Statement of the Trust, all costs and expenses,
including any stock exchange or interdealer quotation system listing fees,
relating to the issuance of Preferred Securities pursuant to such Registration
Statement and this Declaration, the issuance of the Preferred Securities to
initial purchasers thereof, the fees and expenses (including reasonable counsel
fees and expenses) of the Trustees (including any amounts payable under Article
IX), the costs and expenses relating to the operation of the Trust, including
without limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses, costs
and expenditures related to qualification as a REIT and maintenance of REIT
status and costs and expenses incurred in connection with the disposition of
Trust assets).

      (b)   IAC, L.P. will pay any and all United States federal, state, local,
and foreign taxes, and other assessments of a similar nature (other than
withholding taxes imposed on Distributions to Holders of Trust Securities), and
all liabilities, costs and expenses with respect to such taxes or assessments of
the Trust.

      (c)   IAC, L.P. will be primarily liable for any indemnification
obligations arising with respect to the Declaration.

      (d)   IAC, L.P.'s obligations under this Section 3.2 shall be for the
benefit of, and shall be enforceable by, any Person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice hereof. Any such Creditor may enforce IAC,
L.P.'s obligations under this Section 3.2 directly against IAC, L.P., and IAC,
Inc. and IAC, L.P. irrevocably waive any right or remedy to require that any
such Creditor take any action against the Trust or any other Person before
proceeding against IAC, L.P. IAC, Inc. and IAC, L.P. agree to execute such
additional agreements as may be necessary or desirable in order to give full
effect to the provisions of this Section 3.2.



                                       23
<PAGE>   31
                                   ARTICLE IV

                                    TRUSTEES

SECTION 4.1 Number of Trustees; Qualifications.

      (a)   The number of Trustees initially shall be three (3). At any time (i)
before the issuance of Securities, IAC, L.P. may, by written instrument,
increase or decrease the number of, and appoint, remove and replace the,
Trustees, and (ii) after the issuance of Securities and except as provided in
clause (5) below and Section 4.2(a)(ii)(B) with respect to the Special Regular
Trustee, the number of Trustees may be increased or decreased solely by, and
Trustees may be appointed, removed or replaced solely by, vote of Holders of
Common Securities representing a Majority in liquidation amount of the Common
Securities voting as a class; provided that in any case:

            (1)   the number of Trustees shall be at least three (3) unless the
      Trustee that acts as the Property Trustee also acts as the Delaware
      Trustee, in which case the number of Trustees shall be at least two (2);

            (2)   unless a Special Regular Trustee has been appointed (which
      appointment shall not impair the right of the Holders of Common Securities
      to increase or decrease the number of, or to appoint, remove or replace,
      Trustees (other than the Special Regular Trustee) as provided above), one
      or more of the Trustees shall at all times be an officer of IAC, Inc.;

            (3)   if required by the Business Trust Act, one Trustee (the
      "Delaware Trustee") shall be either a natural person who is a resident of
      the State of Delaware or, if not a natural person, an entity which has its
      principal place of business in the State of Delaware and otherwise is
      permitted to act as a Trustee hereunder under the laws of the State of
      Delaware, except that if the Property Trustee has its principal place of
      business in the State of Delaware and otherwise is permitted to act as a
      Trustee hereunder under the laws of the State of Delaware, then the
      Property Trustee shall also be the Delaware Trustee and Section 2.9 shall
      have no application;

            (4)   there shall at all times be a Property Trustee hereunder which
      shall satisfy the requirements of Section 4.1(c); and

            (5)   the number of Trustees shall be increased


                                       24
<PAGE>   32
      automatically by one (1) if an Appointment Event has occurred and is
      continuing and the Holders of a Majority in aggregate liquidation amount
      of the applicable series of Preferred Securities entitled to vote appoint
      a Special Regular Trustee in accordance with and subject to Section
      4.2(a)(ii)(B) and the terms of such series of Preferred Securities.

Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.

      (b)   The initial Regular Trustee shall be:

      James E. Mead

      c/o    Irvine Apartment Communities, Inc.
             550 Newport Center Drive
             Suite 300
             Newport Beach, California 92660

      (c)   There shall at all times be one Trustee which shall act as Property
Trustee. In order to act as Property Trustee hereunder, such Trustee shall:

            (i)   not be an Affiliate of IAC, Inc., IAC, L.P., The Irvine
      Company or Donald Bren;

            (ii)  be a corporation organized and doing business under the laws
      of the United States of America or any State or Territory thereof or of
      the District of Columbia, authorized under such laws to exercise corporate
      trust powers, having a combined capital and surplus of at least
      $50,000,000, and subject to supervision or examination by Federal, State,
      Territorial or District of Columbia authority. If such corporation
      publishes reports of condition at least annually, pursuant to law or to
      the requirements of the supervising or examining authority referred to
      above, then for the purposes of this Section 4.1(c)(ii), the combined
      capital and surplus of such corporation shall be deemed to be its combined
      capital and surplus as set forth in its most recent report of condition so
      published; and

            (iii) if the Trust is excluded from the definition of an Investment
      Company solely by reason of Rule 3a-7 and to the extent Rule 3a-7 requires
      a trustee having certain qualifications to hold title to the "eligible
      assets" (as defined in Rule 3a-7) of the Trust, the Property Trustee shall
      possess those qualifications.

      If at any time the Property Trustee shall cease to satisfy the
requirements


                                       25
<PAGE>   33
of clauses (i)-(iii) above, the Property Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2(d).

      The initial Trustee which shall serve as the Property Trustee is The Bank
of New York, whose address is as set forth in Section 14.1(b).

      (d)   The initial Trustee which shall serve as the Delaware Trustee is The
Bank of New York (Delaware), whose address is as set forth in Section 14.1(c).

      (e)   Any action taken by (i) Holders of Common Securities pursuant to
this Article IV or (ii) Holders of Preferred Securities pursuant to this Article
IV to appoint or remove a Special Regular Trustee upon the occurrence of an
Appointment Event, shall be taken at a meeting of Holders of Common Securities
or Preferred Securities, as the case may be, convened for such purpose or by
written consent as provided in Section 11.2.

      (f)   No amendment may be made to this Section 4.1 which would change any
rights with respect to the number, existence or appointment and removal of
Trustees (other than any Special Regular Trustee), except with the consent of
each Holder of Common Securities. In addition, no amendment or modification may
be made to Section 4.1(c)(iii) unless the Trust receives an unqualified written
opinion addressed to the Trust and delivered to the Regular Trustee of a
nationally recognized independent counsel experienced in such matters that such
amendment will not cause the Trust to be an Investment Company or controlled by
an Investment Company.

      (g)   No amendment may be made to this Section 4.1 or Section
4.2(a)(ii)(B), which would change the rights of Holders of a series of Preferred
Securities to appoint, remove or replace a Special Regular Trustee upon the
occurrence of an Appointment Event applicable to such series except with the
consent of each Holder of Preferred Securities of such series.

      (h)   Any corporation into which the Delaware Trustee or the Property
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Delaware Trustee or the Property Trustee shall be a party, or any corporation
succeeding to the corporate trust business of the Delaware Trustee or the
Property Trustee, shall be the successor of the Delaware Trustee or the Property
Trustee hereunder, as applicable, provided that such corporation shall be
qualified under the provisions of this Section 4.1, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.

SECTION 4.2 Appointment, Removal and Resignation of Trustees.

      (a)   Subject to Section 4.2(b), Trustees may be appointed, removed or
replaced without cause at any time:


                                       26
<PAGE>   34
            (i)   until the issuance of any Securities, by written instrument
      executed by IAC, L.P.; and

            (ii)  after the issuance of any Securities,

                  (A)   other than with respect to a Special Regular Trustee, by
      vote of the Holders of a Majority in liquidation amount of the Common
      Securities voting as a class; and

                  (B)   subject to the next two sentences of this clause (B), if
      an Appointment Event has occurred and is continuing with respect to one or
      more series of Preferred Securities, one (1) additional Regular Trustee
      for all such series, who shall have the same rights, powers and privileges
      under this Declaration as the Regular Trustees, (the "Special Regular
      Trustee"), may be appointed, who need not be an employee or officer of, or
      otherwise an Affiliate of IAC, Inc., by vote of the Holders of a Majority
      in aggregate liquidation amount of the series of Preferred Securities so
      affected (voting separately as a class with all other series of Preferred
      Securities upon which like voting rights have been conferred and are
      exercisable) and such Special Regular Trustee may only be removed
      (otherwise than by the operation of Section 4.2(c)), by vote of the
      Holders of a Majority in liquidation amount of each series of Preferred
      Securities upon which like voting rights have been conferred and are
      exercisable voting as a single class. Only one Special Regular Trustee
      shall be appointed with respect to all series of Preferred Securities upon
      whom the right to appoint a Special Regular Trustee upon the occurrence of
      an Appointment Event shall have been conferred pursuant to the Certificate
      of Terms for such series notwithstanding that such right with respect to a
      series of Preferred Securities becomes exercisable subsequent to a Special
      Regular Trustee having been appointed by any other series of Preferred
      Securities. In such event, the Special Regular Trustee so appointed shall,
      without any further act or vote by the Holders of any series of Preferred
      Securities, be deemed to have been appointed to act in such capacity for
      all series of Preferred Securities upon which like voting rights have been
      conferred and are exercisable.


                                       27
<PAGE>   35
             (b)  (i)   The Trustee that acts as Property Trustee shall not be
                        removed in accordance with Section 4.2(a) until a
                        Successor Property Trustee possessing the qualifications
                        to act as Property Trustee under Section 4.1(c) has been
                        appointed and has accepted such appointment by written
                        instrument executed by such Successor Property Trustee
                        and delivered to the Regular Trustees, IAC, L.P. and the
                        Property Trustee being removed; and

                  (ii)  the Trustee that acts as Delaware Trustee shall not be
                        removed in accordance with Section 4.2(a) until a
                        successor Trustee possessing the qualifications to act
                        as Delaware Trustee under Section 4.1(a)(3) (a
                        "Successor Delaware Trustee") has been appointed and has
                        accepted such appointment by written instrument executed
                        by such Successor Delaware Trustee and delivered to the
                        Regular Trustees, IAC, L.P. and the Delaware Trustee
                        being removed.

      (c)   A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation; provided
that a Special Regular Trustee shall only hold office while an Appointment Event
is continuing and shall cease to hold office immediately after the Appointment
Event with respect to each series of Preferred Securities pursuant to which the
Special Regular Trustee was appointed and all other Appointment Events cease to
be continuing.

      (d)   Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a "Resignation Request") in writing
signed by the Trustee and delivered to IAC, L.P. and the Trust, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:

            (i)   no such resignation of the Trustee that acts as the Property
      Trustee shall be effective until:

                  (A)   a Successor Property Trustee possessing the
      qualifications to act as Property Trustee under Section 4.1(c) has been
      appointed and has accepted such appointment by instrument executed by such
      Successor Property Trustee and delivered to the Trust, IAC, L.P. and the
      resigning Property Trustee; or

                  (B)   if the Trust is excluded from the


                                       28
<PAGE>   36
      definition of an Investment Company solely by reason of Rule 3a-7, until
      the assets of the Trust have been completely liquidated and the proceeds
      thereof distributed to the Holders of the Securities in accordance with
      the priority and payment terms of each class or series of Securities;

            (ii)  no such resignation of the Trustee that acts as the Delaware
      Trustee shall be effective until a Successor Delaware Trustee has been
      appointed and has accepted such appointment by instrument executed by such
      Successor Delaware Trustee and delivered to the Trust, IAC, L.P. and the
      resigning Delaware Trustee; and

            (iii) no such resignation of a Special Regular Trustee shall be
      effective until the 60th day following delivery of the Resignation Request
      to IAC, L.P. and the Trust or such later date specified in the Resignation
      Request during which period the Holders of the Preferred Securities of all
      series upon which the right to appoint a Special Regular Trustee upon the
      occurrence of an Appointment Event shall have been conferred and are then
      exercisable shall have the right to appoint a successor Special Regular
      Trustee as provided in this Article IV.

      (e)   If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery to IAC, L.P. and the Trust of a Resignation
Request, the resigning Property Trustee or Delaware Trustee may petition any
court of competent jurisdiction for appointment of a Successor Property Trustee
or Successor Delaware Trustee. Such court may thereupon after such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.

SECTION 4.3 Vacancies Among Trustees.

      If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 4.1 or if the number of Trustees is
increased pursuant to Section 4.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by a majority of the Regular Trustees
shall be conclusive evidence of the existence of such vacancy. The vacancy shall
be filled with a Trustee appointed in accordance with the requirements of this
Article IV.

SECTION 4.4 Effect of Vacancies.

      The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee, or
any one of them, shall not operate to annul the Trust. Whenever a vacancy in the
number of Regular


                                       29
<PAGE>   37
Trustees shall occur until such vacancy is filled as provided in this Article
IV, the Regular Trustees in office, regardless of their number, shall have all
the powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.

SECTION 4.5 Meetings.

      Meetings of the Regular Trustees shall be held from time to time upon the
call of any Trustee. Regular meetings of the Regular Trustees may be held at a
time and place fixed by resolution of the Regular Trustees. Notice of any
in-person meeting of the Regular Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any telephonic
meeting of the Regular Trustees or any committee thereof shall be hand delivered
or otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before such meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of a Regular Trustee
at a meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Unless provided otherwise in this Declaration, any action of
the Regular Trustees may be taken at a meeting by vote of a majority of the
Regular Trustees present (whether in person or by telephone) and eligible to
vote with respect to such matter; provided that a Quorum is present, or without
a meeting by the unanimous written consent of the Regular Trustees.

SECTION 4.6 Delegation of Power.

      (a)   Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any registration statement or amendment
thereto or other document or schedule filed with the Commission or any stock
exchange or interdealer quotation system or making any other governmental filing
(including, without limitation to filings referred to in Section 2.11).

      (b)   The Regular Trustees shall have power to delegate from time to time
to such of their number or to officers of the Trust or IAC, Inc. the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Regular Trustees or otherwise as the Regular Trustees
may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.


                                       30
<PAGE>   38
                                    ARTICLE V

                                  DISTRIBUTIONS

SECTION 5.1 Distributions.

      Holders shall receive (i) periodic distributions when, as and if declared
by the Regular Trustees out of funds legally available for the payment therefor
("Distributions") and (ii) redemption payments and liquidation distributions, in
each case, in accordance with the applicable terms of the relevant Holder's
Securities and subject to each class or series priority and payment terms.


                                   ARTICLE VI

                             ISSUANCE OF SECURITIES

SECTION 6.1 General Provisions Regarding Securities.

      (a)   The Regular Trustees shall issue on behalf of the Holders,
Securities in fully registered form representing undivided beneficial interests
in the assets of the Trust subject to the priority and payment terms of each
class or series of Securities in accordance with this Article VI.

      (b)   The Regular Trustees may issue from time to time on behalf of the
Trust up to (i) 20,000 common securities (liquidation amount $25.00 per common
security) representing common undivided beneficial interests in the assets of
the Trust, subject to the priority and payment terms of each class or series of
Securities, (the "Common Securities"), (ii) 25 million preferred securities
issuable in one or more series, as provided in Section 6.1(d) below representing
preferred undivided beneficial interests in the assets of the Trust, subject to
the priority and payment terms of each class or series of Securities (the
"Preferred Securities"), and (iii) 25 million securities of a class designated
Excess Preferred Securities issuable in one or more series as provided in
Section 6.1(e) below. The Trust shall have no securities or other interests in
the assets of the Trust other than the Preferred Securities, the Common
Securities and the Excess Preferred Securities.

      (c)   (i) The Common Security Certificates evidencing the Common
Securities shall be substantially in the form attached hereto as Annex I, with
such changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice;

            (ii)  The proceeds from the sale of any Common Securities shall be
      invested in an interest bearing account in, or certificate of deposit of,
      a


                                       31
<PAGE>   39
      Banking Institution;

            (iii) The Holders of Common Securities are entitled to one vote per
      Common Security on all matters submitted for a vote of the Holders of
      Common Securities and, except as otherwise provided in Section 11.1(a) or
      in respect of any series of Preferred Securities hereafter established,
      the exclusive voting power for all purposes (including with respect to
      amendments to this Declaration) shall be vested in the Holders of the
      Common Securities;

            (iv)  Subject to the provisions of law and any preferential rights
      of any series of Preferred Securities hereafter established, Holders of
      Common Securities are entitled to receive ratably such Distributions as
      may be declared from time to time on the Common Securities by a majority
      of the Regular Trustees in their sole and absolute discretion from funds
      legally available therefor;

            (v)   Unless otherwise provided in this Declaration, matters
      submitted for approval to Holders of Common Securities require a majority
      vote of the Common Securities present and voting thereon. The Holders of
      Common Securities have the exclusive right (subject to the terms of the
      Declaration) to appoint, remove or replace Trustees and to increase or
      decrease the number of Trustees, subject to the right of Holders of the
      Preferred Securities of a series to appoint (subject to Section 4.2(a)(B))
      a Special Regular Trustee upon the occurrence of an Appointment Event with
      respect to such series;

            (vi)  Subject to (1) the preferential rights of outstanding series
      of Preferred Securities, if any and (2) the preferential rights of
      outstanding series of Excess Preferred Securities, if any, in the event of
      any liquidation, dissolution, winding up or termination of the Trust,
      whether voluntary or involuntary, each Holder of Common Securities shall
      be entitled, after payment or provision for payment of the debts and other
      liabilities of the Trust and the amount to which the Holders of any series
      of Preferred Securities and Excess Preferred Securities hereafter
      classified or reclassified as having a preference upon liquidation,
      dissolution, winding up or termination of the Trust shall be entitled, to
      receive ratably with each other Holder of Common Securities all remaining
      assets of the Trust available for distribution to the Holders of Common
      Securities; and

            (vii) Holders of Common Securities have no subscription, redemption,
      conversion or preemptive rights;

      (d)   A majority of Regular Trustees are authorized, subject to any


                                       32
<PAGE>   40
limitations prescribed by law and the provisions of this Article VI, to provide
for the issuance of the shares of Preferred Securities in series, by executing a
Certificate of Terms to establish from time to time the number of securities to
be included in each such series, and to fix the designations, powers,
preferences and rights of the securities of each such series and the
qualifications, limitations or restrictions thereof including, but not limited
to, the Ownership Limit applicable to such series of Preferred Securities;
provided, however, that the Regular Trustees shall not approve the issuance of a
series of Preferred Securities that would cause the Trust to be deemed an
Investment Company required to be registered under the Investment Company Act.
Except as required by law, as provided in Section 11.1(a) or as otherwise
provided in a Certificate of Terms with respect to a series of Preferred
Securities, Holders of Preferred Securities shall have no voting rights. Subject
to the provisions contained in Section 11.1(a), the Regular Trustees are
authorized to establish the terms of a series of Preferred Securities and to
cause the issuance thereof without the consent or vote of Holders of any class
or series of Securities. Upon issuance of a series of Preferred Securities, the
Certificate of Terms shall constitute an amendment to this Declaration and shall
become a part hereof whether or not attached hereto and an original executed
copy of such Certificate of Terms shall be delivered to the Property Trustee.

      (e)   At such time as the Regular Trustees authorize a series of Preferred
Securities pursuant to Section 6.1(d), without any further or separate action of
the Regular Trustees, there shall be deemed to be authorized a series of Excess
Preferred Securities consisting of the number of securities included in the
series of Preferred Securities and having terms, rights, restrictions and
qualifications identical thereto, except to the extent that Article VIII
requires different terms. In such event, any appropriate correlative
modification in all defined terms shall be deemed to have been made.

      (f)   The Certificates shall be signed on behalf of the Trust by a
majority of the Regular Trustees. Such signatures may be the manual or facsimile
signatures of the present or any future Regular Trustee. Typographical and other
minor errors or defects in any such reproduction of any such signature shall not
affect the validity of any Certificate. In case any Regular Trustee of the Trust
who shall have signed any of the Certificates shall cease to be such Regular
Trustee before the Certificate so signed shall be delivered by the Trust, such
Certificate nevertheless may be delivered as though the person who signed such
Certificate had not ceased to be such Regular Trustee; and any Certificate may
be signed on behalf of the Trust by such persons as, at the actual date of the
execution of such Certificate, shall be the Regular Trustees of the Trust,
although at the date of the execution and delivery of the Declaration any such
person was not such a Regular Trustee. Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Regular Trustees, as evidenced by their execution thereof, and
may have such letters, numbers or other marks of identification or designation
and such legends or endorsements as the Regular Trustees may deem appropriate,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or


                                       33
<PAGE>   41
interdealer quotation system on which such Securities may be listed, or to
conform to usage. Pending the preparation of definitive Certificates, the
Regular Trustees on behalf of the Trust may execute temporary Certificates
(printed, lithographed or typewritten), in substantially the form of the
definitive Certificates in lieu of which they are issued, but with such
omissions, insertions and variations as may be appropriate for temporary
Certificates, all as may be determined by the Regular Trustees. Each temporary
Certificate shall be executed by the Regular Trustees on behalf of the Trust
upon the same conditions and in substantially the same manner, and with like
effect, as definitive Certificates. Without unnecessary delay, the Regular
Trustees on behalf of the Trust will execute and furnish definitive Certificates
and thereupon any or all temporary Certificates may be surrendered to the
transfer agent and registrar in exchange therefor (without charge to the
Holders). Each Certificate for Preferred Securities whether in temporary or
definitive form shall be countersigned by the manual signature of an authorized
signatory of the Person acting as registrar and transfer agent with respect to
such Securities, which shall initially be the Property Trustee.

      (g)   The consideration received by the Trust for the issuance of the
Capital Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.

      (h)   Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.

      (i)   Every Person, by virtue of having become a Holder or a Preferred
Security Indirect Owner in accordance with the terms of this Declaration, shall
be deemed to have expressly assented and agreed to the terms of, and shall be
bound by this Declaration.

      (j)   Upon issuance of the Common Securities as provided in this
Declaration, the Regular Trustees on behalf of the Trust shall return to IAC,
Inc. the $10 constituting initial trust assets as set forth in the Original
Declaration.


                                   ARTICLE VII

                              TERMINATION OF TRUST

SECTION 7.1 Termination of Trust.

      This Declaration and the Trust shall terminate and be of no further force
or effect when:

            (i)   (A) all of the Preferred Securities of all series shall have
      been repaid in accordance with the terms thereof or called for redemption


                                       34
<PAGE>   42
      and the amounts necessary for redemption thereof shall have been paid to
      the Holders thereof in accordance with the priority and payment terms of
      the Preferred Securities and (B) all of the Common Securities are no
      longer outstanding; or

            (ii)  upon the expiration of the term of the Trust as set forth in
      Section 2.15; or

            (iii) upon the expiration of the term of IAC, L.P. on December 31,
      2092, unless sooner dissolved.

and a certificate of cancellation is filed by the Trustees with the Secretary of
State of the State of Delaware. The Trustees shall so file such a certificate as
soon as practicable after the occurrence of an event referred to in this Section
7.1.

      The provisions of Sections 2.10 and 3.2 and Article IX shall survive the
termination of the Trust.


                                  ARTICLE VIII

                              TRANSFER OF INTERESTS

SECTION 8.1 General.

      (a)   Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration.

      (b)   Common Securities are freely transferable.

      (c)   Subject to this Article VIII, Preferred Securities shall be freely
transferable.

SECTION 8.2 Restriction on Ownership and Transfers of Preferred Securities;
Exchange for Excess Preferred Securities.

      (a)   General.

            (i)   Except as provided in Section 8.2(f), no Person shall
      Beneficially Own shares of a series of Preferred Securities in excess of
      the Ownership Limit applicable to such series.

            (ii)  Except as provided in Section 8.2(f) (and subject to Section
      8.4), any Transfer (whether or not such Transfer is the result of
      transactions


                                       35
<PAGE>   43
      entered into through the facilities of any stock exchange of interdealer
      quotation system) that, if effective, would result in any Person
      Beneficially Owning securities of a series of Preferred Securities in
      excess of the Ownership Limit applicable to such series shall be void ab
      initio as to the Transfer of such securities which would be otherwise
      Beneficially Owned by such Person in excess of the Ownership Limit
      applicable to such series, and the intended transferee shall acquire no
      rights in such securities.

            (iii) Except as provided in Section 8.2(f) (and subject to Section
      8.4), any Transfer (whether or not such Transfer is the result of a
      transaction entered into through the facilities of any stock exchange or
      interdealer quotation system) that, if effective, would result in the
      Preferred Securities being Beneficially Owned by less than 100 Persons
      (determined without reference to any rules of attribution) shall be void
      ab initio as to the Transfer of such securities which would be otherwise
      Beneficially Owned by the transferee and the intended transferee shall
      acquire no rights in such securities.

            (iv)  A Transfer of Preferred Securities which is null and void
      under (A) Section 8.2(a)(ii) because it could, if effective, result in the
      ownership of a series of Preferred Securities in excess of the Ownership
      Limit applicable to such Series or (B) Section 8.2(a)(iii) because it
      could, if effective, result in the Preferred Securities being beneficially
      owned by fewer than 100 Persons, shall not adversely affect the validity
      of the Transfer of any other Preferred Securities in the same or any other
      related transaction.

      (b)   Remedies for Breach.

            If a majority of the Regular Trustees shall at any time determine in
good faith that a Transfer or other event has taken place in violation of
Section 8.2(a) (whether or not such violation is intended), or that a Person
intends to acquire or has attempted to acquire Beneficial Ownership of any
Preferred Securities in violation of Section 8.2(a), the majority of the Regular
Trustees shall be empowered to take any action as they deem advisable to refuse
to give effect to or to prevent such Transfer or other event, including, but not
limited to, refusing to give effect to such Transfer or other event on the books
of the Trust, demanding the repayment of any Distributions received in respect
of such Preferred Securities acquired in violation of Section 8.2(a) or
instituting proceedings to enjoin such Transfer or rescind such Transfer or
attempted Transfer; provided, however, that any Transfers or attempted Transfers
(or in the case of events other than a Transfer, Beneficial Ownership) in
violation of Section 8.2(a), regardless of any action (or non-action) by the
Regular Trustees, (i) shall be void ab initio and (ii) shall automatically
result in the exchange described in Section 8.2(c).

      (c)   Exchange for Excess Stock. If, notwithstanding the other provisions
contained in this Article VIII, at any time there is a purported Transfer
(whether or not such


                                       36
<PAGE>   44
Transfer is the result of a transaction entered into through the facilities of
any stock exchange or interdealer quotation system) or other change in the
capital structure of the Trust or other event such that any Person would
Beneficially Own securities of a series of Preferred Securities in excess of the
Ownership Limit applicable to such series, then, except as otherwise provided in
Section 8.2(f), such Preferred Securities in excess of the Ownership Limit
applicable to such series (rounded up to the nearest whole security) shall be
automatically exchanged for an equal number of securities of Excess Preferred
Securities having the terms set forth in Section 8.3. Such exchange shall be
effective as of the close of business on the business day prior to the date of
the Transfer or change in capital structure or other event.

      (d)   Notice of Restricted Transfer. Any Person who acquires or attempts
to acquire Preferred Securities in violation of Section 8.2(a), or any Person
who is a transferee such that Excess Preferred Securities results under Section
8.2(c), shall immediately give written notice to the Trust of such event and
shall provide to the Regular Trustees such other information as the Regular
Trustees may request in order to determine the effect, if any, of such Transfer
or attempted Transfer or other event on the Trust's status as a REIT. Failure to
give such notice shall not limit the rights and remedies of the Regular Trustees
provided herein in any way.

      (e)   Owners Required to Provide Information. From and after the date of
this Declaration:

            (i)   Every record and Beneficial Owner of more than 5% (or such
      other percentage between ' of 1% and 5%, as determined by a majority of
      the Regular Trustees) of any series of Preferred Securities outstanding
      shall, within 30 days after January 1 of each year, give written notice to
      the Trust stating the name and address of such record or Beneficial Owner,
      the number of securities of any series of Preferred Securities
      Beneficially Owned, and a full description of how such securities are
      held. Each such record or Beneficial Owner of Preferred Securities shall,
      upon demand by the Trust, disclose to the Trust in writing such additional
      information with respect to the Beneficial Ownership of the Preferred
      Securities as a majority of the Regular Trustees, in their sole
      discretion, deem appropriate or necessary to (i) comply with the
      provisions of the Code regarding the qualification of the Trust as a REIT
      under the Code, and (ii) ensure compliance with the applicable Ownership
      Limit. Each Holder of record, including without limitation any Person
      (including a Clearing Agency) who holds Preferred Securities on behalf of
      a Beneficial Owner, shall take all reasonable steps to obtain the written
      notice described in this Section 8.2(e)(i) from the Beneficial Owner.

            (ii)  Any Person who is a Beneficial Owner of securities of any
      series of Preferred Securities and any Person (including the Holder) who
      is holding Preferred Securities for a Beneficial Owner, and any proposed


                                       37
<PAGE>   45
      transferee of Preferred Securities, shall provide such information as a
      majority of the Regular Trustees, in their sole discretion, may request in
      order to determine the Trust's status or to comply with the requirements
      of any taxing authority or other governmental agency, to determine any
      such compliance or to ensure compliance with the applicable Ownership
      Limit, and shall provide a statement or affidavit to the Trust setting
      forth the number of securities of any series of Preferred Securities
      already Beneficially Owned by such holder or proposed transferee and any
      related persons specified, which statement or affidavit shall be in the
      form prescribed by a majority of the Regular Trustees for that purpose.

      (f)   Exceptions.

            (i)   A majority of the Regular Trustees, upon receipt of a ruling
      from the Internal Revenue Service or an opinion of nationally recognized
      tax counsel experienced in such matters, may waive the application, in
      whole or in part, of the applicable Ownership Limit to a Person, if such
      Person is not an individual for purposes of section 542(a) of the Code and
      is a corporation, partnership, estate or trust, provided, however, in no
      event may any such exception cause such Person's ownership, direct or
      indirect, to exceed 9.8% of the value of the Outstanding Preferred
      Securities and Excess Preferred Securities, as such value is determined by
      a majority of the Regular Trustees in their sole discretion. In connection
      with any such exemption, a majority of the Regular Trustees may require
      such representations and undertakings from such Person and may impose such
      other conditions as they deem necessary, in their sole discretion, to
      determine the effect, if any, of the proposed Transfer on the Trust's
      status as a REIT.

            (ii)  For a period of 270 days following the purchase of any series
      of Preferred Securities by an underwriter that (i) is a corporation,
      limited liability company, partnership or other entity and (ii)
      participates in an offering of such series of Preferred Securities, such
      underwriter shall not be subject to the Ownership Limit applicable to such
      series with respect to the Preferred Securities purchased by it as a part
      of or in connection with such offering and with respect to any Preferred
      Securities purchased in connection with market making activities.

      (g)   Legend.

      Each Preferred Securities Certificate shall bear the following legend or
such other legend as the majority of the Regular Trustees may establish in
accordance with Section 6.1(d) at the time such series of Preferred Securities
is established:


                                       38
<PAGE>   46
            "THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
      SUBJECT TO RESTRICTIONS ON TRANSFER. NO PERSON MAY BENEFICIALLY OWN
      SECURITIES OF THIS SERIES OF PREFERRED SECURITIES IN EXCESS OF THE
      OWNERSHIP LIMIT APPLICABLE TO THIS SERIES OF PREFERRED SECURITIES, WITH
      CERTAIN FURTHER RESTRICTIONS AND EXCEPTIONS SET FORTH IN THE AMENDED AND
      RESTATED DECLARATION OF TRUST OF IAC CAPITAL TRUST DATED AS OF JANUARY 20,
      1998, AS AMENDED FROM TIME TO TIME ("DECLARATION"). ANY PERSON WHO
      ATTEMPTS TO BENEFICIALLY OWN SECURITIES OF THIS SERIES OF PREFERRED
      SECURITIES IN EXCESS OF THE APPLICABLE LIMITATION MUST IMMEDIATELY NOTIFY
      THE TRUST. ALL CAPITALIZED TERMS IN THIS LEGEND SHALL HAVE THE MEANINGS
      ASCRIBED TO SUCH TERMS IN THE DECLARATION, AS THE SAME MAY BE AMENDED FROM
      TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER,
      WILL BE SENT WITHOUT CHARGE TO EACH HOLDER OF PREFERRED SECURITIES OF THIS
      SERIES WHO REQUESTS SUCH A COPY. IF THE RESTRICTIONS ON TRANSFER ARE
      VIOLATED, THE TRANSFER WILL BE VOID IN ACCORDANCE WITH THE DECLARATION AND
      THE PREFERRED SECURITIES REPRESENTED HEREBY WILL BE AUTOMATICALLY
      EXCHANGED FOR EXCESS PREFERRED SECURITIES WHICH WILL BE HELD IN TRUST IN
      ACCORDANCE WITH THE DECLARATION."

SECTION 8.3 Excess Preferred Securities.

            The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to Distributions,
qualifications and terms and conditions of redemption of the Excess Preferred
Securities of the Trust:

            (a)   Ownership in Trust.

            Upon any purported Transfer, change in the capital structure of the
Trust or purported change in Beneficial Ownership that results in Excess
Preferred Securities pursuant to Section 8.2(c), such Excess Preferred
Securities shall be deemed to have been transferred to a Person as trustee of a
Charitable Trust for the exclusive benefit of one or


                                       39
<PAGE>   47
more organizations described in sections 170(b), 170(c), or 501(c)(3) of the
Code (the "Charitable Beneficiary" or "Charitable Beneficiaries"), as shall be
designated by a majority of the Regular Trustees in writing, such trustee to be
a person who is unaffiliated with (i) the Trust, (ii) the Purported Beneficial
Transferee; and (iii) the Purported Record Transferee. At all times at least one
Charitable Beneficiary shall be designated by the Regular Trustees. Where a
Transfer or other event results in an automatic exchange of securities of more
than one series for Excess Preferred Securities, then separate Charitable Trusts
shall be deemed to have been established for the Excess Preferred Securities
attributable to the securities of each such series. Securities of Excess
Preferred Securities held in Charitable Trust for the exclusive benefit of the
Charitable Beneficiary shall be issued and outstanding securities of the Trust.
The trustee of the Charitable Trust will be deemed to own the Excess Preferred
Securities held in Charitable Trust for the exclusive benefit of the Charitable
Beneficiary on the day prior to the date of the violative transfer. The
Purported Beneficial Transferee shall have no rights in the shares of Excess
Preferred Securities except the right to receive a price for its interest in the
Preferred Securities which were exchanged for Excess Preferred Securities upon
the terms specified in Section 8.3(e).

      (b)   Distribution Rights.

      Excess Preferred Securities shall be entitled to Distributions as if such
Excess Preferred Securities were Preferred Securities of the series or class in
existence immediately prior to the exchange of such Excess Preferred Securities,
provided that the Distributions shall be paid to the Charitable Trustee to be
held in Charitable Trust for the exclusive benefit of the Charitable
Beneficiary. Any Distribution paid prior to the discovery by the Trust that the
Preferred Securities have been exchanged for Excess Preferred Securities shall
be repaid to the Trust upon demand or, at the Trust's sole election, shall be
offset against any future Distributions payable to the Purported Record
Transferee. Any Distributions so disgorged shall be paid over to the Charitable
Trustee for the exclusive benefit of the Charitable Beneficiary.

      (c)   Rights Upon Liquidation.

      Subject to the preferential rights of Preferred Securities, if any, each
Purported Beneficial Transferee of Excess Preferred Securities shall be entitled
to receive that portion of the assets of the Trust which a Holder of Preferred
Securities that was exchanged for such Excess Preferred Securities would have
been entitled to receive on liquidation had such Preferred Securities remained
outstanding provided that no Purported Beneficial Transferee shall be entitled
to receive any amounts in excess of the price per security such Purported
Beneficial Transferee paid for the Preferred Securities in any purported
Transfer that resulted in the Excess Preferred Securities or, if the Purported
Beneficial Transferee did not give value for such Excess Preferred Securities
(through a gift, devise or other transaction) in any purported Transfer, a price
per security equal to the Market Price on the date of any purported Transfer
that resulted in the Excess Preferred Securities, less the amount of any
Distributions received by the Purported Record Transferee


                                       40
<PAGE>   48
and not repaid or offset against future Distributions pursuant to Section
8.3(b), with any remainder of such Transferee's ratable portion of the Trust's
assets subject to ratable allocation among the Holders of Securities ranking
junior to such Excess Preferred Securities as to the payment of Distributions
and upon liquidation dissolution, winding-up or termination of the Trust as an
asset of the Trust.

      (d)   Voting Rights.

      Subject to Delaware law, effective as of the date that Preferred
Securities are exchanged for Excess Preferred Securities pursuant to Section
8.2(c), the holders of Preferred Securities that have been exchanged for Excess
Preferred Securities shall not be entitled to vote such Preferred Securities on
any matter, and, if such Preferred Securities have voting rights, all votes cast
with respect to securities of Excess Preferred Securities into which such
Preferred Securities have been exchanged shall be voted in accordance with the
direction of the Charitable Trustee of the Charitable Trust acting for the
benefit of the Charitable Beneficiary. The Charitable Trustee shall vote the
securities of Excess Preferred Securities for the exclusive benefit of the
Charitable Beneficiary.

      (e)   Restrictions on Transfer.

            (i)   Excess Preferred Securities shall not be transferable. The
      Purported Record Transferee may freely designate a Person as beneficiary
      of an interest in the Charitable Trust (representing the number of shares
      of Excess Preferred Securities held by the Charitable Trust attributable
      to a purported Transfer that resulted in the Excess Preferred Securities),
      if (A) the shares of Excess Preferred Securities held in the Charitable
      Trust would not be Excess Preferred Securities in the hands of such Person
      and (B) the Purported Beneficial Transferee does not receive a price from
      such Person that reflects a price per security for such Excess Preferred
      Securities that exceeds the lesser of (1) the price per security such
      Purported Beneficial Transferee paid for the Preferred Securities in the
      purported Transfer that resulted in the Excess Preferred Securities, or if
      the Purported Beneficial Transferee did not give value for such Excess
      Preferred Securities (through a gift, devise or other transaction), a
      price per security equal to the Market Price on the date of the purported
      Transfer that resulted in the Excess Preferred Securities and (2) the
      price per security of the Preferred Securities in the transfer described
      in the following sentence. Upon the transfer of an interest in the
      Charitable Trust, the corresponding Excess Preferred Securities in the
      Charitable Trust shall be automatically exchanged for an equal number of
      securities of Preferred Securities of the applicable series of Preferred
      Securities and such Preferred Securities shall be transferred of record to
      the transferee of the interest in the Charitable Trust if such Preferred
      Securities would not be Excess Preferred Securities in the hands of such
      transferee. In the event of such transfer, the beneficial interest of the
      Charitable Beneficiary in the Excess Preferred


                                       41
<PAGE>   49
      Securities will terminate. Prior to any transfer of any interest in the
      Charitable Trust, the Purported Record Transferee must give not less than
      five business days prior written notice to the Trust of the intended
      transfer and the Trust must have waived in writing its purchase rights
      under Section 8.3(f).

            (ii)  Notwithstanding the foregoing, if a Purported Beneficial
      Transferee receives a price for its interest in the shares of Preferred
      Securities that were exchanged for Excess Preferred Securities that
      exceeds the amounts allowable under Section 8.3(e)(i), such Purported
      Beneficial Transferee shall, prior to the exchange of the Excess Preferred
      Securities for Preferred Securities, pay, or cause the Person designated
      pursuant to Section 8.3(e)(i) to pay, such excess to the Charitable
      Trustee to be held for the exclusive benefit of the Charitable
      Beneficiary.

            (iii) If any of the transfer restrictions set forth in this Section
      8.3(e) or any application thereof is determined in a final and
      nonappealable judgment to be void, invalid or unenforceable by any court
      having jurisdiction over the issue, the Purported Record Transferee may be
      deemed, at the option of a majority of the Regular Trustees, to have acted
      as the agent of the Trust in acquiring the excess Preferred Securities as
      to which such restrictions would, by their terms, apply, and to hold such
      Excess Preferred Securities on behalf of the Trust.

      (f)   Purchase Right in Excess Preferred Securities.

      Excess Preferred Securities shall be deemed to have been offered for sale
to the Trust, or its designee (as specified by a majority of the Regular
Trustees), at a price per security equal to the lesser of (i) the price per
security in the transaction that created such Excess Preferred Securities (or,
in the case of a devise or gift, the Market Price at the time of such devise or
gift) and (ii) the Market Price on the date the Trust, or its designee, accepts
such offer. The Trust (or its designee) shall have the right to accept such
offer for a period of ninety days after the later of (i) the date of the
Transfer which resulted in such Excess Preferred Securities and (ii) the date a
majority of the Regular Trustees determines in good faith that a Transfer
resulting in Excess Preferred Securities has occurred. A majority of the Regular
Trustees may appoint a special trustee of the Charitable Trust established under
Section 8.3(a) for the purpose of consummating the purchase of Excess Preferred
Securities by the Trust (or its designee).

SECTION 8.4 Settlement.

      Nothing in this Article VIII shall be interpreted to preclude the
settlement of any transaction entered into through facilities of any stock
exchange or interdealer quotation system.


                                       42
<PAGE>   50
SECTION 8.5 Remedies Not Limited.

      Nothing contained in this Article VIII shall limit the authority of the
Regular Trustees to take such other action as they deem necessary or advisable
(subject to the provisions of Section 8.4), (i) to protect the Trust and the
interests of the holders of its Capital Securities in the preservation of the
Trust's status as a REIT, and (ii) to ensure compliance with the applicable
Ownership Limit

SECTION 8.6 Ambiguity.

      In the case of an ambiguity in the application of any of the provisions of
this Article VIII, including with respect to any of the related definitions set
forth in Article I, a majority of the Regular Trustees shall have the power to
determine the application of the provisions of this Article VIII with respect to
any situation based on their reasonable belief, understanding or knowledge of
the circumstances.

SECTION 8.7 Severability.

      If any provision of this Article VIII or any application of any such
provision is determined in a final and unappealable judgment to be void, invalid
or unenforceable by any Federal or state court having jurisdiction over the
issues, the validity and enforceability of the remaining provisions shall not be
affected and other applications of such provision shall be affected only to the
extent necessary to comply with the determination of such court.

SECTION 8.8 Regular Trustees Discretion.

      Anything in this Article VIII to the contrary notwithstanding, a majority
of the Regular Trustees shall be entitled to take or omit to take such actions
as they in their discretion shall determine to be advisable in order that the
Trust maintain its status as and continue to qualify as a REIT, including, but
not limited to, reducing the applicable Ownership Limit, in the event of a
change in law.

SECTION 8.9 Transfer of Certificates.

      The Regular Trustees shall provide for the registration of Certificates
and of transfers of Certificates, which will be effected without charge but only
upon payment (with such indemnity as the Regular Trustees may require) in
respect of any tax or other government charges which may be imposed in relation
to it. Upon surrender for registration of transfer of any Certificate, the
Regular Trustees shall cause one or more new Certificates to be issued in the
name of the designated transferee or transferees. Every Certificate surrendered
for registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Regular Trustees duly executed by the
Holder or such


                                       43
<PAGE>   51

Holder's attorney duly authorized in writing. Each Certificate surrendered for
registration of transfer shall be canceled by the Regular Trustees. A transferee
of a Certificate shall be entitled to the rights and subject to the obligations
of a Holder hereunder upon the receipt by such transferee of a Certificate. By
acceptance of a Certificate, each transferee shall be deemed to have agreed to
be bound by this Declaration.

SECTION 8.10 Deemed Security Holders.

      The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole Holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and payments on redemption and liquidation of the
Trust and for all other purposes whatsoever and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such Certificate or
in the Securities represented by such Certificate on the part of any Person,
whether or not the Trustees shall have actual or other notice thereof.

SECTION 8.11 Book Entry Interests.

      Unless otherwise specified in the terms of any series of the Preferred
Securities, Preferred Securities Certificates will be issued in the form of one
or more, fully registered, global Preferred Security Certificates (each a
"Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by,
or on behalf of, the Trust. Such Global Certificates shall initially be
registered on the books and records of the Trust in the name of Cede & Co., the
nominee of DTC, and no Preferred Security Indirect Owner will receive a
definitive Preferred Security Certificate representing such Preferred Security
Indirect Owner's interests in such Global Certificates, except as provided in
Section 8.14. Unless and until definitive, fully registered Preferred Security
Certificates (the "Definitive Preferred Security Certificates") with respect to
a series of Preferred Securities have been issued to the Preferred Security
Indirect Owners pursuant to Section 8.14:

            (i)   the provisions of this Section 8.11 shall be in full force and
      effect;

            (ii)  the Trust and the Trustees shall be entitled to deal with the
      Clearing Agency for all purposes of this Declaration (including the
      payment of Distributions on the Global Certificates and payments on
      redemption or liquidation of the Trust and receiving approvals, votes or
      consents hereunder) as the Holder of such series of such Preferred
      Securities and the sole Holder of the Global Certificates and, except as
      set forth herein or in Rule 3a-7 with respect to the Property Trustee,
      shall have no obligation to the Preferred Security Indirect Owners;

            (iii) to the extent that the provisions of this Section 8.11
      conflict with any other provisions of this Declaration, the provisions of
      this Section


                                       44
<PAGE>   52
      8.11 shall control; provided that this clause (iii) shall in no event
      limit or restrict the provisions of Sections 8.2 through 8.8 hereof which
      shall in all events be controlling;

            (iv)  the rights of the Preferred Security Indirect Owners shall be
      exercised only through the Clearing Agency and shall be limited to those
      established by law and agreements between such Preferred Security Indirect
      Owners and the Clearing Agency and/or the Clearing Agency Participants.
      DTC will make book entry transfers among the Clearing Agency Participants
      and receive and transmit payments of Distributions on, and payments or
      redemption of, the Global Certificates and in connection with the
      liquidation of the Trust, to such Clearing Agency Participants.

SECTION 8.12 Notices to Holders of Certificates.

      Whenever a notice or other communication to the Holders of Preferred
Securities is required to be given under this Declaration, unless and until
Definitive Preferred Security Certificates with respect to a series of Preferred
Securities shall have been issued pursuant to Section 8.14, the relevant
Trustees shall give all such notices and communications, specified herein to be
given to Preferred Securities Holders of such series of Preferred Securities, to
the Clearing Agency and, with respect to any Preferred Security Certificate
registered in the name of a Clearing Agency or the nominee of a Clearing Agency,
the Trustees shall, except as set forth herein or in Rule 3a-7 with respect to
the Property Trustee, have no notice obligations to the Preferred Security
Indirect Owners of such series of Preferred Securities.

SECTION 8.13 Appointment of Successor Clearing Agency.

      If any Clearing Agency elects to discontinue its services as securities
depositary with respect to any series of the Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such series of Preferred Securities.

SECTION 8.14 Definitive Preferred Securities Certificates.

      If (i) a Clearing Agency elects to discontinue its services as securities
depositary with respect to a particular series of Preferred Securities and a
successor Clearing Agency is not appointed within 90 days after such
discontinuance pursuant to Section 8.13 or (ii) the Regular Trustees elect after
consultation with IAC, L.P. to terminate the book entry system through the
Clearing Agency with respect to the Preferred Securities of a series, then (x)
Definitive Preferred Security Certificates shall be prepared by the Regular
Trustees on behalf of the Trust with respect to such series of Preferred
Securities and (y) upon surrender of the Global Certificates by the Clearing
Agency, accompanied by registration instructions, the Regular Trustees shall
cause definitive Preferred Security Certificates to be delivered to


                                       45
<PAGE>   53
Preferred Security Indirect Owners of such series in accordance with the
instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be
liable for any delay in delivery of such instructions and each of them may
conclusively rely on and shall be protected in relying on, such instructions.

SECTION 8.15 Mutilated, Destroyed, Lost or Stolen Certificates.

      If (a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and (b) there
shall be delivered to the Regular Trustees such security or indemnity as may be
required by them to keep each of them and the Trust harmless, then in the
absence of notice that such Certificate shall have been acquired by a bona fide
purchaser, a majority of Regular Trustees on behalf of the Trust shall execute
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Certificate, a new Certificate of like denomination. In connection
with the issuance of any new Certificate under this Section 8.15, the Regular
Trustees may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Certificate issued pursuant to this Section shall constitute conclusive evidence
of an ownership interest in the relevant Securities, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.


                                   ARTICLE IX

                    LIMITATION OF LIABILITY; INDEMNIFICATION

SECTION 9.1 Exculpation.

      (a)   No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or, in the
case of the Property Trustee, negligence) or willful misconduct with respect to
such acts or omissions.

      (b)   An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses or any


                                       46
<PAGE>   54
other facts pertinent to the existence and amount of assets from which
Distributions, redemption payments and payments on liquidation, dissolution or
winding up of the Trust, to Holders of Securities might properly be paid.

      (c)   Pursuant to Section 3803(a) of the Business Trust Act, the Holders
of Securities, in their capacities as Holders, shall be entitled to the same
limitation of liability that is extended to stockholders of private corporations
for profit organized under the General Corporation Law of the State of Delaware.

SECTION 9.2 Indemnification.

      (a)   To the fullest extent permitted by applicable law, IAC, L.P. shall
indemnify and hold harmless each Indemnified Person from and against any loss,
damage or claim incurred by such Indemnified Person by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by this
Declaration, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Indemnified
Person by reason of gross negligence (or, in the case of the Property Trustee,
negligence) or willful misconduct with respect to such acts or omissions.

      (b)   To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by IAC,
L.P. prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by IAC, L.P. of an undertaking by or on behalf of the
Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified as authorized in Section
9.2(a).


                                    ARTICLE X

                                   ACCOUNTING

SECTION 10.1 Fiscal Year.

      The fiscal year ("Fiscal Year") of the Trust shall be the calendar year,
or such other year as is required by the Code.

SECTION 10.2 Certain Accounting Matters.

      (a)   At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books of account, records and supporting
documents, which shall reflect in reasonable detail, each transaction of the
Trust. The books of account shall be maintained on the accrual basis method of
accounting, in accordance with generally accepted


                                       47
<PAGE>   55
accounting principles, consistently applied. The Trust shall use the accrual
basis method of accounting for income tax purposes. The books and records of the
Trust, together with a copy of this Declaration and a certified copy of the
Certificate of Trust, or any amendment thereto, shall at all times be maintained
at the principal office of the Trust and shall be open for inspection for any
examination by any Holder or its duly authorized representative for any purpose
reasonably related to its interest in the Trust during normal business hours.

      (b)   The Regular Trustees shall, as soon as available after the end of
each Fiscal Year of the Trust, cause to be prepared and mailed to each Holder of
Securities unaudited financial statements of the Trust for such Fiscal Year,
prepared in accordance with generally accepted accounting principles; provided
that if the Trust is required to comply with the periodic reporting requirements
of Sections 13(a) or 15(d) of the Exchange Act, such financial statements for
such Fiscal Year shall be examined and reported on by a firm of independent
certified public accountants selected by the Regular Trustees (which firm may be
the firm used by IAC, L.P.).

      (c)   The Regular Trustees shall cause to be prepared and mailed to each
Holder of Securities, an annual United States federal income tax information
statement, on such form as is required by the Code, containing such information
with regard to the Securities held by each Holder as is required by the Code and
the Treasury Regulations, and any other information required to be filed by the
Regular Trustees on behalf of the Trust with any taxing authority.
Notwithstanding any right under the Code to deliver any such statement at a
later date, the Regular Trustees shall endeavor to deliver all such statements
within 30 days after the end of each Fiscal Year of the Trust.

      (d)   The Regular Trustees shall cause to be prepared and filed with the
appropriate taxing authority, an annual United States federal income tax return,
on such form as is required by the Code, and any other annual income tax returns
required to be filed by the Regular Trustees on behalf of the Trust with any
state or local taxing authority, such returns to be filed as soon as practicable
after the end of each Fiscal Year of the Trust.

SECTION 10.3 Banking.

      The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Preferred L.P. Units held by the Property Trustee shall be made
directly to the Property Account and no other funds from the Trust shall be
deposited in the Property Account. The sole signatories for such accounts shall
be designated by the Regular Trustees; provided, however, that the Property
Trustee shall designate the sole signatories for the Property Account.

SECTION 10.4 Withholding.

      The Trust and the Trustees shall comply with all withholding requirements


                                       48
<PAGE>   56
under United States federal, state and local law. The Trust shall request, and
the Holders shall provide to the Trust, such forms or certificates as are
necessary to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be requested by
the Trust to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Trust shall file required forms with applicable
jurisdictions and, unless an exemption from withholding is properly established
by a Holder, shall remit amounts withheld with respect to the Holder to
applicable jurisdictions. To the extent that the Trust is required to withhold
and pay over any amounts to any authority with respect to Distributions or
allocations to any Holder, such amount withheld shall be deemed to have been
paid or allocated to such Holder. In the event of any claimed overwithholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount to be withheld was not withheld from a Distribution, the Trust may
reduce subsequent Distributions by the amount of such withholding.


                                   ARTICLE XI

                             AMENDMENTS AND MEETINGS

SECTION 11.1 Amendments.

      (a)   Except as otherwise provided in this Declaration or by any
applicable terms of the Securities or as required by law or the rules of any
stock exchange or interdealer quotation system on which the Preferred Securities
of a series are listed, this Declaration may be amended by, and only by, a
written instrument executed by a majority of the Regular Trustees; provided,
however, that (i) no amendment or modification to this Declaration shall be made
unless the Regular Trustees shall have obtained (A) so long as the Trust has
elected (or reelected) REIT status for United States federal income tax purposes
and not terminated such election (or reelection) under Section 11.1(c) hereof,
either a ruling from the Internal Revenue Service or a written unqualified
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that the Trust will continue to be treated as a REIT for
purposes of United States federal income taxation and (B) a written unqualified
opinion of nationally recognized independent counsel experienced in such matters
to the effect that such amendment or modification will not cause the Trust to be
an Investment Company which is required to be registered under the Investment
Company Act; provided no such ruling or opinions shall be required in connection
with the issuance of a series of Preferred Securities or the establishment of
the terms thereof, (ii) so long as any Preferred Securities remain outstanding
if any proposed modification or amendment provides for, or the Regular Trustees
otherwise propose to effect, (A) any action that would materially and adversely
affect the powers, preferences, privileges or special rights of a series of the
Preferred Securities, whether by way of amendment to the Declaration or
otherwise, or (B) the dissolution, liquidation, winding-up or termination of the
Trust other than pursuant to the terms of the Declaration, then, subject to the
terms of any such series of Preferred Securities, the Holders of each affected
series of outstanding Preferred Securities will be entitled to vote


                                       49
<PAGE>   57
as a separate class on such amendment, modification or proposal and such
amendment, modification or proposal shall not be effective with respect to such
an affected series except with the approval of at least 66-2/3% in liquidation
amount of such series of the Preferred Securities, (iii) Section 3.2 and this
Section 11.1 shall not be amended without the consent of all of the Holders of
the Securities, (iv) no amendment which adversely affects the rights, powers and
privileges of the Property Trustee shall be made without the consent of the
Property Trustee, (v) Section 3.1 shall not be amended without the consent of
IAC, Inc., (vi) Section 3.2 shall not be amended without the consent of IAC,
L.P., (vii) the rights of Holders of Common Securities under Article IV to
increase or decrease the number of, and to appoint, replace or remove, Trustees
(other than a Special Regular Trustee) shall not be amended without the consent
of each Holder of Common Securities, (viii) the rights of Holders of Preferred
Securities of a series to appoint or remove a Special Regular Trustee shall not
be amended without the consent of each Holder of Preferred Securities of a
series upon which such right has been conferred and (ix) Section 2.3 shall not
be amended without the consent of a Majority in aggregate liquidation amount of
each series of outstanding Preferred Securities.

      (b)   Notwithstanding Section 11.1(a), the provisions set forth in
Sections 8.2(a) through (g), 8.3, 8.5 and 8.6 and this Section 11.1(b) may not
be amended in any respect and no other provision may be adopted, amended or
repealed which would have the effect of modifying or permitting the
circumvention of the provisions set forth in Sections 8.2(a) through (g), 8.3,
8.5 and 8.6 and this Section 11.1(b) unless such action is approved by the
affirmative vote of the Holders of not less than 66-2/3% of the outstanding
Common Securities.

      (c)   Notwithstanding anything contained in this Declaration to the
contrary, by the affirmative vote of the Holders of not less than 66-2/3% of the
Common Securities and a majority of the Regular Trustees, the Trust's status as
a REIT for Federal income tax purposes may be terminated.

      (d)   Notwithstanding Section 11.1(a)(ii) and (iii), this Declaration may
be amended without the consent of the Holders of the Securities to (i) cure any
ambiguity, (ii) correct or supplement any provision in this Declaration that may
be defective or inconsistent with any other provision of this Declaration, (iii)
to add to the covenants, restrictions or obligations of IAC, Inc. or IAC, L.P.,
and (iv) to conform to any changes in Rule 3a-7 or any change in interpretation
or application of Rule 3a-7 by the Commission, which amendment does not
materially and adversely affect the rights, preferences or privileges of the
Holders.

SECTION 11.2 Meetings of the Holders of Securities; Action by Written Consent.

      (a)   Meetings of the Holders of Preferred Securities and/or Common
Securities may be called at any time by the Regular Trustees (or as provided in
the terms of the Securities) to consider and act on any matter on which Holders
of such class of Securities (or


                                       50
<PAGE>   58
any series of Preferred Securities) are entitled to act under the terms of this
Declaration, the terms of the Securities or the rules of any stock exchange or
interdealer quotation system on which the Preferred Securities of a series are
listed or admitted for trading. The Regular Trustees shall call a meeting of
Holders of Preferred Securities (or of a series of Preferred Securities) or
Common Securities, if directed to do so by Holders of at least 10% in
liquidation amount of such class or series of Securities. Such direction shall
be given by delivering to the Regular Trustees one or more calls in a writing
stating that the signing Holders of Securities wish to call a meeting and
indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Securities calling a meeting shall specify in writing the
Certificates held by the Holders of Securities exercising the right to call a
meeting and only those specified Certificates shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.

      (b)   The following provision shall apply to meetings of Holders of
Securities:

            (i)   Notice of any such meeting shall be given by mail to all the
      Holders of the applicable class or series of Securities having a right to
      vote thereat not less than 7 days nor more than 60 days prior to the date
      of such meeting. Whenever a vote, consent or approval of the Holders of a
      class or series of Securities is permitted or required under this
      Declaration, pursuant to a Certificate of Terms of a series of Preferred
      Securities, or the rules of any stock exchange or interdealer quotation
      system on which the Preferred Securities of a series are listed or
      admitted for trading, such vote, consent or approval may be given at a
      meeting of the Holders of such Securities. Any action that may be taken at
      a meeting of the Holders of such Securities may be taken without a meeting
      if a consent in writing setting forth the action so taken is signed by
      Holders of such class or series of Securities owning not less than the
      minimum aggregate liquidation amount of such class or series of Securities
      that would be necessary to authorize or take such action at a meeting at
      which all Holders of such class or series of Securities having a right to
      vote thereon were present and voting. Prompt notice of the taking of
      action without a meeting shall be given to the Holders of such class or
      series of Securities entitled to vote who have not consented in writing.
      The Regular Trustees may specify that any written ballot submitted to the
      Holders of Securities for the purpose of taking any action without a
      meeting shall be returned to the Trust within the time specified by the
      Regular Trustees.

            (ii)  Each Holder of a Security may authorize any Person to act for
      it by proxy on all matters in which a Holder of a Security is entitled to
      participate, including waiving notice of any meeting, or voting or
      participating at a meeting. No proxy shall be valid after the expiration
      of 11 months from the date thereof unless otherwise provided in the proxy.
      Every proxy shall be revocable at the pleasure of the Holder of the
      Security executing it. Except as


                                       51
<PAGE>   59
      otherwise provided in this Declaration, all matters relating to the
      giving, voting or validity of proxies shall be governed by the General
      Corporation Law of the State of Delaware relating to proxies, and judicial
      interpretations thereunder, as if the Trust were a Delaware corporation
      and the Holders of the Securities were stockholders of a Delaware
      corporation.

            (iii) Each meeting of the Holders of a class or series of Securities
      shall be conducted by the Regular Trustees or by such other Person that
      the Regular Trustees may designate.

            (iv)  Unless otherwise provided in the Business Trust Act, this
      Declaration or the rules of any stock exchange or interdealer quotation
      system on which the Preferred Securities of a series are then listed or
      admitted for trading, the Regular Trustees, in their sole discretion,
      shall establish all other provisions relating to meetings of Holders of
      Securities, including notice of the time, place or purpose of any meeting
      at which any matter is to be voted on by any Holders of Securities, waiver
      of any such notice, action by consent without a meeting, the establishment
      of a record date, quorum requirements, voting in person or by proxy or any
      other matter with respect to the exercise of any such right to vote.


                                   ARTICLE XII

                       REPRESENTATIONS OF PROPERTY TRUSTEE
                              AND DELAWARE TRUSTEE

SECTION 12.1 Representations and Warranties of Property Trustee and Delaware
Trustee.

      (a)   The Trustee which acts as initial Property Trustee represents and
warrants to the Trust, IAC, Inc. and IAC, L.P. at the date of this Declaration,
and each Successor Property Trustee represents and warrants to the Trust, IAC,
Inc. and IAC, L.P. at the time of the Successor Property Trustee's acceptance of
its appointment as Property Trustee that:

            (i)   The Property Trustee is a banking corporation with trust
      powers, duly organized, validly existing and in good standing under the
      laws of the State of its incorporation, with trust power and authority to
      execute and deliver, and to carry out and perform its obligations under
      the terms of, this Declaration.

            (ii)  The execution, delivery and performance by the Property
      Trustee of this Declaration has been duly authorized by all necessary
      corporate action on the part of the Property Trustee. The Declaration has
      been duly executed and delivered by the Property Trustee, and constitutes
      a legal, valid


                                       52
<PAGE>   60
      and binding obligation of the Property Trustee, enforceable against it in
      accordance with its terms, subject to applicable bankruptcy,
      reorganization, moratorium, insolvency, and other similar laws affecting
      creditors' rights generally and to general principles of equity and the
      discretion of the court (regardless of whether the enforcement of such
      remedies is considered in a proceeding in equity or at law).

            (iii) The execution, delivery and performance of this Declaration by
      the Property Trustee does not conflict with or constitute a breach of the
      Charter or By-laws of the Property Trustee.

            (iv)  No consent, approval or authorization of, or registration with
      or notice to, any banking authority which supervises or regulates the
      Property Trustee is required for the execution, delivery or performance by
      the Property Trustee, of this Declaration.

            (v)   The Property Trustee satisfies the qualifications set forth in
      Section 4.1(c).

      (b)   The Trustee which acts as initial Delaware Trustee represents and
warra4nts to the Trust, IAC, L.P. and IAC, Inc. at the date of this Declaration,
and each Successor Delaware Trustee represents and warrants to the Trust, IAC,
L.P. and IAC, Inc. at the time of the Successor Delaware Trustee's acceptance of
its appointment as Delaware Trustee, that it satisfies the qualifications set
forth in Section 4.1(a)(3).


                                  ARTICLE XIII

                                     MERGER

SECTION 13.1 No Merger, Consolidation or Amalgamation of Trust.

      The Trust shall not consolidate, amalgamate, merge with or into, or
convey, transfer or lease its assets substantially as an entirety to, any Person
except as provided in Section 13.2.

SECTION 13.2 Merger, Consolidation or Amalgamation of Trust.

      The Trust may, at the request of the Holders of the Common Securities and
with the consent of the Regular Trustees, but without the consent of the Holders
of the Preferred Securities, the Property Trustee or the Delaware Trustee,
consolidate, amalgamate, merge with or into, any trust, partnership, corporation
or other entity organized under the laws of any State of the United States or
the District of Columbia; provided, that (i) if the Trust is not the survivor,
such successor entity (x) either expressly assumes all of the


                                       53
<PAGE>   61
obligations of the Trust under the Securities or (y) substitutes for the
Preferred Securities of each series outstanding other securities having
substantially the same terms as the Preferred Securities (the "Successor
Securities"), so long as each series of Successor Securities rank the same as
the Preferred Securities rank with respect to Distributions and payments upon
liquidation, dissolution, winding-up or termination, (ii) IAC, Inc. and IAC,
L.P. expressly acknowledge a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the Holder of the Preferred
L.P. Units but only if in the opinion of nationally recognized independent
counsel to the Trust experienced in matters under the Investment Company Act of
1940, such action is necessary so that the successor entity will not be required
to register as an "investment company" under the Investment Company Act, (iii)
the Preferred Securities or any Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any stock
exchange, interdealer quotation system or with another organization on which the
Preferred Securities are then listed or quoted, (iv) such merger, consolidation
or amalgamation does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any "nationally recognized statistical rating
organization" as defined in Rule 436(g)(2) under the Securities Act or (v) such
merger, consolidation, amalgamation does not adversely affect the powers,
special rights, preferences and privileges of the Holders of the Preferred
Securities (including any Successor Securities) in any material respect. Neither
the consolidation nor merger of the Trust with or into any trust, corporation or
other entity (or of any trust, corporation or other entity with or into the
Trust) nor the sale, lease or conveyance of all or substantially all of the
property of the Trust in conformity with the terms of this Section 13.2 shall be
deemed to constitute a liquidation, dissolution, winding-up or termination of
the Trust.


                                   ARTICLE XIV

                                  MISCELLANEOUS

SECTION 14.1 Notices.

      All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:

      (a)   if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the Regular
Trustees on behalf of the Trust may give notice of to the Holders of the
Securities):


                                       54
<PAGE>   62
            IAC Capital Trust
            c/o Irvine Apartment Communities, Inc.
            550 Newport Center Drive
            Suite 300
            Newport Beach, California  92660
            Attention:   James E. Mead
                               Trustee
            Facsimile No: (714) 720-5532

      (b)   if given to the Property Trustee, at the mailing address of the
Property Trustee set forth below (or such other address as the Property Trustee
may give notice of to the Holders of the Securities):

            The Bank of New York
            101 Barclay Street
            New York, New York  10286
            Attention:  Corporate Trust Trustee
                              Administration
            Facsimile No: (212) 815-5915

      (c)   if given to the Delaware Trustee, at the mailing address of the
Delaware Trustee set forth below (or such other address as the Delaware Trustee
may give notice of to the Holders of the Securities):

            The Bank of New York (Delaware)
            c/o The Bank of New York
            101 Barclay Street
            New York, New York  10286
            Attention:  Corporate Trust Trustee
                              Administration
            Facsimile No: (212) 815-5915

      (d)   if given to the Holders of the Common Securities, IAC, Inc. or IAC,
L.P., at the mailing address of IAC, Inc. set forth below (or such other address
as the Holders of the Common Securities, IAC, Inc. or IAC, L.P. may give notice
to the Trust):

            Irvine Apartment Communities, Inc.
            550 Newport Center Drive
            Suite 300
            Newport Beach, California  92660
            Attention:  Corporate Secretary
            Facsimile No: (714) 750-5532

      (e)   if given to any other Holder, at the address set forth on the books
and


                                       55
<PAGE>   63
records of the Trust.

      A copy of any notice to the Property Trustee or the Delaware Trustee shall
also be sent to the Trust. All notices shall be deemed to have been given, when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

SECTION 14.2 Undertaking for Costs.

      All parties to this Declaration agree, and each Holder of any Securities
by his or her acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit against the Property Trustee for any
action taken or omitted by it as Property Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 14.2 shall not apply to any suit instituted
by the Property Trustee, to any suit instituted by any Holder of Preferred
Securities, or group of Holders of Preferred Securities, holding more than 10%
in aggregate liquidation amount of the outstanding Preferred Securities of any
series.

SECTION 14.3 Governing Law.

      This Declaration and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.

SECTION 14.4 Headings.

      Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.

SECTION 14.5 Partial Enforceability.

      If any provision of this Declaration, or the application of such provision
to any Person or circumstance, is determined in a final and nonappealable
judgment to be void, invalid or unenforceable by any Federal or state court
having jurisdiction over the issues, the validity and enforceability of the
remainder of this Declaration, or the application of such provision to Persons
or circumstances other than those to which it is held void, invalid or
unenforceable, shall not be affected thereby


                                       56
<PAGE>   64
SECTION 14.6 Counterparts.

      This Declaration may contain more than one counterpart of the signature
pages and this Declaration may be executed by the affixing of the signature of
IAC, Inc., IAC, L.P. and each of the Trustees to one of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.

SECTION 14.7 Intention of the Parties.

      It is the intention of the parties hereto that the Trust be treated as a
real estate investment trust for United States federal income tax purposes. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.

SECTION 14.8 Successors and Assigns.

      Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by IAC, Inc.,
IAC, L.P. and the Trustees shall bind and inure to the benefit of their
respective successors and assigns, whether so expressed.

SECTION 14.9 Personal Liability.

      The Holders of the Securities, in their capacities as such, shall be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware.


                                       57
<PAGE>   65
      IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.


IRVINE APARTMENT COMMUNITIES, INC.,
as one of the sponsors of the Trust



By: /s/ JAMES E. MEAD
    -------------------------------------------
    Name:  James E. Mead
    Title: Senior Vice President, Chief
           Financial Officer and Secretary


IRVINE APARTMENT COMMUNITIES, L.P.
as one of the sponsors of the Trust
        By:  Irvine Apartment Communities, Inc.,
             its general partner


By: /s/ JAMES E. MEAD
    -------------------------------------------
    Name:  James E. Mead
    Title: Senior Vice President, Chief
           Financial Officer and Secretary



JAMES E. MEAD


By: /s/ JAMES E. MEAD
------------------------------------------------
James E. Mead,
not in his individual capacity,
but solely as Trustee


<PAGE>   66
THE BANK OF NEW YORK,
not in its individual capacity,
but solely as Trustee


By: /s/ VAN K. BROWN
    -------------------------------------
    Name:         VAN K. BROWN
    Title:  Assistant Vice President



THE BANK OF NEW YORK (DELAWARE),
not in its individual capacity,
but solely as Trustee


By: /s/ WALTER N. GITLIN
    -------------------------------------
    Name:         WALTER N. GITLIN
    Title:  Authorized Signatory


<PAGE>   67

                                                                       EXHIBIT A


                    CERTIFICATE OF TRUST OF IAC CAPITAL TRUST

      This CERTIFICATE OF TRUST of IAC Capital Trust (the "Trust"), dated as of
October 31, 1997, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. Code Section 3801 et seq.).

      1.    Name. The name of the business trust being formed hereby is IAC
Capital Trust.

      2.    Delaware Trustee. The name and business address of the trustee of
the Trust with a principal place of business in the State of Delaware is The
Bank of New York (Delaware), a Delaware banking corporation, White Clay Center,
Route 273, Newark, Delaware 19711.

      3.    Effective Date. This Certificate of Trust shall be effective as of
its filing.

      IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.

                             The Bank of New York (Delaware),
                             as Trustee


                             By:    /s/Walter N. Gitlin
                                    ------------------------------------
                                    Name:  Walter N. Gitlin
                                    Title:  Authorized Signatory

                                    The Bank of New York,
                                    as Trustee


                             By:    /s/Van K. Brown
                                    ------------------------------------
                                    Name:  Van K. Brown
                                    Title:  Assistant Vice President


                                    /s/James E. Mead
                                    ------------------------------------
                                    James E. Mead,
                                    as Trustee


                                      A-1
<PAGE>   68
                                                                       EXHIBIT B


                     INITIAL PURCHASERS OF COMMON SECURITIES

<TABLE>
<CAPTION>
               Name                            Number of Common Securities
               ----                            ---------------------------

<S>                                            <C>
Irvine Apartment Communities, Inc.                         90

William H. McFarland                                       29

Richard E. Lamprecht                                       27

James E. Mead                                              27

William W. Thompson                                        27
                                                           ---
               Total:                                      200
</TABLE>


                                      B-1
<PAGE>   69
                                                                         ANNEX I


Certificate Number                                   Number of Common Securities
   C-__                                                           [____________]


                    Certificate Evidencing Common Securities

                                       of

                                IAC Capital Trust


      IAC Capital Trust, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the
registered owner of ______________ (__________) common securities of the Trust
representing common undivided beneficial interests in the assets of the Trust
(the "Common Securities"). The Common Securities are transferable on the books
and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer and
satisfaction of the other conditions set forth in the Declaration (as defined
below). The designations, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities are set forth in, and this
certificate and the Common Securities represented hereby are issued and shall in
all respects be subject to the terms and provisions of, the Amended and Restated
Declaration of Trust of the Trust dated as of January 20, 1998, as the same may
be amended, modified or restated from time to time (the "Declaration"). The
Common Securities and the Preferred Securities (as defined in the Declaration)
issued by the Trust pursuant to the Declaration represent, subject to the
priority and payment terms of such class or series, undivided beneficial
interests in the assets of the Trust, including the Preferred L.P. Units (as
defined in the Declaration) issued by Irvine Apartment Communities, L.P., a
Delaware limited partnership. The Trust will furnish a copy of the Declaration
to the Holder without charge upon written request to the Trust at its principal
place of business or registered office.

      Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.


                                      I-1
<PAGE>   70
      IN WITNESS WHEREOF, the Trustees of the Trust have executed this
certificate this ____ day of __________, _____.


                                            IAC CAPITAL TRUST



                                           By _________________________________
                                              James E. Mead, not in his
                                              individual capacity, but solely as
                                              trustee


                                      I-2
<PAGE>   71
                                   ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

(Insert assignee's social security or tax identification number)

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

(Insert address and zip code of assignee)

and irrevocably appoints

_______________________________________________________________

_______________________________________________________________


_____________________________________________________ agent to transfer this
Common Security Certificate on the books of the Trust. The agent may substitute
another to act for him or her.

Date: ________________________

Signature: _________________________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)


                                      I-3
<PAGE>   72
                                                                        ANNEX II


      [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - THIS
PREFERRED SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR
PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO
TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED
SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR
ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

      UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (55 WATER STREET, NEW YORK) TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.,
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL SINCE THE REGISTERED OWNERS HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]

THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER. NO PERSON MAY BENEFICIALLY OWN SECURITIES OF THIS
SERIES OF PREFERRED SECURITIES IN EXCESS OF THE OWNERSHIP LIMIT APPLICABLE TO
THIS SERIES OF PREFERRED SECURITIES, WITH CERTAIN FURTHER RESTRICTIONS AND
EXCEPTIONS SET FORTH IN THE AMENDED AND RESTATED DECLARATION OF TRUST OF IAC
CAPITAL TRUST DATED AS OF JANUARY 20, 1998, AS AMENDED FROM TIME TO TIME
("DECLARATION"). ANY PERSON WHO ATTEMPTS TO BENEFICIALLY OWN SECURITIES OF THIS
SERIES OF PREFERRED SECURITIES IN EXCESS OF THE APPLICABLE LIMITATION MUST
IMMEDIATELY NOTIFY THE TRUST. ALL CAPITALIZED TERMS IN THIS LEGEND SHALL HAVE
THE MEANINGS ASCRIBED TO SUCH TERMS IN THE DECLARATION, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON
TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH HOLDER OF PREFERRED SECURITIES OF
THIS SERIES WHO REQUESTS SUCH A COPY.


                                      II-1
<PAGE>   73
IF THE RESTRICTIONS ON TRANSFER ARE VIOLATED, THE TRANSFER WILL BE VOID IN
ACCORDANCE WITH THE DECLARATION AND THE PREFERRED SECURITIES REPRESENTED HEREBY
WILL BE AUTOMATICALLY EXCHANGED FOR EXCESS PREFERRED SECURITIES WHICH WILL BE
HELD IN TRUST IN ACCORDANCE WITH THE DECLARATION.


Certificate Number                                Number of Preferred Securities
   A-                                                                        [ ]
                                                                CUSIP NO. ______


             Certificate Evidencing Series [ ] Preferred Securities

                                       of

                                IAC Capital Trust

          ___% Series [ ] REIT Trust Originated Preferred Securities
                (liquidation amount $[ ] per Preferred Security)


      IAC Capital Trust, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that _________ (the
"Holder") is the registered owner of _____ (______) preferred securities of the
Trust representing preferred undivided beneficial interests in the assets of the
Trust designated the ___% Series [ ] REIT Trust Originated Preferred Securities
(liquidation amount $[ ] per Preferred Security) (the "Series [ ] Preferred
Securities"). The Series [ ] Preferred Securities are transferable, subject to
the transfer restrictions set forth in the Declaration referred to below, on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Series [ ] Preferred Securities are set forth in, and this
certificate and the Series [ ] Preferred Securities represented hereby are
issued and shall in all respects be subject to the terms and provisions of, the
Amended and Restated Declaration of Trust of the Trust dated as of January 20,
1998, as the same may be amended, modified or restated from time to time (the
"Declaration") including the designation of the terms of Series [ ] Preferred
Securities as set forth in the Certificate of Terms (as defined in the
Declaration) of the Series [ ] Preferred Securities. The Series [ ] Preferred
Securities, the Common Securities and any other series of Preferred Securities
(as defined in the Declaration) issued by the Trust pursuant to the Declaration
represent, subject to the priority and payment terms of each such class or
series, undivided beneficial interests in the assets of the Trust, including the
Preferred L.P. Units (as defined in the Declaration) issued by Irvine Apartment
Communities, L.P., a Delaware limited partnership. The Trust


                                     II-2
<PAGE>   74
will furnish a copy of the Declaration to the Holder without charge upon written
request to the Trust at its principal place of business or registered office.

      Upon receipt of this certificate, the Holder is bound by the Declaration
and the Certificate of Terms for the Series [ ] Preferred Securities and is
entitled to the benefits thereunder.

            IN WITNESS WHEREOF, the Trustees of the Trust have executed this
      certificate this ___ day of ____________, ____.


                                IAC CAPITAL TRUST



                                 By:  _________________________________,
                                      James E. Mead, not in his
                                      individual capacity but solely
                                      as trustee

Dated:

Countersigned and Registered:

The Bank of New York,
  Transfer Agent and Registrar



By:___________________________
    Authorized Signature


                                      II-3
<PAGE>   75
                                        ASSIGNMENT




FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
____________________________________________________________
____________________________________________________________
____________________________________________________________

(Insert assignee's social security or tax identification number)
____________________________________________________________
____________________________________________________________
____________________________________________________________

(Insert address and zip code of assignee)

and irrevocably appoints
____________________________________________________________
____________________________________________________________
____________________________________________________________

agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.



Date: _________________________

Signature: ____________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.




Signature Guaranty: _________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program"as may be determined by the registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.


                                      II-4