EXHIBIT 1.1
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AVALONBAY COMMUNITIES, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
DISTRIBUTION AGREEMENT
DECEMBER 21, 1998
PAINEWEBBER INCORPORATED
FIRST UNION CAPITAL MARKETS
J.P. MORGAN SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
WARBURG DILLON READ LLC
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TABLE OF CONTENTS
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1. DESCRIPTION OF NOTES 1
2. APPOINTMENT AS AGENT 3
(a) Appointment 3
(b) Sale of Note 3
(c) Purchases as Principal 3
(d) Solicitations as Agent 3
(e) Reliance 4
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
(a) Effectiveness of Registration Statement; Filing of Prospectus 4
(b) Compliance with Securities Act 4
(c) Incorporated Documents 5
(d) Organization, Power and Authority of Company 5
(e) Organization, Power and Authority and Capitalization of Subsidiaries 5
(f) Capital Stock Matters 6
(g) Financial Statements 6
(h) Company's Internal Accounting System 7
(i) Notes 7
(j) Distribution Agreement and Indenture 8
(k) Rating 9
(l) No Material Adverse Change 9
(m) Company Not an Investment Company 9
(n) No Material Actions or Proceedings 9
(o) Filing and Enforceability Contracts 9
TABLE OF CONTENTS
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PAGE
(p) Compliance With Law 9
(q) No Further Consents Required 10
(r) Title to Properties 10
(s) Mortgages; Community Matters 11
(t) Title Insurance 11
(u) Accuracy of Company's Statements 11
(v) No Price Stabilization or Manipulation 11
(w) No Labor Disputes 11
(x) No Unlawful Contributions 11
(y) Compliance With Environmental Laws 12
(z) Hazardous Materials 12
(aa) Periodic Review of Costs of Environmental Compliance 13
(bb) Property and Casualty Insurance 13
(cc) REIT Status 14
(dd) Tax matters 14
(ee) No Plan Assets 14
(ff) Distribution of Offering Materials 14
(gg) No Infringement of Intellectual Property Rights 14
(hh) No Applicable Registration Rights 14
(ii) Form S-3 Eligibility 14
4. PURCHASES AS PRINCIPAL; SOLICITATIONS AS AGENT 14
(a) Purchases as Principal 14
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(b) Solicitations as Agent 16
(c) Administrative Procedures 16
(d) Agents' Obligations Several and Not Joint 17
5. COVENANTS OF THE COMPANY 17
(a) Amendments and Supplements 17
(b) Notification Upon Certain Events 17
(c) Compliance With Securities Laws 17
(d) Copies of Offering Documents 18
(e) Copies of Securities Filings and Distributions 18
(f) Earnings Statements 18
(g) Payment of Expenses 18
(h) Blue Sky Qualification 19
(i) No Price Stabilization or Manipulation 19
(j) Rating Agency Matters 19
(k) Establishing Terms of Notes 19
(l) Use of Proceeds 19
(m) Preparation of Pricing Supplements 19
(n) Unaudited Financial Information 20
(o) Audited Financial Information 20
(p) REIT Status 20
(q) Market Stand-Off Pending Settlement 20
(r) Market Stand-Off Generally 20
TABLE OF CONTENTS
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6. CONDITIONS OF AGENTS' OBLIGATIONS AT THE CLOSING 21
(a) Opinion of Company Counsel 21
(b) Opinion of Company Tax Counsel 21
(c) Letter of Company Special Counsel Regarding Tax Exempt Financings
and Other Matters 21
(d) Letter of Company Special Counsel Regarding Certain
Real Estate Operations 21
(e) Opinion of Counsel to the Agents 21
(f) Comfort Letter 22
(g) Officers' Certificate 23
(h) No Stop Orders or Unmet Commission Requests 24
(i) No Material Adverse Change 24
(j) No Material Litigation Commenced 25
(k) Accuracy of Representations and Warranties; Observance of Covenants 25
(l) Blue Sky Qualification 25
(m) Other Documents 25
(n) Special Conditions for Agents' Purchases as Principal 25
7. DELIVERY OF AND PAYMENT FOR NOTES SOLD THROUGH THE AGENTS 26
8. ADDITIONAL COVENANTS OF THE COMPANY 27
(a) Reaffirmation of Representations and Warranties 27
(b) Subsequent Delivery of Certificates 27
(c) Subsequent Delivery of Legal Opinions 27
(d) Subsequent Delivery of Letters of Special Counsel 28
(e) Subsequent Delivery of Comfort Letters 28
TABLE OF CONTENTS
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9. INDEMNIFICATION AND CONTRIBUTION 29
(a) Indemnification of the Agents by the Company 29
(b) Indemnification of the Company and its Directors,
Certain Officers and Control Persons by the Agents 30
(c) Procedures 30
(d) Contribution 31
(e) Survival of Indemnity and Contribution Provisions 32
10 REIMBURSEMENT OF AGENTS' EXPENSES 32
11 REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY 32
12 ROLE OF AGENTS 32
13 TERMINATION 33
14 NOTICES 34
15 PARTIES 35
16 GOVERNING LAW 35
17 COUNTERPARTS 35
18 ENFORCEABILITY 35
19 WAIVER OF RIGHTS TO TRIAL BY JURY 35
20 AMENDMENTS AND MODIFICATIONS 36
EXHIBIT A Terms of Notes
EXHIBIT B Administrative Procedures Agreement
PART I Administrative Procedures for Certificates Notes and Generally
Applicable Administrative Procedures
PART II Administrative Procedures for Global Note Method of Book-Entry
Notes
PART III Administrative Procedures for Master Note Method of Book-Entry
Notes
EXHIBIT C Form of Opinion of Counsel to the Company
SCHEDULE I Information in the Prospectus Furnished by any Agent
SCHEDULE II List of Subsidiaries
SCHEDULE III Commissions
AvalonBay Communities Inc.
Medium-Term Notes
Due Nine Months or More From Date of Issue
Distribution Agreement
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December 21, 1998
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
First Union Capital Markets
One First Union Center
300 So. College Street/TW6
Charlotte, North Carolina 28288
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
NationsBanc Montgomery Securities LLC
100 N. Tryon Street, 7th Floor
Charlotte, NC 28255
Warburg Dillon Read LLC
677 Washington Boulevard
Stamford, Connecticut 06901
Ladies and Gentlemen:
AvalonBay Communities, Inc., a Maryland corporation (the "Company"),
confirms its agreement with PaineWebber Incorporated, First Union Capital
Markets, J.P. Morgan Securities Inc., NationsBanc Montgomery Securities LLC and
Warburg Dillon Read LLC (each, an "Agent" and collectively, the "Agents"), with
respect to the issue and sale from time to time by the Company of its Medium-
Term Notes Due Nine Months or More From Date of Issue (the "Notes"), as follows:
Capitalized terms used but not otherwise defined herein shall have the
meanings given to those terms in the Prospectus (as defined herein).
1. DESCRIPTION OF NOTES. The Company proposes to issue the Notes
under that certain Indenture, dated as of January 16, 1998 (the "Original
Indenture"), as supplemented by that certain First Supplemental Indenture, dated
as of January 20, 1998, that certain Second Supplemental Indenture, dated as of
July 7, 1998, and that certain Third Supplemental Indenture, dated as of the
date hereof (collectively and together with the Original
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Indenture and any additional indentures supplemental thereto entered into after
the date hereof, the "Indenture") between the Company and State Street Bank and
Trust Company, as trustee (the "Trustee"). As of the date of this agreement
(this "Distribution Agreement"), the Company has authorized the issuance and
sale of up to U.S. $400,000,000 aggregate initial offering price (or its
equivalent, based upon the applicable exchange rate at the time of issuance, in
such foreign or composite currencies as the Company shall designate at the time
of issuance) of Notes to or through the Agents pursuant to the terms of this
Distribution Agreement [, as such amount may be reduced by the aggregate initial
offering price of any other debt securities issued by the Company, whether
within or without the United States, pursuant to the registration statement
referred to below]. It is understood, however, that the Company may from time to
time authorize the issuance of additional Notes and that such additional Notes
may be sold to or through the Agents or through or to other agents pursuant to
the terms of this Distribution Agreement, all as though the issuance of such
Notes were authorized as of the date hereof.
This Distribution Agreement provides both for the sale of Notes by the
Company to one or more Agents as principal for resale to investors and other
purchasers and for the sale of Notes by the Company directly to investors (as
may from time to time be agreed to by the Company and the applicable Agent), in
which case the applicable Agent will act as an agent of the Company in
soliciting offers for the purchase of Notes.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-60875) for the
registration of debt securities, including the Notes, under the Securities Act
of 1933, as amended (the "Securities Act"), and the offering thereof from time
to time in accordance with Rule 430A or Rule 415 of the rules and regulations of
the Commission thereunder (the "Securities Act Rules and Regulations"). Such
registration statement has been declared effective by the Commission. Such
registration statement (and any further registration statements which may be
filed by the Company for the purpose of registering additional Notes and in
connection with which this Distribution Agreement is included or incorporated by
reference as an exhibit) and the prospectus constituting a part thereof
(including in each case the information, if any, deemed to be part thereof
pursuant to Rule 430A(b) of the Securities Act Rules and Regulations), and any
prospectus supplement and pricing supplement relating to the Notes, including
all documents incorporated therein by reference, as from time to time amended or
supplemented by the filing of documents pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or the Securities Act or otherwise, is
referred to herein as the "Registration Statement." A prospectus supplement
(the "Prospectus Supplement") setting forth the terms of the offer of the Notes
contemplated by this Distribution Agreement, and additional information
concerning the Company has been or will be prepared and will be filed by the
Company pursuant to Rule 424(b) of the Securities Act
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Rules and Regulations, on or before the second business day after it is first
used in connection with the offer and sale of Notes under this Distribution
Agreement (or such earlier time as may be required by the Securities Act Rules
and Regulations). The final form of prospectus included in the Registration
Statement, as supplemented by the Prospectus Supplement (including any
supplement to the Prospectus that sets forth the purchase price, interest rate
or formula, maturity date and other terms of a particular issue of Notes and all
documents incorporated therein by reference (each, a "Pricing Supplement")), is
referred to herein as the "Prospectus," except that if any revised prospectus,
whether or not such revised prospectus is required to be filed by the Company
pursuant to Rule 424(b) of the Securities Act Rules and Regulations, shall be
provided to the Agents by the Company for use in connection with the offer and
sale of any of the Notes under this Distribution Agreement, the term
"Prospectus" shall refer to such revised prospectus from and after the time such
documents are first provided to the Agents for such use. If the Company elects
to rely on Rule 434 promulgated pursuant to the Securities Act, all references
to the Prospectus shall be deemed to include, without limitation, the form of
prospectus and the term sheet, taken together, provided to the Agents by the
Company in reliance on such Rule 434. Any registration statement (including any
supplement thereto or information which is deemed part thereof) filed by the
Company under Rule 462(b) of the Securities Act Rules and Regulations (a "Rule
462(b) Registration Statement") shall be deemed to be part of the Registration
Statement. Any prospectus (including any amendment or supplement thereto or
information which is deemed part thereof) included in the Rule 462(b)
Registration Statement shall be deemed to be part of the Prospectus. For
purposes of this Distribution Agreement, all references to the Registration
Statement, the Prospectus, any preliminary prospectus or any amendment or
supplement thereto shall be deemed to include any copy filed with the Commission
pursuant to its Electronic Data Gathering Analysis and Retrieval System (EDGAR),
and such copy shall be identical (except to the extent permitted by Regulation
S-T) to any Prospectus delivered to any Agent for use in connection with the
offering of the Notes by the Company.
2. APPOINTMENT AS AGENT.
(a) Appointment. Subject to the terms and conditions stated
herein and subject to the reservation by the Company of the right to
solicit, sell or accept offers for Notes directly on its own behalf, the
Company hereby appoints the Agents as its exclusive agents (except as
described below), for the purpose of soliciting and receiving offers to
purchase Notes from the Company by others and, on the basis of the
representations and warranties herein contained, but subject to the terms
and conditions herein set forth, each Agent agrees to use reasonable
efforts to solicit and receive offers to purchase Notes upon terms
acceptable to the Company at such times and in such amounts as the Company
shall from time to time specify. The Company agrees that Notes will be sold
exclusively to or through the Agents except as otherwise described below.
The Company may accept offers to purchase Notes through an agent other than
an Agent (and, in connection therewith, may respond to inquiries and
requests for information from any such agents), provided that (i) the
Company shall not have solicited such offers, (ii) the Company and such
agent shall have executed an agreement with respect to such purchases
having terms and conditions (including, without limitation, commission
rates) with respect to such purchases substantially the same as the terms
and conditions that would apply to such purchases under this Distribution
Agreement if such agent were an Agent (which may be accomplished by
incorporating by reference in such agreement the terms and conditions of
this Distribution Agreement) and (iii) the Company shall provide the Agents
with a copy of such agreement promptly following the execution thereof.
(b) Sale of Notes. The Company shall not sell or approve the
solicitation of offers for the purchase of Notes in excess of the amount
which shall be authorized by the Company from time to time or in excess of
the aggregate initial offering price of Notes registered pursuant to the
Registration Statement. The Agents shall have no responsibility for
maintaining records with respect to the aggregate initial offering price of
Notes sold, or of otherwise monitoring the availability of Notes for sale,
under the Registration Statement.
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(c) Purchases as Principal. The Agents shall not have any
obligation to purchase Notes from the Company as principal, but one or more
Agents may agree from time to time to purchase Notes as principal for
resale to investors and other purchasers determined by such Agent or
Agents. Any such purchase of Notes by an Agent or Agents as principal shall
be made in accordance with Section 4(a) hereof.
(d) Solicitations as Agent. If agreed upon by an Agent and the
Company, such Agent, acting solely as agent for the Company and not as
principal, will solicit offers for the purchase of Notes. Such Agent will
communicate to the Company, orally, each offer to purchase Notes solicited
by it on an agency basis, other than those offers rejected by such Agent.
Such Agent shall have the right, in its discretion reasonably exercised, to
reject any proposed purchase of Notes, in whole or in part, and any such
rejection shall not be deemed a breach of its agreement contained herein.
The Company shall have the right to withdraw, cancel or modify any offer
hereunder without notice and the sole right to accept offers to purchase
the Notes and may reject any such offer in whole or in part and any such
rejection shall not be deemed a breach of its agreements contained herein.
Such Agent shall make reasonable efforts to assist the Company in obtaining
performance by each purchaser whose offer to purchase Notes has been
solicited by it and accepted by the Company. Such Agent shall not have any
liability to the Company in the event that any such purchase is not
consummated for any reason. If the Company shall default on its obligation
to deliver Notes to a purchaser whose offer it has accepted, the Company
shall (i) hold such Agent harmless against any loss, claim or damage
arising from or as a result of such default by the Company and (ii)
notwithstanding such default, pay to such Agent any commission to which it
would otherwise be entitled.
(e) Reliance. The Company and the Agents agree that any Notes
purchased by one or more Agents as principal shall be purchased, and any
Notes the placement of which an Agent arranges as agent shall be placed by
such Agent, in reliance on the representations, warranties, covenants and
agreements of the Company contained herein and on the terms and conditions
and in the manner provided herein.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each Agent as of the date hereof, as
of the date of each acceptance by the Company of an offer for the purchase of
Notes (whether to an Agent as principal or through an Agent as agent), as of the
date of each delivery of Notes (whether to an Agent as principal or through an
Agent as agent (each a "Delivery Date")) (the date of each such delivery to an
Agent as principal being hereafter referred to as a "Settlement Date"), and as
of any time that the Registration Statement or the Prospectus shall be amended
or supplemented (it being understood that such representations, warranties and
agreements shall be deemed to relate to the Registration Statement and the
Prospectus as amended or supplemented to each such time) as follows:
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(a) Effectiveness of Registration Statement; Filing of
Prospectus. The Company has filed with the Commission a registration
statement on Form S-3 (File No. 333-60875) for the registration of debt
securities, including the Notes, under the Securities Act, and the offering
thereof from time to time in accordance with Rule 430A or Rule 415 of the
Securities Act Rules and Regulations. Such registration statement has been
declared effective by the Commission. The Prospectus Supplement setting
forth the terms of the offer of the Notes contemplated by this Distribution
Agreement, and additional information concerning the Company has been or
will be prepared and will be filed by the Company pursuant to Rule 424(b)
of the Securities Act Rules and Regulations, on or before the second
business day after it is first used in connection with the offer and sale
of Notes under this Distribution Agreement (or such earlier time as may be
required by the Securities Act Rules and Regulations).
(b) Compliance with Securities Act. Each part of the
Registration Statement, when such part became or becomes effective, and the
Prospectus and any amendment or supplement to such Registration Statement
or such Prospectus, on the date of filing thereof with the Commission and
as of the date hereof, complied or will comply in all material respects
with the requirements of the Securities Act and the Securities Act Rules
and Regulations; the Indenture, on the date of filing thereof with the
Commission and as of the date hereof complied or will comply in all
material respects with the requirements of the Trust Indenture Act of 1939,
as amended, and the rules and regulations of the Commission thereunder (the
"TIA"); each part of the Registration Statement, when such part became or
becomes effective did not or will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; the
Prospectus and any amendment or supplement thereto, on the date of filing
thereof with the Commission and as of the date hereof did not or will not
include an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that the
foregoing shall not apply to (i) that part of the Registration Statement
which constitutes the Statement of Eligibility and Qualification under the
TIA and (ii) statements in, or omissions from, any such document in
reliance upon, and in conformity with, information concerning the Agents
that was furnished to the Company by the Agents specifically for use in the
preparation thereof. The Company acknowledges that the only information
furnished to the Company by the Agents on or before the date hereof
specifically for inclusion in the Registration Statement or the Prospectus
is the information set forth in Schedule I hereto.
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(c) Incorporated Documents. The documents incorporated by
reference in the Registration Statement, the Prospectus and any amendment
or supplement to such Registration Statement or such Prospectus, when they
became or become effective under the Securities Act or were or are filed
with the Commission under the Exchange Act, as the case may be, conformed
or will conform in all material respects with the requirements of the
Securities Act, the Securities Act Rules and Regulations, the Exchange Act
and the rules and regulations of the Commission thereunder (the "Exchange
Act Rules and Regulations"), as applicable.
(d) Organization, Power and Authority of Company. The Company
has been duly organized and is validly existing as a corporation in good
standing under the laws of the State of Maryland with the power and
authority to conduct all the
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activities conducted by it, to own or lease all the assets owned or leased
by it and otherwise to conduct its business as described in the
Registration Statement and Prospectus. The Company is duly licensed or
qualified to do business and in good standing in each jurisdiction in which
the nature of the activities conducted by it or the character of the assets
owned or leased by it makes such licensing or qualification necessary
except where the failure to be so qualified, considering all such cases in
the aggregate, will not have a material adverse effect on the business,
properties, business prospects, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries (as hereinafter
defined), taken as a whole.
(e) Organization, Power and Authority and Capitalization of
Subsidiaries. As of the date of this Agreement, the only subsidiaries (as
defined in the Securities Act Rules and Regulations) of the Company are the
entities listed on Schedule II attached hereto. Each of the Company's
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subsidiaries is an entity duly organized or formed, as the case may be,
and, in the case of each such subsidiary that is a corporation, limited
partnership or limited liability company (each a "Subsidiary" and,
collectively, the "Subsidiaries") is validly existing and in good standing
under the laws of its respective jurisdiction of organization or
incorporation. Each of the Company's subsidiaries has full power and
authority to conduct all the activities conducted by it, to own or lease
all the assets owned or leased by it and otherwise to conduct its business
as described in the Registration Statement and the Prospectus. Each of the
Subsidiaries is duly licensed or qualified to do business in good standing
as a corporation, limited partnership or limited liability company, as the
case may be, in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it makes
such licensing or qualification necessary except where the failure to be so
qualified, considering all such cases in the aggregate, will not have a
material adverse effect on the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company
and its Subsidiaries, taken as a whole. Except for the stock or other
interests in the subsidiaries and as disclosed in the Registration
Statement, the Company does not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation
or have any equity interest in any firm, partnership, joint venture, trust,
association or other entity. Complete and correct copies of the charter of
the Company, as amended through the date hereof (collectively, the
"Charter"), and the bylaws of the Company, as amended through the date
hereof (the "Bylaws"), and the charter documents of each of its
subsidiaries and all amendments thereto have been delivered to counsel for
the Agents. Except as otherwise described in the Registration Statement or
the Prospectus, or as described in Schedule II, all of the issued and
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outstanding capital stock of each corporate Subsidiary of the Company has
been duly authorized and will be, as of the Closing Date, validly issued,
fully paid and non-assessable and owned by the Company.
(f) Capital Stock Matters. The outstanding securities of the
Company, including the outstanding shares of common stock, $0.01 par value
(the "Common Stock"), and the outstanding shares of each series of
preferred stock (the "Preferred Stock") have been duly authorized and are
validly issued, fully paid and nonassessable by the Company and conform to
the description thereof in the Prospectus. Except as set forth in the
Registration Statement or the Prospectus, the Company does
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not have outstanding any option to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell, any of its securities or any
shares of capital stock of any subsidiary or any such warrants, convertible
securities or obligations, except for shares of Common Stock to be issued
to certain employees in connection with the deferment of income, shares of
Common Stock issuable pursuant to awards granted or to be granted under the
Company's 1994 Stock Incentive Plan, as amended and restated, shares of
Common Stock issuable under the Company's 1996 Non-Qualified Employee Stock
Purchase Plan, shares of Common Stock issuable under the Company's Dividend
Reinvestment and Stock Purchase Plan and shares of Common Stock issuable
upon redemption or conversion of units of limited partnership interests.
(g) Financial Statements. The financial statements and
schedules included or incorporated by reference in the Registration
Statement and the Prospectus set forth fairly the financial condition of
the respective entity or entities presented as of the dates indicated and
the results of operations and changes in financial position for the periods
therein specified in conformity with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise stated therein and except to the extent that Avalon Properties,
Inc. applied different principles than the Company prior to its merger with
and into the Company and except, in the case of interim periods, for the
notes thereto and normal year-end adjustment). The pro forma financial
statements of the Company included in the Registration Statement and the
Prospectus comply in all material respects with the applicable requirements
of Rule 11-02 of Regulation S-X of the Commission and the pro forma
adjustments have been properly applied to the historical amounts in the
compilation of such statements. No other financial statements (or
schedules) of the Company or any predecessor of the Company are required by
the Securities Act or the Securities Act Rules and Regulations to be
included in the Registration Statement or the Prospectus.
PricewaterhouseCoopers LLP (together with any other nationally recognized
accounting firm that the Company may from time to time engage, the
"Accountants"), who have reported on the financial statements and schedules
which are audited, are independent accountants with respect to the Company
as required by the Securities Act and the Securities Act Rules and
Regulations. The statements included in the Registration Statement with
respect to the Accountants pursuant to Rule 509 of Regulation S-K of the
Securities Act Rules and Regulations are true and correct in all material
respects.
(h) Company's Internal Accounting System. The Company maintains
a system of internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets and financial and
corporate books and records is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
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(i) Notes. The Notes are as of the date hereof duly authorized
by the Company for issuance and sale pursuant to this Distribution
Agreement and the Indenture; and when duly authenticated and delivered by
the Trustee in accordance with the terms of the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee),
against payment of the consideration therefor, the Notes will be valid and
legally binding obligations of the Company entitled to the benefit of the
Indenture and will be enforceable against the Company in accordance with
their terms, subject, as to enforcement, to (i) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, (ii) general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
law), (iii) the discretion of the court before which any proceeding
therefor may be brought, (iv) requirements that a claim with respect to any
Notes payable in a foreign or composite currency (or a foreign or composite
currency judgment in respect of such claim) be converted into U.S. dollars
at a rate of exchange prevailing on a date determined pursuant to
applicable law and (v) governmental authority to limit, delay or prohibit
the making of payments outside the United States (collectively, the
"Enforceability Limitations") and authorization of the Notes did not, and
the execution, delivery and performance of the Notes will not, constitute a
breach or violation of, or a default under, or conflict with, or give any
other party a right to terminate any of its obligations under, or result in
the acceleration of any obligation under, or result in the creation or
imposition of any lien, charge or encumbrance upon the Communities or any
of the other assets of the Company or any of its subsidiaries pursuant to
the terms or provisions of, the Charter or Bylaws of the Company, the
articles or certificate of incorporation or bylaws or partnership agreement
or operating agreement of any of the Company's subsidiaries or any Contract
(as defined herein) or any judgment, ruling, decree, order, law, statute,
rule or regulation of any court or other governmental agency or body
applicable to the Communities or the business or properties of the Company
or any of its subsidiaries, except as disclosed in the Prospectus or except
for such instances as, individually or in the aggregate, do not involve a
material risk to the business, properties, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries,
taken as a whole; the Indenture has been duly qualified under the TIA and
prior to the issuance of the Notes will be duly authorized, executed and
delivered by the Company, and assuming due authorization, execution and
delivery thereof by the Trustee, will constitute a valid and legally
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement thereof
may be limited by the Enforceability Limitations; the Notes and the
Indenture will conform in all material respects to the statements relating
thereto contained in the Prospectus; and the Notes are, in all material
respects, in the form contemplated by the Indenture. Upon payment of the
purchase price and delivery of the Notes in accordance with this
Distribution Agreement, each of the purchasers thereof will receive good,
valid and marketable title to such Notes, free and clear of all liens,
charges and encumbrances.
(j) Distribution Agreement and Indenture. The Company has the
corporate power and authority to enter into this Distribution Agreement,
the Indenture, the Notes and each Terms Agreement (as defined herein). This
Distribution Agreement and the Indenture have been duly authorized,
executed and delivered by the Company and constitute valid and binding
agreements of the Company, enforceable against the
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Company in accordance with the terms hereof and thereof, except to the
extent that enforcement thereof may be limited by the Enforceability
Limitations. The execution, delivery and the performance of this
Distribution Agreement, the Indenture and each Written Terms Agreement (as
defined herein) and the entry into, and the performance of, each non-
written Terms Agreement and the consummation of the transactions
contemplated herein and therein did not and will not constitute a breach or
violation of, or a default under, or conflict with, or give any other party
a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, or result in the creation or
imposition of any lien, charge or encumbrance upon the Communities or any
of the other assets of the Company or any of its subsidiaries pursuant to
the terms or provisions of, the Charter or Bylaws of the Company, the
articles or certificate of incorporation or bylaws or partnership agreement
or operating agreement of any of the Company's subsidiaries or any material
contract, lease or other instrument to which the Company or any of its
subsidiaries is a party or by which any of their property may be bound or
any judgment, ruling, decree, order, law, statute, rule or regulation of
any court or other governmental agency or body applicable to the
Communities or the business or properties of the Company or any of its
subsidiaries, except as disclosed in the Prospectus or except for such
instances as, individually or in the aggregate, do not involve a material
risk to the business, properties, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, taken as a
whole.
(k) Rating. At the time of each Settlement Date, the Notes will
be rated at least Baa1 by Moody's Investors Service, Inc. ("Moody's") and
at least BBB+ by Standard & Poor's Ratings Service ("S&P" and, together
with Moody's, the "Rating Agencies"), or such other rating as to which the
Company shall have most recently notified the Agents pursuant to Section
5(b)(iv) hereof.
(l) No Material Adverse Change. Except as contemplated in the
Prospectus, subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company and its
subsidiaries, taken as a whole, have not incurred any liabilities or
obligations, direct or contingent, or entered into any transactions, not in
the ordinary course of business, that are material to the Company and its
subsidiaries taken as a whole, and there has not been any material change
in the capital stock, short-term debt or long-term debt of the Company, or
any material adverse change, or any development involving a prospective
material adverse change, in the condition (financial or other), business,
prospects, net worth or results of operations of the Company and its
subsidiaries taken as a whole.
(m) Company Not an Investment Company. The Company is not an
"investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended
(the "1940 Act").
(n) No Material Actions or Proceedings. Except as set forth in
the Registration Statement and the Prospectus, there is not pending or, to
the knowledge of the Company, threatened any action, suit or proceeding
against or affecting the Company or any of its subsidiaries or any of their
respective directors, partners or officers in their capacity as such, or
any of the Current Communities, the Development Communities or the
Redevelopment Communities (each as defined in the Prospectus and
collectively, the
9
"Communities") before or by any Federal or state court, commission,
regulatory body, administrative agency or other governmental body, domestic
or foreign, wherein an unfavorable ruling, decision or finding might,
individually or in the aggregate, have a material adverse effect on the
business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries,
taken as a whole.
(o) Filing and Enforceability of Contracts. There are no
contracts or documents of a character required to be described in the
Prospectus or to be filed as exhibits to the Registration Statement by the
Securities Act or the Securities Act Rules and Regulations that have not
been so described or filed (the "Contracts"). All Contracts executed and
delivered on or before the date hereof to which the Company or any
subsidiary of the Company is a party have been duly authorized, executed
and delivered by the Company or such subsidiary and, assuming due
authorization, execution and delivery thereof by the other parties thereto,
constitute valid and binding agreements of the other parties thereto,
enforceable against such parties in accordance with the terms thereof,
subject to the Enforceability Limitations.
(p) Compliance With Law. Each of the Company and its
subsidiaries has complied in all material respects with all laws,
regulations and orders applicable to it or their respective businesses and
properties where the failure to comply would, individually or in the
aggregate, have a material adverse effect on the business, properties,
business prospects, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole; neither
the Company nor any of its subsidiaries is, and upon consummation of each
sale of a Note, none of them will be, in default under any Contract, the
violation of which would individually or in the aggregate have a material
adverse effect on the Company and its subsidiaries taken as a whole, and no
other party under any such Contract to which the Company or any of its
subsidiaries is a party is, to the knowledge of the Company, in default in
any material respect thereunder; the Company is not in violation of its
Charter or Bylaws; except as disclosed in the Prospectus, the Company and
each of its subsidiaries have or, upon each Delivery Date, will have all
governmental licenses (including, without limitation, a California real
estate brokerage license and a California general contractor's license, if
applicable), permits, consents, orders, approvals and other authorizations
required to carry on its business as contemplated in the Prospectus, and
none of them has received any notice of proceedings relating to the
revocation or modification of any such governmental license, permit,
consent, order, approval or other authorization which, individually or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the business, properties,
business prospects, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole.
(q) No Further Consents Required. No consent, approval,
authorization or order of, or filing with, any court or governmental agency
or body is required for the consummation of the transactions contemplated
by this Distribution Agreement and the Indenture in connection with the
issuance or sale of the Notes by the Company, except such as may be
required under the Securities Act, the Exchange Act, the TIA or state
securities or blue sky laws; and the Company has full power and authority
to authorize, issue and sell the Notes as contemplated by this Distribution
Agreement and the Indenture, free of any preemptive or similar rights.
10
(r) Title to Properties. The Company, or its subsidiaries, as
applicable, has good and marketable title to the Communities, and the
Communities are not subject to any liens or encumbrances except for
monetary liens as set forth in the Prospectus or the Registration
Statement, non-delinquent property taxes, utility easements and other
immaterial non-monetary liens or encumbrances of record. All liens,
charges, encumbrances, claims or restrictions on or affecting the
Communities which are required to be disclosed in the Prospectus are
disclosed therein. Except as is disclosed in the Registration Statement or
the Prospectus and except as would not, in the aggregate, have a material
adverse effect on the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole, (i) each of the Company and each of its
subsidiaries has valid, subsisting and enforceable leases with its tenants
for the properties described in the Prospectus as leased by it, (ii) no
tenant under any of the leases pursuant to which the Company or any
subsidiary leases its properties has an option or right of first refusal to
purchase the premises demised under such lease, (iii) the use and occupancy
of each of the properties of the Company and its subsidiaries complies in
all material respects with all applicable codes and zoning laws and
regulations, (iv) the Company has no knowledge of any pending or threatened
condemnation or zoning change that will in any material respect affect the
size of, use of, improvements of, construction on, or access to any of the
properties of the Company or its subsidiaries, and (v) the Company has no
knowledge of any pending or threatened proceeding or action that will in
any manner affect the size of, use of, improvements on, construction on, or
access to any of the properties of the Company or its subsidiaries.
(s) Mortgages; Community Matters. Except as disclosed in the
Registration Statement, the mortgages and deeds of trust encumbering the
Communities are not convertible nor will the Company or any of its
subsidiaries hold a participating interest therein and such mortgages and
deeds of trust are not cross-defaulted or cross-collateralized to any
property not to be owned directly or indirectly by the Company. To the
knowledge of the Company (i) the present use and occupancy of each of the
Communities complies with all applicable codes and zoning laws and
regulations, if any, except for such failures to comply which would not
individually or in the aggregate have a material adverse effect on the
condition, financial or otherwise, or on the earnings, business affairs or
business prospects of the Company and its subsidiaries taken as a whole;
and (ii) there is no pending or, to the Company's knowledge, threatened
condemnation, zoning change, environmental or other proceeding or action
that will in any material respect affect the size of, use of, improvements
on, construction on, or access to the Communities, except for such
proceedings or actions that would not individually or in the aggregate have
a material adverse effect on the condition, financial or otherwise, or on
the earnings, business affairs or business prospects of the Company and its
subsidiaries taken as a whole.
(t) Title Insurance. Title insurance in favor of the mortgagee,
the Company or its Subsidiaries is maintained with respect to each of the
Communities, in an amount at least equal to the greater of (i) the cost of
acquisition of such property and
11
(ii) the cost of construction by the Company and its subsidiaries of the
improvements located on such property (measured at the time of such
construction), except, in each case, where the failure to maintain such
title insurance would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries taken as a whole.
(u) Accuracy of Company's Statements. No statement,
representation, warranty or covenant made by the Company in this
Distribution Agreement or made in any certificate or document required by
this Distribution Agreement to be delivered to the Agents was or will be,
when made, inaccurate, untrue or incorrect.
(v) No Price Stabilization or Manipulation. Except as stated
in the Prospectus, neither the Company nor any of its directors, officers
or controlling persons has taken, nor will it take, directly or indirectly,
any action designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Notes to
facilitate the sale or resale of the Notes.
(w) No Labor Disputes. No labor dispute with the employees of
the Company or any subsidiary exists or, to the knowledge of the Company
after due inquiry and investigation, is threatened, which, in either case,
would have a material adverse effect on the business, properties, business
prospects, condition (financial or otherwise) or results of operations of
the Company and its subsidiaries, taken as a whole.
(x) No Unlawful Contributions. Neither the Company nor any of
its subsidiaries nor, to the Company's knowledge, any employee or agent of
the Company of any subsidiary has made any payment of funds of the Company
or any subsidiary or received or retained any funds in violation of any
law, rule or regulation or of a character required to be disclosed in the
Prospectus which has not been so disclosed.
(y) Compliance With Environmental Laws. As of each Delivery
Date the Company, and each of its subsidiaries (i) will be in compliance in
all material respects with any and all applicable foreign, Federal, state
and local laws and regulations relating to the protection of human health
and safety, the Hazardous Materials (as defined below), or hazardous or
toxic wastes, pollutants or contaminants (the "Environmental Laws"); (ii)
will have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses; and (iii) will be in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals are otherwise disclosed in the Prospectus or
would not, individually or in the aggregate, have a material adverse effect
on the Company and its subsidiaries taken as a whole.
(z) Hazardous Materials.
(i) None of the Company or any partnership or other
subsidiary that owns a Community (each a
12
"Partnership") has at any time, and, to the best knowledge of the Company
after due inquiry and investigation, no other party has, at any time,
handled, buried, stored, retained, refined, transported, processed,
manufactured, generated, produced, spilled, allowed to seep, leak, escape
or leach, or be pumped, poured, emitted, emptied, discharged, released,
injected, dumped, transferred or otherwise disposed of or dealt with,
Hazardous Materials (as hereinafter defined) on, to, above under, in, into
or from the Communities, except as disclosed in the environmental reports
previously delivered to the Agents or referred to in the Prospectus, or
such as would not individually or in the aggregate have a material adverse
effect on the Company and its subsidiaries, taken as a whole. Neither the
Company nor its subsidiaries intends to use the Communities or any
subsequently acquired properties described in the Prospectus for the
purpose of handling, burying, storing, retaining, refining, transporting,
processing, manufacturing, generating, producing, spilling, seeping,
leaking, escaping, leaching, pumping, pouring, emitting, emptying,
discharging, releasing, injecting, dumping, transferring or otherwise
disposing of or dealing with Hazardous Materials, except for the use,
storage and transportation of small quantities of substances that are
regularly used as office supplies, household cleaning supplies, gardening
supplies, or pool maintenance supplies in compliance with applicable
Environmental Laws and in accordance with prudent business practices and
good hazardous materials storage and handling practices.
(ii) None of the Company or the Partnerships, to the best
knowledge of the Company after due inquiry and investigation, knows of any
seepage, leak, escape, leach, discharge, injection, release, emission,
spill, pumping, pouring, emptying or dumping of Hazardous Materials into
waters on, under or adjacent to the Communities or onto lands from which
such hazardous or toxic waste or substances might seep, flow or drain into
such waters, except as disclosed in the environmental reports previously
delivered to the Agents or referred to in the Prospectus or such as would
not individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(iii) None of the Company or the Partnerships to the best
knowledge of the Company after due inquiry and investigation, has received
notice of, or has knowledge of any occurrence or circumstance which, with
notice or passage of time or both, would give rise to, any claim under or
pursuant to any Environmental Law pertaining to Hazardous Materials,
hazardous or toxic waste or substances on or originating from the
Communities arising out of the conduct of any such party, including,
without limitation, pursuant to any Environmental Law, except as disclosed
in the environmental reports previously delivered to the Agents or referred
to in the Prospectus or such as would not individually or in the aggregate
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
13
As used herein, "Hazardous Material" shall include, without
limitation, any flammable materials or explosives, petroleum or petroleum-
based products, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or related materials, asbestos or
any material as defined by any Federal, state or local environmental law,
ordinance, rule, or regulation including, without limitation, Environmental
Laws, the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Section 9601, et seq.) ("CERCLA"), the
-- ---
Hazardous Materials Transportation Act, as amended (49 U.S.C. Section 1801,
et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C.
-- ---
Section 9601, et seq.), and in the regulations adopted and publications
-- ---
promulgated pursuant to each of the foregoing or by any Federal, state or
local governmental authority having or claiming jurisdiction over the
Communities as described in the Prospectus.
(aa) Periodic Review of Costs of Environmental Compliance. In
the ordinary course of its business, each of the Company and the
Partnerships conducts a periodic review of the effect of Environmental Laws
on its business, operations and properties in the course of which it
identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for
investigation, clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review and on the basis of the reviews
conducted by the Company in connection with the Communities, the Company
has reasonably concluded that such associated costs and liabilities would
not individually or in the aggregate, have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(bb) Property and Casualty Insurance. The Company and its
subsidiaries maintain property and casualty insurance (other than
earthquake insurance) in favor of the Company and its subsidiaries with
respect to each of the Communities, in an amount and on such terms as is
reasonable for businesses of the type proposed to be conducted by the
Company and its subsidiaries. The Company maintains earthquake insurance on
the Communities to the extent described in the Form 8-K filed with the
Commission on the date hereof. Neither the Company nor any subsidiary has
received from any insurance company notice of any material defects or
deficiencies affecting the insurability of any of the Communities (other
than with respect to seismic activities).
(cc) REIT Status. The Company has elected to be taxed as a REIT
under the Code and will use its best efforts to continue to be organized
and will continue to operate in a manner so as to qualify as a "real estate
investment trust" ("REIT") under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code"), unless the Board of
Directors determines that it is no longer in the best interest of the
Company to continue to be so qualified.
(dd) No Plan Assets. Neither the assets of the Company nor its
subsidiaries constitute, nor will such assets, as of the Closing Date,
constitute, "plan assets" under the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
14
(ee) Distribution of Offering Materials. The Company has not
distributed and, prior to the later to occur of (i) the Closing Date and
(ii) completion of the distribution of the Notes, will not distribute any
offering material in connection with the offering and sale of the Notes
other than the Registration Statement, the Prospectus or other materials,
if any, permitted by the Securities Act.
(ff) Form S-3 Eligibility. The Company satisfies all conditions
and requirements for the use of a Registration Statement on Form S-3 under
the Securities Act and the Securities Act Rules and Regulations.
4. PURCHASES AS PRINCIPAL; SOLICITATIONS AS AGENT.
(a) Purchases as Principal. If so agreed by one or more of the
Agents and the Company in each instance, Notes may be purchased by such
Agent or Agents as principal. An Agent's commitment to purchase Notes as
principal shall be deemed to have been made on the basis of the
representations and warranties of the Company herein contained and shall be
subject to the terms and conditions herein set forth. In addition, in
connection with each such sale, the Company and such Agent or Agents will
enter into a supplemental agreement (a "Terms Agreement") that will provide
for the terms of the sale of such Notes to, and the purchase thereof by,
such Agent or Agents (which terms, unless otherwise agreed, shall, to the
extent applicable, include those terms specified in Exhibit A hereto). Each
Terms Agreement shall take the form of either (i) an oral agreement between
such Agent or Agents and the Company, with written confirmation prepared by
such Agent or Agents and mailed to the Company, or (ii) a written agreement
between such Agent or Agents and the Company (a "Written Terms Agreement").
Unless the context otherwise requires, references herein to this
"Distribution Agreement" shall include the applicable Terms Agreement of
one or more Agents to purchase Notes from the Company as principal. Each
purchase of Notes, unless otherwise agreed, shall be at a discount from the
principal amount of each such Note equivalent to the applicable commission
set forth in Schedule III hereto. The Agents may engage the services of any
other broker or dealer in connection with the resale of the Notes purchased
by them as principal and may allow any portion of the discount received in
connection with such purchases from the Company to such brokers and
dealers. At the time of each purchase of Notes by one or more Agents as
principal, the Company and such Agent or Agents shall agree in the Terms
Agreement whether any stand-off provision (as referred to in Section 5(r)
hereof) or any officers' certificate, opinion of counsel or comfort letter
(as referred to in Sections 8(b), 8(c) and 8(e) hereof) will be required.
If the Company and two or more Agents enter into an agreement pursuant to
which such Agents agree to purchase Notes from the Company as principal and
one or more of such Agents shall fail at the Settlement Date to purchase
the Notes which it or they are obligated to purchase (the "Defaulted
Notes"), then the nondefaulting Agents shall have the right, within 24
hours thereafter, to make arrangements for one of them or one or more other
Agents or underwriters to purchase all, but not less than all, of the
Defaulted Notes in such amounts as may be agreed upon and upon the terms
herein set forth; provided, however, that if such arrangements shall not
have been completed within such 24-hour period, then:
15
(i) if the aggregate principal amount of Defaulted Notes does
not exceed 10% of the aggregate principal amount of Notes to be so
purchased by all of such Agents on the Settlement Date, the
nondefaulting Agents shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their
respective initial underwriting obligations bear to the underwriting
obligations of all nondefaulting Agents; or
(ii) if the aggregate principal amount of Defaulted Notes exceeds
10% of the aggregate principal amount of Notes to be so purchased by
all of such Agents on the Settlement Date, such agreement shall
terminate without liability on the part of any nondefaulting Agent.
No action taken pursuant to this paragraph shall relieve any
defaulting Agent from liability in respect of its default. In the event of
any such default which does not result in a termination of such agreement,
either the nondefaulting Agents or the Company shall have the right to
postpone the Settlement Date for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or the
Prospectus or in any other documents or arrangements.
Unless otherwise specified in a Terms Agreement, if an Agent or
Agents are purchasing Notes as principal, it or they, as the case may be,
may resell such Notes to other dealers. Any such sales may be at a
discount, which shall not exceed the amount set forth in the Prospectus
Supplement relating to such Notes.
(b) Solicitations as Agent. On the basis of the
representations and warranties herein contained, but subject to the terms
and conditions herein set forth, when agreed by the Company and an Agent,
such Agent, as an agent of the Company, will use its reasonable efforts to
solicit offers to purchase the Notes upon the terms and conditions set
forth herein and in the Prospectus. The Agents are not authorized to
appoint sub-agents with respect to Notes sold through them as agents. All
Notes sold through an Agent as agent will be sold at 100% of their
principal amount unless otherwise agreed to by the Company and such Agent.
The Company reserves the right, in its sole discretion, to
suspend solicitation of offers for the purchase of Notes through an Agent,
as agent, commencing at any time for any period of time or permanently. As
soon as practicable, but not later than one business day, after receipt of
instructions from the Company, such Agent will suspend solicitation of
offers for the purchase of Notes from the Company until such time as the
Company has advised such Agent that such solicitation may be resumed.
During the period of time that such solicitation is suspended, the Company
shall not be required to deliver, or cause to be delivered, any opinions,
letters, or certificates in accordance with Section 8 hereof; provided that
if the Registration Statement or Prospectus is amended or supplemented
during the period of suspension (other than by an amendment or supplement
providing solely for a change in the interest rates, redemption provisions,
amortization schedules or maturities offered for the Notes or for a change
that the Agents deem to be immaterial), no Agent shall be required to
resume soliciting offers to purchase Notes until the Company have
delivered, or cause to be
16
delivered, such opinions, letters and certificates in accordance with
Section 8 hereof or as such Agent may reasonably request.
Upon settlement, the Company agrees to pay to each Agent, as
consideration for the sale of each Note resulting from a solicitation made
or an offer to purchase received by such Agent, a commission, in the form
of a discount from the purchase price of such Note equal to the applicable
percentage of the principal amount of such Note as set forth in Schedule
III hereto.
(c) Administrative Procedures. The purchase price, interest
rate or formula, maturity date and other terms of the Notes (as applicable)
specified in Exhibit A hereto shall be agreed upon by the Company and the
applicable Agent or Agents and specified in a Pricing Supplement to the
Prospectus to be prepared by the Company in connection with each sale of
Notes. Except as otherwise specified in the applicable Pricing Supplement,
the Notes will be issued in denominations of U.S. $1,000 or any larger
amount that is an integral multiple of U.S. $1,000. Administrative
procedures with respect to the issuance and sale of Notes shall be agreed
upon from time to time by the Company, the Agents and the Trustee (the
"Procedures"), and initially such Procedures shall be as set forth in
Exhibit B hereto. The Agents and the Company agree to perform, and the
Company agrees to cause the Trustee to agree to perform, their respective
duties and obligations specifically provided to be performed by them in the
Procedures.
(d) Agents' Obligations Several and Not Joint. The Company
acknowledges that the obligations of the Agents under this Agreement are
several and not joint.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Agents as follows:
(a) Amendments and Supplements. During the period in which a
prospectus relating to the Notes is required to be delivered under the
Securities Act, the Company shall (i) notify the Agents promptly of the
time when any subsequent amendment to the Registration Statement has become
effective or any supplement to the Prospectus has been filed and of any
request by the Commission for any amendment or supplement to the
Registration Statement or Prospectus or for additional information, (ii)
prepare and file with the Commission, promptly upon your request, any
amendments or supplements to the Registration Statement or Prospectus that,
in your opinion, may be necessary or advisable in connection with your
distribution of the Notes, and (iii) file no amendment or supplement to the
Registration Statement or Prospectus (other than any document required to
be filed under the Exchange Act that upon filing is deemed to be
incorporated by reference therein) to which the Agents or your counsel
shall reasonably object by notice to the Company after having been
furnished a copy a reasonable time prior to the filing.
(b) Notification Upon Certain Events. The Company shall advise
you, promptly after it receives notice or otherwise learns, (i) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration
17
Statement, (ii) of the suspension of the qualification or registration of
the Notes for offering or sale in any jurisdiction, (iii) of the initiation
or threatening (in writing) of any proceeding for any such purpose or (iv)
of any change in the rating assigned by the Rating Agencies or any other
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act, to any
debt securities (including the Notes) of the Company, or the public
announcement by any nationally recognized statistical rating organization
that it has under surveillance or review, with possible negative
implications, its rating of any such debt securities, or the withdrawal by
any nationally recognized statistical rating organization of its rating of
such debt securities; and the Company will promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such
a stop order should be issued.
(c) Compliance With Securities Laws. The Company shall comply
with all requirements imposed upon it by the Securities Act, the Securities
Act Rules and Regulations, the Exchange Act, the Exchange Act Rules and
Regulations and the TIA as from time to time in force, so far as is
necessary to permit the continuance of sales of, or dealings in, the Notes
as contemplated by the provisions hereof and the Prospectus. If during such
period any event occurs as a result of which, in the opinion of counsel to
the Agents, the Registration Statement contains an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend
or supplement the Registration Statement or Prospectus to comply with the
Securities Act, the Company will promptly notify the Agents and will amend
or supplement the Registration Statement or Prospectus (at the expense of
the Company) so as to correct such statement or omission or effect such
compliance.
(d) Copies of Offering Documents. The Company shall furnish to
the Agents copies of the Registration Statement, the Prospectus (including
all documents incorporated by reference therein) and all amendments and
supplements to the Registration Statement and the Prospectus that are filed
with the Commission during the period in which a prospectus relating to the
Notes is required to be delivered under the Securities Act (including all
documents filed with the Commission during such period that are deemed to
be incorporated by reference therein), in each case as soon as available
and in such quantities as the Agents may from time to time reasonably
request.
(e) Copies of Securities Filings and Distributions. The
Company shall furnish the Agents with copies of filings of the Company
under the Securities Act and Exchange Act and with all other financial
statements and reports it distributes generally to the holders of any class
of its capital stock during the period of five years commencing on the date
upon which the Prospectus Supplement is filed pursuant to Rule 424(b) of
the Securities Act Rules and Regulations.
18
(f) Earnings Statements. The Company shall make generally
available to its security holders and to the Agents as soon as practicable
after each sale of Notes, earning statements (which need not be audited)
that satisfy the provisions of Section 11(a) of the Securities Act and the
Securities Act Rules and Regulations (including, without limitation, Rule
158 of the Securities Act Rules and Regulations) with respect to each sale
of Notes.
(g) Payment of Expenses. The Company shall pay, or reimburse
if paid by you, whether or not the transactions contemplated by this
Distribution Agreement are consummated or this Distribution Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Company under this Distribution Agreement, including but
not limited to costs and expenses of or relating to (i) the preparation,
printing and filing of the Registration Statement and exhibits thereto, the
Prospectus and any amendment or supplement to the Registration Statement or
the Prospectus, (ii) the word processing and reproduction of the Indenture
and the Notes and the delivery of the Notes, (iii) the costs incurred by
the Company in furnishing (including costs of shipping, mailing and
courier) such copies of the Registration Statement, the Prospectus and all
amendments and supplements thereto, as may be requested for use in
connection with the offering and sale of the Notes by the Agents or by
dealers to whom Notes may be sold, (iv) the filing fees and the fees and
expenses of counsel to the Agents in connection with any filings required
to be made with the National Association of Securities Dealers or its
subsidiary NASD Regulation Inc., (iv) any registration or qualification of
the Notes for offer and sale under the securities or blue sky laws of such
jurisdictions designated by you, including the reasonable fees,
disbursements and other charges of your counsel in connection therewith,
and the preparation of any blue sky or legal investment memoranda, (iv) the
fees charged by each of the Rating Agencies for the rating of the Notes at
the request of the Company, (v) counsel (including local and special
counsel) to the Company and any surveyors, engineers, appraisers,
photographers, accountants and other professionals engaged by the Company,
(vi) the transfer agent for the Notes, (vii) the costs and expenses of the
Trustee under the Indenture, (viii) PricewaterhouseCoopers LLP or such
other nationally-recognized accountants as may be engaged by the Company in
connection with the offering of the Notes (the "Accountants") and (ix) the
reasonable fees and disbursements of counsel to Agents incurred in
connection with the establishment of the program relating to the Notes and
incurred from time to time in connection with the transactions contemplated
hereby.
(h) Blue Sky Qualification. The Company shall qualify the
notes for offering and sale under the applicable securities laws and real
estate syndication laws of such states and other jurisdictions of the
United States or Canada as the Agents may designate, and will maintain such
qualifications in effect for as long as may be required for the
distribution of the Notes; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify
as a foreign corporation in any jurisdiction in which it is not so
qualified. The Company will file such statements and reports as may be
required by the laws of each jurisdiction in which the Notes have been
qualified as above provided. The Company will promptly advise the Agents of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Notes for sale in any such state or
jurisdiction or the initiating or threatening of any proceeding for such
purpose.
(i) No Price Stabilization or Manipulation. The Company shall
not take, at any time, directly or indirectly, other than in connection
with this Distribution Agreement, any action designed to stabilize, or
which might reasonably be expected to
19
cause or result in, or which has constituted or which might reasonably be
expected to constitute the stabilization of, the price of the Notes.
(j) Rating Agency Matters. The Company shall take all
reasonable action necessary to enable the Rating Agencies to provide their
respective credit ratings of the Notes.
(k) Establishing Terms of Notes. The Company shall execute and
deliver a Supplemental Indenture or officer's certificate, as applicable,
designating the Notes as the debt securities to be offered, and
establishing the applicable terms and provisions of each Note in accordance
with the provisions of the Indenture and any applicable Terms Agreement.
(l) Use of Proceeds. The Company shall apply the net proceeds
to the Company from the sale of the Notes by the Company as set forth under
the caption "Use of Proceeds" in the Prospectus.
(m) Preparation of Pricing Supplements. The Company shall
prepare, with respect to any Notes to be sold to or through an Agent or
Agents pursuant to this Distribution Agreement, a Pricing Supplement with
respect to such Notes in a form previously approved by such Agent or
Agents. The Company will deliver such Pricing Supplement no later than
11:00 a.m., New York City time, on the business day following the date of
the Company's acceptance of the offer for the purchase of such Notes and
will file such Pricing Supplement pursuant to Rule 424(b)(3) under the
Securities Act not later than the close of business of the Commission on
the fifth business day after the date on which such Pricing Supplement is
first used.
(n) Unaudited Financial Information. The Company shall furnish
to the Agents, within two business days following the date on which such
information is first released to the general public, interim financial
statement information related to the Company with respect to each of the
first three quarters of any fiscal year and preliminary financial statement
information with respect to any fiscal year; and the Company shall cause
the Prospectus to be amended or supplemented to include or incorporate by
reference financial information with respect thereto and corresponding
information for the comparable period of the preceding fiscal year, as well
as such other information and explanations as shall be necessary for an
understanding thereof and as shall be required by the Securities Act or the
Securities Act Rules and Regulations.
(o) Audited Financial Information. The Company shall furnish
to the Agents, within two business days following the date on which such
information is first released to the general public, financial information
included in or derived from the audited financial statements of the Company
for the preceding fiscal year; and the Company shall cause the Registration
Statement and the Prospectus to be amended, whether by the filing of
documents pursuant to the Exchange Act or the Securities Act or otherwise,
to include or incorporate by reference such audited financial statements
and the report or reports, and consent or consents to such inclusion or
incorporation by reference, of the independent accountants with respect
thereto, as well as such other information and explanations as shall be
necessary for an understanding of such financial statements and as shall be
required by the Securities Act or the Securities Act Rules and Regulations.
20
(p) REIT Status. Unless the Board of Directors of the Company
determines in its reasonable business judgment and pursuant the Charter
that continued qualification as a "real estate investment trust" under the
Code is not in the Company's best interest, the Company will use its best
efforts to, and will continue to meet the requirements to, qualify as a
"real estate investment trust" under the Code.
(q) Market Stand-Off Pending Settlement. Between the date of
any Terms Agreement and the Settlement Date with respect to such Terms
Agreement, the Company will not, without such Agent's prior consent, offer,
sell, contract to sell or otherwise dispose of any debt securities of the
Company substantially similar to such Notes (other than (i) the Notes that
are to be sold pursuant to such Terms Agreement, (ii) Notes previously
agreed to be sold by the Company, and (iii) commercial paper and short-term
bank loans issued in the ordinary course of business (collectively, the
"Market Stand-Off Exceptions")), except as may otherwise be provided in
such Terms Agreement.
(r) Market Stand-Off Generally. If requested by any Agent in
connection with a purchase by it of Notes as principal in accordance with
Section 4(a) hereof, the Company shall cause such transaction to be subject
to the terms of such market stand-off provision as shall be agreed upon by
the Company and such Agent at the time of such agreement to purchase Notes
as principal.
6. CONDITIONS OF AGENTS' OBLIGATIONS AT THE CLOSING. The
obligations of the Agents to purchase Notes as principal and to solicit offers
for the purchase of Notes as agent of the Company, and the obligations of any
purchasers of the Notes sold through an Agent as agent, shall be subject to the
accuracy of the representations and warranties of the Company herein, to the
accuracy of the statements of the officers of the Company made in any
certificate furnished pursuant to the provisions hereof, to the performance and
observance by the Company of all of its covenants and agreements contained
herein and to the following additional conditions precedent:
(a) Opinion of Company Counsel. On the Commencement Date and,
if called for by any Terms Agreement, on the corresponding Settlement Date,
the relevant Agents shall have received the opinion of Goodwin, Procter &
Hoar llp, counsel for the Company, dated the date of its delivery, to the
effect set forth in Exhibit C.
---------
(b) Opinion of Company Tax Counsel. On the Commencement Date
and, if called for by any Terms Agreement, on the corresponding Settlement
Date, the relevant Agents shall have received the opinion of Goodwin,
Procter & Hoar llp, tax counsel to the Company, dated the date of its
delivery, to the effect that, subject to the assumptions and qualifications
historically included by such counsel in opinions rendered in recent public
offerings by AvalonBay Communities, Inc., commencing with the taxable year
ending December 31, 1994, the form of organization of the Company and its
operations are such as to enable the Company to qualify as a "real estate
investment trust" under the applicable provisions of the Code.
21
(c) Letter of Company Special Counsel Regarding Tax Exempt
Financings and Other Matters. On the Commencement Date and, if called for
by any Terms Agreement, on the corresponding Settlement Date, the relevant
Agents shall have received a statement of Cox, Castle & Nicholson llp,
counsel for the Company, dated the date of its delivery, to the effect that
to the best of their knowledge statements relating to the Current
Communities, the Development Communities, the Redevelopment Communities and
the Development Rights (each as defined in the Prospectus) and tax-exempt
bond financing in the Prospectus (but excluding the statistical and
financial data, physical condition and construction status of such
communities included therein) which involved transactions in which they
represented the Company are materially fair and accurate.
(d) Letter of Company Special Counsel Regarding Certain Real
Estate Operations. On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the relevant Agents shall
have received a statement of Goulston & Storrs, P.C., special counsel to
the Company, dated the date of its delivery, to the effect that to the best
of their knowledge certain statements regarding certain of the Company's
real estate operations in the Prospectus are materially fair and accurate.
(e) Opinion of Counsel to the Agents. On the Commencement Date
and, if called for by any Terms Agreement, on the corresponding Settlement
Date, the relevant Agents shall have received from O'Melveny & Myers llp,
counsel to the Agents, such opinion or opinions, dated the date of its
delivery, with respect to the organization of each of the Company, the
validity of the Indenture, the Notes, the Registration Statement, the
Prospectus and other related matters as the Agents reasonably may request,
and such counsel shall have received such documents and information as they
request to enable them to pass upon such matters.
(f) Comfort Letter. On the Commencement Date and, if called
for by any Terms Agreement, on the corresponding Settlement Date, the
relevant Agents shall have received a letter from the Accountants, dated
the date of its delivery, containing information of the type ordinarily
included in accountants' "comfort letters" delivered according to Statement
of Auditing Standards No. 72 (or any successor bulletin) published by the
American Institute of Certified Public Accountants, including, without
limitation, statements to the effect that:
(i) They are independent public accountants with respect
to the Company and the Subsidiaries within the meaning of the
Securities Act and the Securities Act Rules and Regulations, and no
information concerning their relationship with or interest in either
of the Company is required by Item 10 of the Registration Statement.
(ii) In their opinion, the financial statements and
supporting schedules examined by them and included or incorporated by
reference in the Registration Statement and Prospectus and audited by
them and covered by their opinions therein comply as to form in all
material respects with the applicable accounting requirements of the
Securities
22
Act and the Securities Act Rules and Regulations with respect to
registration statements on Form S-3 and the Exchange Act and the
Exchange Act Rules and Regulations.
(iii) They have performed limited procedures, not
constituting an audit, including a reading of the latest available
unaudited interim consolidated financial statements of the Company, a
reading of the minute books of the Company, inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, and on the basis of such limited review and
procedures nothing came to their attention that caused them to believe
that:
(A) the unaudited financial statements of the Company
included in the Registration Statement, or incorporated by
reference therein, do not comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act and the Securities Act Rules and Regulations and
the Exchange Act and the Exchange Act Rules and Regulations, or
material modifications are required for them to be presented in
conformity with generally accepted accounting principles;
(B) the operating data and balance sheet data
included or incorporated by reference in the Prospectus were not
determined on a basis substantially consistent with that used in
determining the corresponding amounts in the audited financial
statements included or incorporated by reference in the
Registration Statement;
(C) the pro forma financial information included or
incorporated by reference in the Registration Statement was not
determined on a basis substantially consistent with that of the
audited financial statements included or incorporated by
reference in the Registration Statement; or
(D) at a specified date not more than five days prior
to the date hereof, there had been any change in the capital
stock of the Company or the Subsidiaries, or any increase in the
debt of the Company or the Subsidiaries or any decrease in the
net assets of the Company or their Subsidiaries, as compared with
the amounts shown in the most recent consolidated balance sheet
of the Company and the Subsidiaries, included in the Registration
Statement or incorporated by reference therein, or, during the
period from the date of the most recent consolidated statement of
operations included in the Registration Statement or incorporated
by reference therein to a specified date not more than five days
prior to the date hereof, there were any decreases, as compared
with the corresponding period in the preceding year, in revenues,
net income or funds from operations of the Company and the
Subsidiaries, except in all instances for changes, increases or
decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur.
23
(iv) In addition to the examination referred to in their
report included in the Registration Statement and the Prospectus and
the limited procedures referred to in clause (iii) above, they have
carried out certain other specified procedures, not constituting an
audit, with respect to certain amounts, percentages and financial
information which are included in the Registration Statement and the
Prospectus and which are specified by the Agents, and have found such
amounts, percentages and financial information to be in agreement with
the relevant accounting, financial and other records of the Company
and their Subsidiaries identified in such letter.
(g) Officers' Certificate. On the Commencement Date and, if
called for by any Terms Agreement, on the corresponding Settlement Date,
the Agents shall have received from the Company a certificate, dated the
date of its delivery, signed by each of the Chief Executive Officer and the
Chief Financial Officer of the Company, in form and substance satisfactory
to the Agents, to the effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued and, to the best of such
officers' information and belief, no proceeding for that purpose is
pending or threatened by the Commission;
(ii) No order suspending the effectiveness of the
Registration Statement or the qualification or registration of the
Notes under the securities or Blue Sky laws of any jurisdiction is in
effect and, to the best of such officers' information and belief, no
proceeding for such purpose is pending before or threatened or
contemplated by the Commission or the authorities of any such
jurisdiction;
(iii) Any request for additional information on the part
of the staff of the Commission or any such authorities has been
complied with to the satisfaction of the staff of the Commission or
such authorities;
(iv) Each signer of such certificate has carefully examined
the Registration Statement and the Prospectus (including any documents
filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus) and (A) as of the date of such
certificate, such documents, taken together, are true and correct in
all material respects and do not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not untrue or misleading and (B) no event has
occurred as a result of which it is necessary to amend or supplement
the Prospectus in order (1) to make the statements therein not untrue
or misleading in any material respect or (2) to otherwise comply with
the disclosure requirements of Form S-3. There has been no document
required to
24
be filed under the Exchange Act and the Exchange Act Rules and
Regulations that upon such filing would be deemed to be incorporated
by reference into the Prospectus that has not been so filed;
(v) Each of the representations and warranties of the
Company contained in this Distribution Agreement was, when originally
made, and is, at the time such certificate is delivered, true and
correct in all material respects;
(vi) Each of the covenants required to be performed by the
Company herein on or prior to the delivery of such certificate has
been duly, timely and fully performed in all material respects, and
each condition herein required to be complied with by the Company on
or prior to the date of such certificate has been duly, timely and
fully complied with, in all material respects; and
(vii) Subsequent to the latter of the execution and
delivery of the Distribution Agreement and the date of the most recent
Terms Agreement through the date of such certificate, there has not
occurred any downgrading in the rating accorded the Notes or any other
debt securities of the Company by any Rating Agency nor has any notice
been given to the Company of (A) any intended or potential downgrading
by any Rating Agency in such securities, or (B) any review or possible
change by any Rating Agency that does not indicate a stable, positive
or improving rating accorded such securities.
(h) No Stop Orders or Unmet Commission Requests. (i) No stop
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall be pending or
threatened by the Commission, (ii) no order suspending the effectiveness of
the Registration Statement or the qualification or registration of the
Notes under the securities or Blue Sky laws of any jurisdiction shall be in
effect and no proceeding for such purpose shall be pending before or
threatened or contemplated by the Commission or the authorities of any such
jurisdiction, (iii) any request for additional information on the part of
the staff of the Commission or any such authorities shall have been
complied with to the satisfaction of the staff of the Commission or such
authorities, and (iv) after the date hereof no amendment or supplement to
the Registration Statement or the Prospectus (other than any document
required to be filed under the Exchange Act that upon filing is deemed to
be incorporated by reference therein) shall have been filed unless a copy
thereof was first submitted to the Agents and the Agents did not object
thereto in good faith.
(i) No Material Adverse Change. Since the respective dates as
of which information is given in the Registration Statement and the
Prospectus, (i) there shall not have been a material adverse change in the
general affairs, business, business prospects, properties, management,
condition (financial or otherwise) or results of operations of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, in each case other than as
set forth in or contemplated by the Registration Statement and the
Prospectus, (ii) there shall not
25
have been any material change on a consolidated basis, in the equity
capitalization or long-term debt of the Company, or any adverse change in
the rating assigned to any securities of the Company, in each case other
than as set forth in or contemplated by the Registration Statement and the
Prospectus, and (iii) neither the Company nor any of its subsidiaries shall
have sustained any material loss or interference with its business or
properties from fire, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not set forth in
the Registration Statement and the Prospectus, if in the judgment of the
Agents any such development makes it impracticable or inadvisable to offer
or deliver the Notes on the terms and in the manner contemplated in the
Prospectus.
(j) No Material Litigation Commenced. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, there shall have been no litigation or other proceeding
instituted against the Company or any of its subsidiaries or any of their
respective officers or directors in their capacities as such, before or by
any Federal, state or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, in
which litigation or proceeding an unfavorable ruling, decision or finding
would materially and adversely affect the business, properties, business
prospects, condition (financial or otherwise) or results of operations of
the Company and its subsidiaries taken as a whole.
(k) Accuracy of Representations and Warranties; Observance of
Covenants. At each Delivery Date, each of the representations and
warranties of the Company contained herein shall be true and correct in all
material respects, as if made at such Delivery Date, and all covenants and
agreements contained herein to be performed on the part of the Company and
all conditions contained herein to be fulfilled or complied with by the
Company at or prior to such Delivery Date, shall have been duly performed,
fulfilled or complied with.
(l) Blue Sky Qualification. The Notes shall be qualified for
sale in the jurisdictions designated pursuant to Section 5(h), each such
qualification shall be in effect and not subject to any stop order or other
proceeding.
(m) Other Documents. On the Commencement Date and on each
Delivery Date, counsel to the Agents shall have been furnished with such
other documents and opinions as such counsel may reasonably require for the
purpose of enabling such counsel to pass upon the issuance and sale of
Notes as herein contemplated and related proceedings, or in order to
evidence the accuracy and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance
and sale of Notes as herein contemplated shall be satisfactory in form and
substance to the Agents and to counsel to the Agents.
(n) Special Conditions for Agents' Purchases as Principal. The
obligations of the Agents to purchase Notes as principal will be subject to
the following further conditions: (i) the rating assigned by each of the
Rating Agencies, or any other nationally recognized securities rating
agency, to any debt securities of the Company as
26
of the date of the agreement to purchase Notes as principal shall not have
been lowered and no such rating agency shall have publicly announced that
it has under surveillance or review, with possible negative implications,
its ratings of any debt securities of the Company since that date and (ii)
there shall not have come to the attention of any Agent any facts that
would cause such Agent to believe that the Prospectus, at the time it was
required to be delivered to a purchaser of the Notes, contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in light of the circumstances
existing at such time, not misleading.
The documents required to be delivered by this Section 6 as a
condition precedent to each Agent's obligation to begin soliciting offers to
purchase Notes as an agent of the Company shall be delivered to the Agents at
the San Francisco office of O'Melveny & Myers llp, counsel for the Agents, not
later than 3:00 p.m., San Francisco time, on the date hereof, or at such other
time and/or place as the Agents and the Company may agree, but in no event later
than the day prior to the earlier of (i) the date on which the Agents begin
soliciting offers to purchase Notes and (ii) the first date on which the Company
accepts any offer by an Agent to purchase Notes pursuant to a Terms Agreement.
The date of delivery of such documents is referred to herein as the
"Commencement Date."
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Agents and their counsel. The Company
will furnish the Agents with such conformed copies of such opinions,
certificates, letters and other documents as the Agents shall reasonably
request.
If any condition specified in this Section 6 shall not have been
fulfilled when and as required to be fulfilled, this Distribution Agreement may
be terminated by the Agents by notice to the Company at any time and any such
termination shall be without liability of any party to any other party, except
that the covenant regarding provision of an earnings statement set forth in
Section 5(f) hereof, the indemnity and contribution agreements set forth in
Section 9 hereof, the provisions concerning payment of expenses under Section 10
hereof, the provisions concerning the representations, warranties and agreements
to survive delivery of Section 11 hereof, the provisions relating to parties set
forth in Section 15 and the provisions relating to governing law set forth in
Section 16 hereof shall remain in effect.
7. DELIVERY OF AND PAYMENT FOR NOTES SOLD THROUGH THE AGENTS.
Delivery of Notes sold through any Agent as agent shall be made by the Company
to such Agent for the account of any purchaser only against payment therefor in
immediately available funds. In the event that a purchaser shall fail either to
accept delivery of or to make payment for a Note on the date fixed for
settlement, such Agent shall promptly notify the Company and deliver such Note
to the Company and, if such Agent has theretofore paid the Company for such
Note, the Company will promptly return such funds to such Agent unless the
failure arose from the gross negligence or willful misconduct of such Agent or
from a default by such Agent in the performance of its obligations hereunder. If
such failure occurred for any reason other than the gross negligence or willful
misconduct of such Agent or from a default by such Agent in the performance of
its obligations hereunder, the Company will reimburse such Agent on an equitable
basis for its loss of the use of the funds for the period such funds were
credited to the Company's account.
27
8. ADDITIONAL COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Agents that:
(a) Reaffirmation of Representations and Warranties. Each
acceptance by the Company of an offer for the purchase of Notes (whether to
an Agent as principal or through an Agent as agent), and each delivery of
Notes (whether to an Agent as principal or through an Agent as agent),
shall be deemed to be an affirmation that the representations and
warranties of the Company contained in this Distribution Agreement and in
the most recent certificate (for each type of certificate) theretofore
delivered to any Agent pursuant hereto (and if the applicable Agent has not
received a copy of such certificate, one shall be supplied) are true and
correct in all material respects at the time of such acceptance or sale, as
the case may be, and an undertaking that such representations and
warranties will be true and correct at the time of delivery to such Agent
or to the purchaser, as the case may be, of the Note or Notes relating to
such acceptance or sale, as the case may be, as though made at and as of
each such time (and it is understood that such representations and
warranties shall relate to the Registration Statement and Prospectus as
amended and supplemented to each such time).
(b) Subsequent Delivery of Certificates. Each time that there
is filed with the Commission any Quarterly Report on Form 10-Q or Annual
Report on Form 10-K incorporated by reference into the Prospectus, and
otherwise only (i) as may be required in connection with a sale pursuant to
Section 4(a) or (ii) at such times as may be reasonably requested by an
Agent following the occurrence of any event that such Agent reasonably
considers to be a material adverse change to the business, prospects,
properties, financial position or results of operations of the Company and
its subsidiaries, taken as a whole, the Company shall furnish or cause to
be furnished to the Agents forthwith a certificate, dated the date of
filing with the Commission of such document, the date of such sale or the
date requested by such Agent, as applicable, in form reasonably
satisfactory to such Agent, to the effect that the statements contained in
the certificate referred to in Section 6(g) hereof which were last
furnished to the Agents are true and correct at the time of such filing, as
though made at and as of such time (except that such statements shall be
deemed to relate to the Registration Statement and the Prospectus as
amended and supplemented to such time) or, in lieu of such certificate, a
certificate substantially similar to the certificate referred to in Section
6(g) hereof, modified as necessary to relate to the Registration Statement
and the Prospectus as amended and supplemented to the time of delivery of
such certificate.
(c) Subsequent Delivery of Legal Opinions. Each time that
there is filed with the Commission any Quarterly Report on Form 10-Q or
Annual Report on Form 10-K incorporated by reference into the Prospectus,
and otherwise only (i) as may be required in connection with a sale
pursuant to Section 4(a) or (ii) at such times as may be reasonably
requested by an Agent following the occurrence of any event that such Agent
reasonably considers to be material adverse change to the business,
prospects, properties, financial position or results of operations of the
Company taken as a whole, the Company shall furnish or cause to be
furnished forthwith, and in any case promptly upon request, to the Agents
and to counsel to the Agents the written opinions of counsel to the
Company, dated the date of filing with the Commission of such document, the
date of such sale or the date requested by such Agent, as applicable, to
the effect of the
28
opinions and statements referred to in Sections 6(a)and 6(b) and in form
and substance reasonably satisfactory to the Agents, which opinions may
include such reductions or limitations as shall be reasonably satisfactory
to the Agents, and shall be modified, as necessary, to relate to the
Registration Statement and the Prospectus as amended and supplemented to
the time of delivery of such opinion or, in lieu of such opinion, counsel
last furnishing such opinion to the Agents may furnish the Agents with a
letter substantially to the effect that the Agents may rely on such last
opinion to the same extent as though it were dated the date of such letter
authorizing reliance (except that statements in such last opinion shall be
deemed to relate to the Registration Statement and the Prospectus as
amended and supplemented to the time of delivery of such letter authorizing
reliance).
(d) Subsequent Delivery of Letters of Special Counsel. Each
time that there is filed with the Commission any Annual Report on Form 10-K
incorporated by reference into the Prospectus, and otherwise only (i) as
may be required in connection with a sale pursuant to Section 4(a) or (ii)
at such times as may be reasonably requested by an Agent following the
occurrence of any event that such Agent reasonably considers to be material
adverse change to the business, prospects, properties, financial position
or results of operations of the Company taken as a whole, the Company shall
furnish or cause to be furnished forthwith, and in any case promptly upon
request, to the Agents and to counsel to the Agents letters from special
counsel to the Company, dated the date of filing with the Commission of
such document, the date of such sale or the date requested by such Agent,
as applicable, to the effect of the statements referred to in Sections 6(c)
and 6(d) and in form and substance reasonably satisfactory to the Agents,
which opinions may include such reductions or limitations as shall be
reasonably satisfactory to the Agents, and shall be modified, as necessary,
to relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such opinion or, in lieu of such
opinion, counsel last furnishing such opinion to the Agents may furnish the
Agents with a letter substantially to the effect that the Agents may rely
on such last opinion to the same extent as though it were dated the date of
such letter authorizing reliance (except that statements in such last
opinion shall be deemed to relate to the Registration Statement and the
Prospectus as amended and supplemented to the time of delivery of such
letter authorizing reliance).
(e) Subsequent Delivery of Comfort Letters. Each time that
there is filed with the Commission any Quarterly Report on Form 10-Q or
Annual Report on Form 10-K incorporated by reference into the Prospectus,
and otherwise only (i) as may be required in connection with a sale
pursuant to Section 4(a) or (ii) at such times as may be reasonably
requested by an Agent following the occurrence of any event that such Agent
reasonably believes may have caused a material adverse change to the
financial position or results of operations of the Company and its
consolidated subsidiaries, taken as a whole, the Company shall cause the
Accountants forthwith to furnish the Agents a letter, dated the date of the
filing of such document with the Commission, the date of such sale or the
date requested by such Agent, as applicable, in form and substance
reasonably satisfactory to the Agents, substantially similar to the
portions of the letter referred to in clauses (i) and (ii) of Section 6(f)
hereof (but modified to relate to the Registration Statement and Prospectus
as amended and supplemented to the date of such
29
letter) and substantially similar to the portions of the letter referred to
in clauses (iii) and (iv) of said Section 6(f) with such changes as may be
necessary to reflect changes in the financial statements and other
information derived from the accounting records of the Company.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Agents by the Company. The Company
will indemnify and hold harmless the Agents and their directors, officers,
employees and agents and each person, if any, who controls any Agent within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, liabilities,
expenses and damages (including, but not limited to, any and all
investigative, legal and other expenses reasonably incurred in connection
with, and any and all amounts paid in settlement of, any action, suit or
proceeding between any of the indemnified parties and any indemnifying
parties or between any indemnified party and any third party, or otherwise,
or any claim asserted), as and when incurred, to which an Agent, or any
such person, may become subject under the Securities Act, the Exchange Act
or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on (i) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to
the Registration Statement or the Prospectus or in any documents filed
under the Exchange Act and deemed to be incorporated by reference into the
Prospectus, or in any application or other document executed by or on
behalf of the Company or based on written information furnished by or on
behalf of the Company filed in any jurisdiction in order to qualify the
Notes under the securities laws thereof or filed with the Commission, (ii)
the omission or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading or (iii) any act or failure to act or any alleged act or failure
to act by an Agent in connection with, or relating in any manner to, the
Notes or the offering contemplated hereby, and which is included as part of
or referred to in any loss, claim, liability, expense or damage arising out
of or based upon matters covered by clause (i) or (ii) above (provided that
the Company shall not be liable under this clause (iii) to the extent it is
finally judicially determined by a court of competent jurisdiction that
such loss, claim, liability, expense or damage resulted directly from any
such acts or failures to act undertaken or omitted to be taken by an Agent
through gross negligence or willful misconduct); provided that the Company
will not be liable to the extent that such loss, claim, liability, expense
or damage arises from the sale of the Notes to any person by an Agent and
is based on an untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to
an Agent furnished in writing to the Company by such Agent expressly for
inclusion in the Registration Statement, any preliminary prospectus or the
Prospectus.
(b) Indemnification of the Company and its Directors, Certain
Officers and Control Persons by the Agents. The Agents will indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, each director of the Company and each officer of the Company
who signs the Registration
30
Statement to the same extent as the foregoing indemnity from the Company to
the each Agent, but only insofar as losses, claims, liabilities, expenses
or damages arise out of or are based on any untrue statement or omission or
alleged untrue statement or omission made in reliance on and in conformity
with information relating to an Agent furnished in writing to the Company
by such Agent expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus. This indemnity will be in
addition to any liability that an Agent might otherwise have; provided,
however, that in no case shall an Agent be liable or responsible for any
amount in excess of the total discount or commission received by such Agent
in connection with the offering of the Notes that were the subject of the
claim for indemnification.
(c) Procedures. Any party that proposes to assert the right to
be indemnified under this Section 9 will, promptly after receipt of notice
of commencement of any action against such party in respect of which a
claim is to be made against an indemnifying party or parties under this
Section 9, notify each such indemnifying party of the commencement of such
action, enclosing a copy of all papers served, but the omission so to
notify such indemnifying party will not relieve it from any liability that
it may have to any indemnified party under the foregoing provisions of this
Section 9 unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If
any such action is brought against any indemnified party and it notifies
the indemnifying party of its commencement, the indemnifying party will be
entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of
the commencement of the action from the indemnified party, jointly with any
other indemnifying party similarly notified, to assume the defense of the
action, with counsel satisfactory to the indemnified party, and after
notice from the indemnifying party to the indemnified party of its election
to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below
and except for the reasonable costs of investigation subsequently incurred
by the indemnified party in connection with the defense. The indemnified
party will have the right to employ its own counsel in any such action, but
the fees, expenses and other charges of such counsel will be at the expense
of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party,
(ii) the indemnified party has reasonably concluded (based on advice of
counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those
available to the indemnifying party, (iii) a conflict or potential conflict
exists (based on advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (iv) the indemnifying party
has not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other
charges of more than one separate firm admitted to practice in such
jurisdiction at any time for all such indemnified party or
31
parties. All such fees, disbursements and other charges will be reimbursed
by the indemnifying party promptly as they are incurred. An indemnifying
party will not be liable for any settlement of any action or claim effected
without its written consent (which consent will not be unreasonably
withheld). No indemnifying party shall, without the prior written consent
of each indemnified party, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated by this Section 9 (whether or not any
indemnified party is a party thereto), unless such settlement, compromise
or consent includes a unconditional release of each indemnified party from
all liability arising or that may arise out of such claim, action or
proceeding.
(d) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
the foregoing paragraphs of this Section 9 is applicable in accordance with
its terms but for any reason is held to be unavailable from the Company or
the Agents, the Company and any applicable Agent will contribute to the
total losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted, but after deducting any contribution received by the
Company from persons other than an Agent, such as persons who control the
Company within the meaning of the Securities Act and officers of the
Company who signed the Registration Statement, who also may be liable for
contribution) to which the Company and any applicable Agent may be subject
in such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and any applicable Agent on the
other. The relative benefits received by the Company on the one hand and
any applicable Agent on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of any Notes (before
deducting expenses) received by the Company bear to the total commissions
received by applicable Agent or Agents. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one
hand, and any applicable Agent, on the other, with respect to the
statements or omissions which resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by the Company or
an Agent, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by an indemnified party as a result of
the loss, claim, liability, expense or damage, or action in respect
thereof, referred to above in this Section 9(d) shall be deemed to include,
for purpose of this Section 9(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 9(d), no Agent shall be required to contribute any amount in excess
of the commissions and other compensation received by such Agent and no
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be
32
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9(d), any person
who controls a party to this Distribution Agreement within the meaning of
the Securities Act will have the same rights to contribution as that party,
and each officer of the Company who signed the Registration Statement will
have the same rights to contribution as the Company, subject in each case
to the provisions hereof. Any party entitled to contribution, promptly
after receipt of notice of commencement of any action against such party in
respect of which a claim for contribution may be made under this Section
9(d), will notify any such party or parties from whom contribution may be
sought but the omission so to notify will not relieve the party or parties
from whom contribution may be sought from any other obligation it or they
may have under this Section 9(d). No party will be liable for contribution
with respect to any action or claim settled without its written consent
(which consent will not be unreasonably withheld).
(e) Survival of Indemnity and Contribution Provisions. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company contained in this
Distribution Agreement shall remain operative and in full force and effect
regardless of (i) any investigation made by an Agent or on its behalf, (ii)
acceptance of any of the Notes and payment therefore or (iii) any
termination of this Distribution Agreement.
10. REIMBURSEMENT OF AGENTS' EXPENSES. If the Company shall fail
to perform any agreement on its part to be performed hereunder, or if any
condition of the Agents' obligations hereunder required to be fulfilled by the
Company is not fulfilled, the Company will reimburse any applicable Agent for
all reasonable out-of-pocket expenses (including fees and disbursements of
counsel) incurred by such Agent in connection with this Distribution Agreement,
and upon demand the Company shall pay the full amount thereof to such Agent. If
this Distribution Agreement is terminated pursuant to Section 13 by reason of
the default of any Agent, the Company shall not be obligated to reimburse such
Agent on account of those expenses.
11. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Distribution
Agreement or in certificates of officers of the Company submitted pursuant
hereto shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Agent or any con-trolling person of
such Agent, or by or on behalf of the Company or of any of its Subsidiaries, and
shall survive each delivery of and payment for any of the Notes.
12. ROLE OF AGENTS. In acting under this Agreement and in
connection with the sale of any Notes by the Company (other than Notes sold to
an Agent as principal), each Agent is acting solely as agent of the Company and
does not assume any obligation towards or relationship of agency or trust with
any purchaser of Notes. An Agent shall make reasonable efforts to assist the
Company in obtaining performance by each purchaser whose offer to purchase Notes
has been solicited by such Agent and accepted by the Company, but such Agent
shall not have any liability to the Company in the event any such purchase is
not consummated for any reason. If the Company shall default in its obligations
to deliver Notes to a purchaser whose offer it has accepted, the Company shall
hold the relevant Agent harmless against any loss, claim, damage or liability
arising from or as a result of such default and shall, in
33
particular, pay to such Agent the commission it would have received had such
sale been consummated.
13. TERMINATION. The Company shall have the right to terminate this
Distribution Agreement with respect to any or all of the Agents at any time by
giving notice hereunder to the Agents as hereinafter specified. The Agents
shall have the right by giving notice as hereinafter specified at any time to
terminate this Distribution Agreement if (i) the Company shall have failed,
refused or been unable, at any time, to perform any agreement on its part to be
performed hereunder, (ii) any other condition of the Agents' obligations
hereunder is not fulfilled when due, (iii) the rating assigned by either of the
Rating Agencies to the Company or the Notes as of or subsequent to the date of
this Distribution Agreement shall have been lowered since that date or if either
of the Rating Agencies shall have publicly announced that it has under
surveillance or review for the purpose of considering lowering such rating, its
rating of the Company or the Notes, (iv) trading in any of the equity securities
of the Company shall have been suspended by the Commission, the NASD, by an
exchange that lists such equity securities or by the Nasdaq Stock Market, (v)
trading in securities generally on the New York Stock Exchange or the Nasdaq
Stock Market shall have been suspended or limited or minimum or maximum prices
shall have been generally established on such exchange or over the counter
market, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by such exchange or by order of the Commission or the NASD or any
court or other governmental authority, (vi) a general banking moratorium shall
have been declared by either Federal or New York State authorities, (vii) any
material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States or
any outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall have
occurred the effect of any of which is such as to make it, in the sole judgment
of the Agents, impracticable or inadvisable to market the Shares on the terms
and in the manner contemplated by the Prospectus, or (viii) if there shall have
come to the attention of the Agents any facts that would cause them to believe
that the Prospectus, at the time it was required to be delivered to a purchaser
of Notes, included an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in light of the
circumstances existing at the time of such delivery, not misleading. As used in
this Section 13, the term "Prospectus" means the Prospectus in the form first
provided to the Agents for use in confirming sales of the related Notes. In the
event of any such termination, neither party will have any liability to the
other party hereto, except that (i) an Agent shall be entitled to any commission
earned in accordance with the third paragraph of Section 4(b) hereof, (ii) if at
the time of termination (a) such Agent shall own any Notes purchased by it as
principal with the intention of reselling them or (b) an offer to purchase any
of the Notes has been accepted by the Company but the time of delivery to the
purchaser or his agent of the Note or Notes relating thereto has not occurred,
the covenants set forth in Sections 5 and 8 hereof shall remain in effect until
such Notes are so resold or delivered, as the case may be, and (iii) the
covenant set forth in Section 5(f) hereof, the provisions of Section 10 hereof,
the indemnity and contribution agreements set forth in Section 9 hereof, and the
provisions of Sections 11, 15 and 16 hereof shall remain in effect.
34
14. NOTICES. All notices or communications hereunder shall be in
writing and shall be mailed, delivered or telecopied and confirmed (a) if to the
Company, to:
AvalonBay Communities, Inc.
2900 Eisenhower Avenue, Suite 300
Alexandria, Virginia 22314
Attention: Thomas J. Sargeant
Telephone: 703-317-4635
Telecopy: 703-329-0060
with a copy to:
Goodwin, Procter & Hoar llp
Exchange Place
53 State Street
Boston, Massachusetts 02109-2881
Attention: David W. Watson, P.C.
Telephone: 617-570-1888
Telecopy: 617-523-1231
(b) and if to the Agents to:
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Attention: Corporate Real Estate Department
Telephone: 212-713-7911
Telecopy: 212-713-7949
with a copy to:
O'Melveny & Myers llp
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attention: Peter T. Healy, Esq.
Telephone: (415) 984-8833
Telecopy: (415) 984-8701
First Union Capital Markets
One First Union Center
300 So. College Street/TW6
Charlotte, North Carolina 28288
Attention: James T. Williams, Jr.
Telephone: (704) 383-8766
Telecopy: (704) 383-9527
J.P. Morgan Securities Inc.
60 Wall Street, 13th Floor
New York, NY 10260
Attention: Transaction Execution Group
Telephone: (212) 648-9080
Telecopy: (212) 648-5151
35
NationsBanc Montgomery Securities LLC
100 N. Tryon Street, 7th Floor
Charlotte, NC 28255
Attention: Debt Finance Group
Telephone: 704-386-7800
Telecopy: 704-388-9939
Warburg Dillon Read LLC
677 Washington Boulevard
Stamford, Connecticut 06901
Attention: Christopher Forshner
Telephone: (203) 719-8244
Telecopy: (203) 719-7139
Any party to this Distribution Agreement may change such address for
notices by sending to the other parties to this Distribution Agreement written
notice of a new address for such purpose.
15. PARTIES. This Distribution Agreement shall inure to the benefit
of and be binding upon the Agents and the Company and their respective
successors. Nothing expressed or mentioned in this Distribution Agreement is
intended, or shall be construed, to give any person, firm or corporation, other
than the parties hereto and their respective successors and the controlling
persons and officers and directors referred to in Section 9 hereof and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Distribution Agreement or any provision herein
contained. This Distribution Agreement and all conditions and provisions hereof
are intended to be for the sole and exclusive benefit of the parties hereto and
respective successors and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Notes shall be deemed to be a
successor by reason merely of such purchase.
16. GOVERNING LAW. THIS DISTRIBUTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE.
17. COUNTERPARTS. This Distribution Agreement may be executed in
one or more counterparts, signature pages may be detached from such separately
executed counterparts and reattached to other counterparts and, in each such
case, the executed counterparts hereof shall constitute a single instrument.
Signature pages may be delivered by telecopy.
18. ENFORCEABILITY. In case any provision of this Distribution
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
36
19. WAIVER OF RIGHTS TO TRIAL BY JURY. The Company and the Agents
each hereby irrevocably waive any right they may have to a trial by jury in
respect of any claim based upon or arising out of this Distribution Agreement or
the transactions contemplated hereby.
20. AMENDMENTS AND MODIFICATIONS. This Distribution Agreement may
not be amended or otherwise modified or any provision hereof waived except by an
instrument in writing signed by the Agents and the Company.
[Signature page follows.]
37
If the foregoing correctly sets forth the understanding between the
Company and the several Agents, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between the Company and the several Agents.
AvalonBay Communities, Inc.
By:
----------------------------
Thomas J. Sargeant
Chief Financial Officer
ACCEPTED as of the date first above written:
PAINEWEBBER INCORPORATED
By:
----------------------------
Frederick T. Caven, Jr.
Managing Director
FIRST UNION CAPITAL MARKETS
By:
----------------------------
Name:
Title:
J.P. MORGAN SECURITIES INC.
By:
----------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
----------------------------
Name:
Managing Director
S-38
WARBURG DILLON READ LLC
By:
----------------------------
Name:
Title:
S-39
EXHIBIT A
Terms of Notes
--------------
The following terms, if applicable, shall be agreed to by an Agent or
Agents and the Company in connection with each sale of Notes:
[ ] Book Entry
[ ] Certificated
Principal Amount: $
(or principal amount of foreign currency or composite currency)
Interest Payment Dates:
---------------------------------
Interest Rate:
-----------------
[ ] Fixed
[ ] Floating
If Floating Rate Note:
Interest Rate Basis(es):
-----------------
If LIBOR:
[ ] LIBOR Reuters Page:
------------
[ ] LIBOR Telerate Page:
------------
Designated LIBOR Currency:
------------
IF CMT Rate:
Designated CMT Telerate Page:
------------
If Telerate Page 7052:
[ ] Weekly Average
[ ] Monthly Average
Designated CMT Maturity Index:
------------
Index Maturity:
Spread and/or Spread Multiplier, if any:
------------
Initial Interest Rate, if any:
------------
Initial Interest Reset Date:
------------
Interest Reset Dates:
------------
Interest Payment Dates:
------------
Maximum Interest Rate, if any:
------------
Minimum Interest Rate, if any:
------------
Fixed Rate Commencement Date, if any:
------------
Fixed Interest Rate, if any:
------------
Day Count Convention:
------------
Calculation Agent:
------------
Redemption Provisions:
Initial Redemption Date:
------------
Initial Redemption Percentage:
------------
Annual Redemption Percentage Reduction, if any:
------------
S-40
Repayment Provisions:
Optional Repayment Date(s):
------------
Original Issue Date:
------------
Stated Maturity Date:
------------
Specified Currency:
------------
Exchange Rate Agent:
------------
Authorized Denomination:
------------
Purchase Price: %, plus accrued interest, if any, from
------
Price to Public: %, plus accrued interest, if any, from
------
Issue Price:
------------
Settlement Date and Time:
------------
Additional/Other Terms:
Also, in connection with the purchase of Notes by an Agent as
principal, agreement as to whether the following will be required:
[ ] Officers' Certificate pursuant to Section 8(b) of the Distribution
Agreement.
[ ] Legal Opinions of Company Counsel pursuant to Section 8(c) of the
Distribution Agreement.
[ ] Legal Opinions of Special Counsel (regarding tax exempt financings and
certain property matters) pursuant to Section 8(d) of the Distribution
Agreement.
[ ] Comfort Letter pursuant to Section 8(e) of the Distribution Agreement.
[ ] Stand-off Agreement pursuant to Section 5(r) of the Distribution
Agreement.
Exhibit A--Page 41
EXHIBIT B
ADMINISTRATIVE PROCEDURES AGREEMENT
-----------------------------------
AVALONBAY COMMUNITIES, INC.
MEDIUM-TERM NOTE PROGRAM
ADMINISTRATIVE PROCEDURES
The Medium-Term Notes Due Nine Months or More from Date of Issue (the
"Notes") are to be offered on a continuous basis by AvalonBay Communities, Inc.,
a Maryland corporation (the "Issuer"). PaineWebber Incorporated, First Union
Capital Markets, J.P. Morgan Securities Inc., NationsBanc Montgomery Securities
LLC, and Warburg Dillon Read LLC, as agents (the "Agents"), have each agreed to
use their best efforts to solicit purchases of the Notes. The Issuer reserves
the right to sell Notes directly or indirectly on its own behalf to investors
(other than broker-dealers). The Agents will not be obligated to, but may from
time to time, purchase Notes as principal for their own account. The Notes are
being sold pursuant to a Distribution Agreement dated December 21, 1998 (the
"Agency Agreement"), among the Issuer, and the Agents, and will be issued
pursuant to an indenture dated as of January 16, 1998 and all indentures
supplemental thereto, including that certain First Supplemental Indenture, dated
as of January 20, 1998, that certain Second Supplemental Indenture, dated as of
July 7, 1998, and that certain Third Supplemental Indenture, dated the date of
the Agency Agreement (collectively, the "Indenture"), between the Issuer and
State Street Bank and Trust Company, as Trustee (the "Trustee"). Capitalized
terms used herein and not defined herein shall have the meanings ascribed to
such terms in the Agency Agreement. The Notes have been registered under the
Securities Act of 1933, as amended (the "Act").
Each Note will be represented by either a Global Security (as defined
in the Indenture), such Global Security, for purposes hereof either a global
note (a "Global Note") or a master note (a "Master Note"), registered in the
name of a nominee of The Depository Trust Company, as Depositary ("DTC") (a
"Book-Entry Note"), or a certificate issued in definitive form (a "Certificated
Note"). It is currently contemplated that both Notes that bear interest at a
fixed rate (a "Fixed Rate Note") and Notes that bear interest at a variable rate
(a "Floating Rate Note") and that are denominated and payable in U.S. dollars
may be issued as Book-Entry Notes.
Administrative procedures and specific terms of the offering are
explained below. The Issuer will advise the Agents in writing of those persons
handling administrative responsibilities with whom the Agents are to communicate
regarding offers to purchase Notes and the details of their delivery.
Administrative procedures may be modified from time to time as reflected in the
applicable Pricing Supplement (as defined below) or elsewhere.
S-42
PART I
ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
AND GENERALLY APPLICABLE ADMINISTRATIVE PROCEDURES
Issue/Authentication Date: Each Note shall be dated as of the date of its
- ------------------------- authentication by the Trustee or an agent
designated by the Issuer for such purpose (the
"Designated Agent"). Each Note will also bear an
original issue date (the "Issue Date") which, with
respect to any Note (or portion thereof), shall mean
the date of its original issuance (i.e., the
settlement date) and shall be specified therein. The
issue date will remain the same for all Notes
subsequently issued upon transfer, exchange or
substitution of an original Note regardless of their
dates of authentication.
Maturities: Each Note shall mature on a Business Day, selected
- ---------- by the purchaser and agreed to by the Issuer,
which shall be nine months or more from the date
of issue.
Price to Public: Each Note shall be issued at 100% of principal
- --------------- amount unless otherwise specified in a supplement
to the Prospectus (a "Pricing Supplement").
Denominations: The denominations of the Notes shall be $1,000 and
- ------------- integral multiples of $1,000 in excess thereof.
(Any Notes denominated other than in U.S. dollars
will be issuable in denominations as set forth in
such Notes.)
Registration: Notes shall be issued only in fully registered form.
- ------------
Minimum Purchase: The minimum aggregate amount of Notes denominated
- ---------------- and payable in U.S. dollars which may be offered
to any purchaser will be $1,000.
Interest: General. Each Note shall bear interest in
- -------- accordance with its terms, as described in the
Prospectus Supplement (as defined in the Agency
Agreement), as supplemented by the applicable
Pricing Supplement.
Calculation of Interest: Interest on Fixed Rate Notes and interest rates on
- ----------------------- Floating Rate Notes will be determined as set forth
in the form of Notes. With respect to Floating Rate
Notes, the Calculation Agent shall determine the
interest rate for each Interest Reset Date and
communicate such interest rate to the Issuer, and
the Issuer will promptly notify the Trustee, or the
Designated Agent, and the Paying Agent of each such
determination.
S-43
Payments of Interest
- --------------------
and Principal: All interest payments (excluding interest payments
- ------------- made at maturity) will be made by check mailed to
the person entitled thereto; provided, however, that
if a holder of one or more Notes of like tenor and
terms with an aggregate principal amount equal to or
greater than U.S. $10,000,000 (or the equivalent
thereof in foreign currencies or currency units)
shall designate in writing to the Paying Agent at
its corporate trust office in The City of New York
on or prior to the Regular Record Date relating to
the Interest Payment Date an appropriate account
with a bank, the Paying Agent will, subject to
applicable laws and regulations and until it
receives notice to the contrary, make such payment
and all succeeding payments to such person by wire
transfer to the designated account. If a payment
cannot be made by wire transfer because the
information received by the Paying Agent is
incomplete, a notice will be mailed to the holder at
its registered address requesting such information.
Upon presentation of the relevant Note, the Trustee,
or the Designated Agent, (or any duly appointed
Paying Agent) will pay in immediately available
funds the principal amount of such Note at maturity
and accrued interest, if any, due at maturity;
provided that the Note is presented to the Trustee,
or the Designated Agent, (or any such Paying Agent)
to make payments in accordance with its normal
procedures. The Issuer will provide the Trustee, or
the Designated Agent, (and any such Paying Agent)
with funds available for such purpose. Notes
presented to the Trustee, or the Designated Agent,
at maturity for payment will be canceled and
destroyed by the Trustee, or the Designated Agent,
and a certificate of destruction will be delivered
to the Issuer. On the fifth Business Day (as defined
below) immediately preceding each interest payment
date, the Trustee, or the Designated Agent, will
furnish to the Issuer a statement showing the total
amount of the interest payments to be made on such
interest payment date. The Trustee, or the
Designated Agent, will provide monthly to the Issuer
a list of the principal and interest to be paid on
Notes maturing in the next succeeding six months.
The Trustee, or the Designated Agent, will assume
responsibility for withholding taxes on interest
paid as required by law.
Acceptance of Offers: The Agents will promptly advise the Issuer of each
- -------------------- reasonable offer to purchase Notes received by it,
other than those rejected by the Agents. The Agents
may, in their discretion reasonably exercised,
without notice to the Issuer, reject any offer
received by it, in whole or in part. The Issuer will
have the right to withdraw, cancel or modify such
offer without notice and will have the sole right to
accept offers to purchase Notes and may reject any
such offer, in whole or in part. If the Issuer
rejects an offer, the Issuer will promptly notify
the Agents.
Exhibit B--Page 44
Settlement: All offers accepted by the Issuer will be settled
- ---------- on the third Business Day next succeeding the date
of acceptance unless otherwise agreed by any
purchaser, the Agents and the Issuer. The settlement
date shall be specified upon receipt of an offer.
Prior to 3:00 p.m., New York City time, on the
business day prior to the settlement date, the
Issuer will instruct the Trustee, or the Designated
Agent, to authenticate and deliver the Notes
pursuant to the terms communicated by the Presenting
Agent (as defined below) pursuant to the next
succeeding section no later than 2:15 p.m., New York
City time, on that day.
Details for Settlement: For each offer accepted by the Issuer, the Agent who
- ---------------------- presented the offer (the "Presenting Agent") shall
communicate to the Issuer, Attention: Thomas J.
Sargeant, CFO (Fax No.: (703) 329-0060) who will
provide a copy to the Trustee, Attention: Robert J.
Dunn (Fax No.: (617) 664-5151) and the Designated
Agent, if any, by facsimile transmission or other
acceptable means the following information (the
"Purchase Information"):
* Exact name in which the Note or Notes are
to be registered ("registered owner").
* Exact address of registered owner.
* Taxpayer identification number of registered
owner.
* Principal amount of each Note to be
delivered to the registered owner.
* Specified Currency and, if other than U.S.
dollar, denominations.
* In the case of a Fixed Rate Note, the
interest rate or, in the case of a Floating Rate Note, the interest rate
formula, the Initial Interest Rate (if known at such time), Index Maturity,
Interest Reset Period, Interest Reset Dates, Spread or Spread Multiplier (if
any), minimum interest rate (if any) and maximum interest rate (if any).
* Interest Payment Period and Interest
Payment Dates.
* Maturity Date of Notes.
* Issue Price of Notes.
* Settlement date for Notes.
Exhibit B--Page 45
* Presenting Agent's commission (to be paid
in the form of a discount from the proceeds remitted to the Issuer
upon settlement).
* Redemption provisions, if any.
* Repayment provisions, if any.
* Original issue discount provisions, if any.
* In the case of Currency Indexed Notes, the
above-listed information, as applicable and the Base Exchange Rate(s), Base
Interest Rate and Indexed Currencies.
* In the case of Dual Currency Notes, the
above listed information, as applicable, and the Optional Payment Currency,
Designated Exchange Rate and Option Election Dates.
* The issue date of, and the settlement date
for, Notes will be the same. Before accepting any offer to purchase Notes to be
settled in less than three days, the Issuer shall verify that the Trustee, or
the Designated Agent, will have adequate time to prepare and authenticate the
Notes. Prior to preparing the Notes for delivery, the Trustee, or the Designated
Agent, will confirm the Purchase Information by telephone with the Presenting
Agent and the Issuer.
Confirmation: For each accepted offer, the Presenting Agent will
- ------------ issue a confirmation, in writing, telephonically
or through any other commonly used method of communication to the purchaser
and a confirmation to the Issuer, Attention: Thomas J. Sargeant, CFO
(Fax No.: (703) 329-0060).
Note Deliveries
- ---------------
and Cash Payment: Upon the receipt of appropriate documentation and
- ---------------- instructions from the Issuer and verification
thereof, the Trustee, or the Designated Agent, will
cause the Notes to be prepared and authenticated and
hold the Notes for delivery against payment.
The Trustee, or the Designated Agent, will deliver
the Notes, in accordance with instructions from the
Issuer, to the Presenting Agent, as the Issuer's
agent, for the benefit of the purchaser only against
payment in immediately available funds in an amount
equal to the face amount of the Notes less the
Presenting Agent's commission plus any premium or
less any discount; provided, however, that the
Trustee, or the Designated Agent, may deliver Notes
to the Presenting Agent against receipt therefor
and, later the same day, receipt of such funds in
such amount. Upon receipt of such payment, the
Trustee, or the Designated Agent, shall pay promptly
an amount equal thereto
Exhibit B--Page 46
to the Issuer in immediately available funds by wire
transfer to the following account of the Issuer:
Bank: Fleet National Bank
ABA Number: 011 900 571
Account Number: 1510350-03121
For Credit To: Fleet National Bank Loan
Clearance Account
Reference: AvalonBay Communities, Inc.
Attn: Kim Lewis (860) 986-5982
The Presenting Agent, as the Issuer's agent, will
deliver the Notes (with the written confirmation
provided for above) to the purchaser thereof against
payment by such purchaser in immediately available
funds. Delivery of any confirmation or Note will be
made in compliance with "Delivery of Prospectus"
below.
Failure of Purchaser: In the event that a purchaser shall fail to accept
- -------------------- delivery of and make payment for a Note on the
settlement date, the Presenting Agent will notify
the Trustee or the Designated Agent and the Issuer,
by telephone, confirmed in writing. If the Note has
been delivered to the Presenting Agent, as the
Issuer's agent, the Presenting Agent shall return
such Note to the Trustee, or the Designated Agent.
If funds have been advanced for the purchase of such
Note, the Trustee, or the Designated Agent, will,
immediately upon receipt of such Note contact the
Issuer to the attention of Thomas J. Sargeant, CFO
(Fax No.: (703) 329-0060) advising the Issuer of
such failure. At such time, the Issuer will refund
the payment previously made by the Presenting Agent
in immediately available funds. Such payments will
be made on the settlement date, if possible, and in
any event not later than the business day following
the settlement date. If such failure shall have
occurred for any reason other than the failure of
the Presenting Agent to provide the Purchase
Information to the Issuer or to provide a
confirmation to the purchaser, the Issuer will
reimburse the Presenting Agent on an equitable basis
for its loss of the use of funds during the period
when they were credited to the account of the
Issuer.
Immediately upon receipt of the Note in respect of
which the failure occurred, the Trustee, or the
Designated Agent, will cause the Security Registrar
to make appropriate entries to reflect the fact that
the Note was never issued and will destroy the Note.
Exhibit B--Page 47
Procedure for Rate Changes: The Issuer and the Agents will discuss from time to
- -------------------------- time the price of, and the rates to be borne by,
the Notes that may be sold as a result of the
solicitation of offers by the Agent. Once an Agent
has recorded any indication of interest in Notes
upon certain terms, and communicated with the
Issuer, if the Issuer plans to accept an offer to
purchase Notes upon such terms, it will prepare a
Pricing Supplement to the Prospectus, as then
amended or supplemented, reflecting the terms of
such Notes and will arrange to transmit such Pricing
Supplement to the Commission for filing in
accordance with and within the time prescribed by
the applicable paragraph of Rule 424(b) under the
Act. The Issuer will supply at least two copies of
the Prospectus as then amended or supplemented, and
bearing such Pricing Supplement, to the Presenting
Agent. The Issuer shall use its reasonable best
efforts to send such Pricing Supplement by telecopy
or overnight express (for delivery by the close of
business on the applicable trade date, but in no
event later than 11:00 a.m. New York City time, on
the Business Day following the applicable trade
date) to the Presenting Agent and the Trustee at the
following applicable address:
if to: PaineWebber Incorporated
to: Fixed Income Division
Attention: Mike Sabatino
1285 Avenue of the Americas, 11th Floor
New York, NY 10019
Telecopy Number: (212) 713-2233
Phone Number: (212) 713-4814
if to: First Union Capital Markets
to: Attn: Mark Adamson
301 South College Street, TW8
Charlotte, NC 28288
Telecopy Number: (704) 383-7727
if to: J.P. Morgan Securities Inc.
to: Attn: MTN Trading Desk
60 Wall Street, 3rd Floor
New York, NY 10260
Telephone Number: (212) 648-0591
Telecopy Number: (212) 648-5909/1/
- ------------------
/1/ Please send by telecopy with original to follow by mail.
Exhibit B--Page 48
if to: NationsBanc Montgomery Securities LLC
to both: Continuously Offered Products
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number: (704) 388-9939/2/
and
Syndicate Operations
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number: (704) 388-9212/3/
if to: Warburg Dillon Read LLC
to: Attention: Jeff London
677 Washington Blvd.
Stamford, CT 06901
Telecopy Number: (212) 719-7139
if to: State Street Bank and Trust
(the Trustee)
to: Attention: Robert J. Dunn
2 International Place, 4th Floor
Boston, MA 02110
Telecopy Number: (617) 664-5151
and to: the Designated Agent, if any.
For record keeping purposes, one copy of such
Pricing Supplement shall also be mailed to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attention: Peter T. Healy, Esq.
Telecopy Number: (415) 984-8701
and to:
Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109-2281
Attention: John O. Newell, Esq.
Telecopy Number: (617) 523-1231
- ---------------------
/2/ Please send by telecopy rather than mail.
/3/ Please send by telecopy rather than mail.
Exhibit B--Page 49
In each instance that a Pricing Supplement is
prepared, the Presenting Agent will provide a copy
of such Pricing Supplement to each investor or
purchaser of the relevant Notes or its agent.
Pursuant to Rule 434 of the Securities Act of 1933,
as amended, the Pricing Supplement may be delivered
separately from the Prospectus. No settlements with
respect to Notes upon such terms may occur prior to
such transmitting and such Agent will not, prior to
such transmitting, mail confirmations to customers
who have offered to purchase Notes upon such terms.
After such transmitting, sales, mailing of
confirmations and settlements may occur with respect
to Notes upon such terms, subject to the provisions
of "Delivery of Prospectus" below..
Outdated Pricing Supplements and copies of the
Prospectus to which they are attached (other than
those retained for files), will be destroyed.
Suspension of Solicitation;
- ---------------------------
Amendment or Supplement: As provided in the Agency Agreement, the Issuer may
- ----------------------- suspend solicitation of purchases at any time and,
upon receipt of notice from the Issuer, the Agents
will, as promptly as practicable, but in no event
later than one business day following such notice,
suspend solicitation until such time as the Issuer
has advised them that solicitation of purchases may
be resumed. If the Agents receive the notice from
the Issuer contemplated by Section 4(b) of the
Agency Agreement, they will promptly suspend
solicitation and will only resume solicitation as
provided in the Agency Agreement. If the Issuer
decides to amend or supplement the Registration
Statement or the Prospectus relating to the Notes,
it will promptly advise the Agents and will furnish
the Agents with the proposed amendment or supplement
in accordance with the terms of the Agency
Agreement. The Issuer will promptly file or mail to
the Commission for filing such amendment or
supplement, provide the Agents with copies of any
such amendment or supplement, confirm to the Agents
that such amendment or supplement has been filed
with the Commission and advise the Agents that
solicitation may be resumed. Any such suspension
shall not affect the Issuer's obligations under the
Agency Agreement; and in the event that at the time
the Issuer suspends solicitation of purchases there
shall be any offers already accepted by the Issuer
outstanding for settlement, the Issuer will have the
sole responsibility for fulfilling such obligations;
the Agents will make reasonable efforts to assist
the Issuer to fulfill such obligations, but the
Agents will not be obligated to fulfill such
obligations. The Issuer will in addition promptly
advise the Agents and the Trustee, or the Designated
Agent, if such offers
Exhibit B--Page 50
are not to be settled and if copies of the
Prospectus as in effect at the time of the
suspension may not be delivered in connection with
the settlement of such offers.
Delivery of Prospectus: A copy of the Prospectus, as most recently amended
- ---------------------- or supplemented on the date of delivery thereof
(except as provided below), must be delivered to a
purchaser prior to or together with the earlier of
delivery of (i) the written confirmation provided
for above, and (ii) any Note purchased by such
purchaser at the following address:
if to: PaineWebber Incorporated
to: Fixed Income Division
Attention: Mike Sabatino
1285 Avenue of the Americas, 11th Floor
New York, NY 10019
Telecopy Number: (212) 713-2233
Phone Number: (212) 713-4814
if to: First Union Capital Markets
to: Attn: Mark Adamson
301 South College Street, TW8
Charlotte, NC 28288
Telecopy Number: (704) 383-7727
if to: J.P. Morgan Securities Inc.
to: Attn: MTN Trading Desk
60 Wall Street, 3rd Floor
New York, NY 10260
Telephone Number: (212) 648-0591
Telecopy Number: (212) 648-5909/4/
if to: NationsBanc Montgomery Securities LLC
to both: Continuously Offered Products
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number: (704) 388-9939/5/
and
Syndicate Operations
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number: (704) 388-9212/6/
- -------------------------
/4/ Please send by telecopy with original to follow by mail.
/5/ Please send by telecopy rather than mail.
/6/ Please send by telecopy rather than mail
Exhibit B--Page 51
if to: Warburg Dillon Read LLC
to: Attention: Jeff London
677 Washington Blvd.
Stamford, CT 06901
Telecopy Number: (212) 719-7139
if to: State Street Bank and Trust
(the Trustee)
to: Attention: Robert J. Dunn
2 International Place, 4th Floor
Boston, MA 02110
Telecopy Number: (617) 664-5151
and to: the Designated Agent, if any.
For record keeping purposes, one copy of such
Prospectus shall also be mailed to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attention: Peter T. Healy, Esq.
Telecopy Number: (415) 984-8701
and to:
Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109-2281
Attention: John O. Newell, Esq.
Telecopy Number: (617) 523-1231
The Issuer shall ensure that the Presenting Agent
receives copies of the Prospectus and each amendment
or supplement thereto (including appropriate Pricing
Supplements) in such quantities and within such time
limits as will enable the Presenting Agent to
deliver such confirmation or Note to a purchaser as
contemplated by these procedures and in compliance
with the preceding sentence. If, since the date of
acceptance of a purchaser's offer, the Prospectus
shall have been supplemented solely to reflect any
sale of Notes on terms different from those agreed
to between the Issuer and such purchaser or a change
in posted rates not applicable to such purchaser,
such purchaser
Exhibit B--Page 52
shall not receive the Prospectus as supplemented by
such new supplement, but shall receive the
Prospectus as supplemented to reflect the terms of
the Notes being purchased by such purchaser and
otherwise as most recently amended or supplemented
on the date of delivery of the Prospectus.
Authenticity of Signatures: The Issuer will cause the Trustee, or the
- -------------------------- Designated Agent, to furnish the Agent from time
to time with the specimen signatures of each of the
officers, employees or agents of the Trustee, or the
Designated Agent, who have been authorized by the
Trustee, or the Designated Agent, respectively, to
authenticate Notes, but the Agent will have no
obligation or liability to the Issuer or the
Trustee, or the Designated Agent, in respect of the
authenticity of the signature of any officer,
employee or agent of the Issuer or the Trustee, or
the Designated Agent, on any Note.
Advertising Cost: The Issuer and the Company will determine with the
- ---------------- Agent the amount of advertising that may be
appropriate in offering the Notes.
Business Day: "Business Day" means any day (other than a
- ------------ Saturday, Sunday or legal holiday) on which
banking institutions in The City of New York are
open for business (and, (i) with respect to LIBOR
Notes which is also a day on which dealings in
deposits in U.S. dollars are transacted in the
London interbank market, and (ii) with respect to
Notes denominated in a Specified Currency other than
U.S. dollars, on which banking institutions in the
principal financial center of the country of the
Specified Currency are open for business).
Exhibit B--Page 53
PART II
ADMINISTRATIVE PROCEDURES FOR GLOBAL NOTE METHOD
OF BOOK-ENTRY NOTES
The following explains the administrative procedures for the Global
Note method of the DTC book-entry system. Any reference to "Book-Entry Notes"
in this Part II refers to the Global Note method (for a discussion of the Master
Note method of the DTC book-entry system, see Part III below). Certain
generally applicable administrative procedures are set forth in Part I above
(See "Issue/Authentication Date," "Price to Public," "Minimum Purchase,"
"Authenticity of Signatures," "Advertising Cost," and "Business Day"). In
connection with the qualification of the Book-Entry Notes for eligibility in the
book-entry system maintained by DTC, the Trustee will perform the custodial,
document control and administrative functions described below, in accordance
with its respective obligations under a Letter of Representations (the "Letter")
from the Issuer and the Trustee to DTC dated on or around the date hereof, and a
Medium-Term Note Certificate Agreement between the Trustee and DTC and its
obligations as a participant in DTC, including DTC's Same-Day Funds Settlement
System ("SDFS"). Both Fixed and Floating Rate Notes denominated and payable in
U.S. dollars may be issued in book-entry form. Single and Multi-Indexed Notes
may also be issued in book-entry form.
Issuance: On any date of settlement (as defined under
- -------- "Settlement" below) for one or more Book-Entry
Notes, the Issuer will issue a single global
security in fully registered form without coupons (a
"Global Note") representing up to $150,000,000
principal amount of all such Notes that have the
same Stated Maturity, redemption provisions, if any,
repayment provisions, if any, Interest Payment
Dates, Original Issue Date, original issue discount
provisions, if any, and, in the case of Fixed Rate
Notes, interest rate, or in the case of Floating
Rate Notes, interest rate formula, initial interest
rate, Index Maturity, Interest Reset Period,
Interest Reset Dates, Spread or Spread Multiplier
(if any), minimum interest rate (if any) and maximum
interest rate (if any) and, in the case of Fixed
Rate Notes or Floating Rate Notes that are also
Currency Indexed Notes, Specified Currency, Indexed
Currency, Face Amount and Base Exchange Rate and the
Base Interest Rate, if any, or that are also other
Indexed Notes, the same terms (all of the foregoing
are collectively referred to as the "Terms"). Each
Global Note will be dated and issued as of the date
of its settlement date, which will be (i) with
respect to an original Global Note (or any portion
thereof), its original issue date, and (ii)
following a consolidation of Global Notes, the most
recent Interest Payment Date to which interest has
been paid or duly provided for on the predecessor
Global Notes, regardless of the date of
authentication of such subsequently issued Global
Note. Each Book-Entry Note will be deemed to have
been dated and issued as of the settlement date,
which date shall be the Original Issue Date. No
Global Note will represent any Certificated Note.
Exhibit B--Page 54
Identification Numbers: The Issuer has arranged with the CUSIP Service
- ---------------------- Bureau of Standard & Poor's Ratings Services (the
"CUSIP Service Bureau") for the reservation of a
series of CUSIP numbers consisting of approximately
900 CUSIP numbers relating to Book-Entry Notes. The
Trustee, the Issuer and DTC have obtained from the
CUSIP Service Bureau a written list of such reserved
CUSIP numbers. The Trustee will assign CUSIP numbers
to Global Notes as described below under Settlement
Procedure "B". DTC will notify the CUSIP Service
Bureau periodically of the CUSIP numbers that the
Trustee has assigned to Global Notes. The Trustee
will notify the Issuer at any time when fewer than
100 of the reserved CUSIP numbers remain unassigned
to Global Notes, and, if it deems necessary, the
Issuer will reserve additional CUSIP numbers for
assignment to Global Notes representing Book Entry
Notes. Upon obtaining such additional CUSIP numbers,
the Issuer shall deliver a list of such additional
CUSIP numbers to the Trustee and DTC.
Registration: Each Global Note will be issued only in fully
- ------------ registered form without coupons. Each Global Note
will be registered in the name of Cede & Co., as
nominee for DTC, on the Securities Register
maintained under the Indenture. The beneficial owner
of a Book-Entry Note (or one or more indirect
participants in DTC designated by such owner) will
designate one or more participants in DTC (with
respect to such Note, the "Participants") to act as
agent or agents for such owner in connection with
the book-entry system maintained by DTC, and DTC
will record in book-entry form, in accordance with
instructions provided by such Participants, a credit
balance with respect to such Note in the account of
such Participants. The ownership interest of such
beneficial owner in such Note will be recorded
through the records of such Participants or through
the separate records of such Participants and one or
more indirect participants in DTC.
Transfers: Transfers of a Book-Entry Note will be accomplished
- --------- by book entries made by DTC and, in turn, by
Participants (and, in certain cases, one or more
indirect participants in DTC acting on behalf of
beneficial transferors and transferees of such
Note).
Exchanges: The Trustee may deliver to DTC and the CUSIP
- --------- Service Bureau at any time a written notice of
consolidation (a copy of which shall be attached to
the Global Note resulting from such consolidation)
specifying (i) the CUSIP numbers set forth on two or
more outstanding Global Notes that represent Book-
Entry Notes having the same Terms and for which
interest has been paid to the same date, (ii) a
date, occurring at least thirty days after such
written notice is delivered and at least thirty days
before the next
Exhibit B--Page 55
Interest Payment Date for such Book-Entry Notes, on
which such Global Notes shall be exchanged for a
single replacement Global Note and (iii) a new CUSIP
number to be assigned to such replacement Global
Note. Upon receipt of such a notice, DTC will send
to its Participants (including the Trustee) a
written reorganization notice to the effect that
such exchange will occur on such date. Prior to the
specified exchange date, the Trustee will deliver to
the CUSIP Service Bureau a written notice setting
forth such exchange date and the new CUSIP number
and stating that, as of such exchange date, the
CUSIP numbers of the Global Notes to be exchanged
will no longer be valid. On the specified exchange
date, the Trustee will exchange such Global Notes
for a single Global Note bearing the new CUSIP
number and a new Original Issue Date and the CUSIP
numbers of the exchanged Global Notes will, in
accordance with CUSIP Service Bureau procedures, be
canceled and not immediately reassigned.
Notwithstanding the foregoing, if the Global Notes
to be exchanged exceed $150,000,000 in aggregate
principal amount, one Global Note will be
authenticated and issued to represent each
$150,000,000 of principal amount of the exchanged
Global Notes and an additional Global Note will be
authenticated and issued to represent any remaining
principal amount of such Global Notes (see
"Denominations" below).
Maturities: Each Book-Entry Note will mature on a Business Day
- ---------- nine months or more from the settlement date
for such Note.
Notice of Repayment Terms: With respect to each Book-Entry Note that is
- ------------------------- repayable at the option of the Holder, the Trustee
will furnish DTC on the settlement date pertaining
to such Book-Entry Note a notice setting forth the
terms of such repayment option. Such terms shall
include the start date and end dates of the first
exercise period, the purchase date following such
exercise period, the frequency that such exercise
periods occur (e.g., quarterly, semiannually,
annually, etc.) and if the repayment option expires
before maturity, the same information (except
frequency) concerning the last exercise period. It
is understood that the exercise period shall be at
least 15 calendar days long and that the purchase
date shall be at least seven calendar days after the
last day of the exercise period.
Redemption and Repayment: The Trustee will comply with the terms of the Letter
- ------------------------ with regard to redemptions and repayments of the
Notes. If a Global Note is to be redeemed or repaid
in part, the Trustee will exchange such Global Note
for two Global Notes, one of which shall represent
the portion of the Global Note being redeemed or
repaid and
Exhibit B--Page 56
shall be canceled immediately after issuance and the
other of which shall represent the remaining portion
of such Global Note and shall bear the CUSIP number
of the surrendered Global Note.
Denominations: Book Entry Notes will be issued in principal
- ------------- amounts of $1,000 or any amount in excess thereof
that is an integral multiple of $1,000. Global Notes
will be denominated in principal amounts not in
excess of $150,000,000. If one or more Book Entry
Notes having an aggregate principal amount in excess
of $150,000,000 would, but for the preceding
sentence, be represented by a single Global Note,
then one Global Note will be issued to represent
each $150,000,000 principal amount of such Book-
Entry Note or Notes and an additional Global Note
will be issued to represent any remaining principal
amount of such Book-Entry Note or Notes. In such a
case, each of the Global Notes representing such
Book-Entry Note or Notes shall be assigned the same
CUSIP number.
Interest: General. Interest on each Book-Entry Note will
- -------- begin to accrue from the Original Issue Date of
the Global Note representing such Note or from the
most recent date to which interest has been paid, as
the case may be, in accordance with the terms of the
Note, as described in the Prospectus Supplement (as
defined in the Agency Agreement), as supplemented by
the applicable Pricing Supplement. Standard & Poor's
Ratings Services will use the information received
in the pending deposit message described under the
Settlement Procedure "C" below in order to include
the amount of any interest payable and certain other
information regarding the related Global Note in the
appropriate weekly bond report published by Standard
& Poor's Ratings Services.
Notice of Interest Payment
- --------------------------
and Regular Record Dates: On the first Business Day of January, April, July
- ------------------------ and October of each year, the Trustee will deliver
to the Issuer and DTC a written list of Regular
Record Dates and Interest Payment Dates that will
occur with respect to Book-Entry Notes during the
six-month period beginning on such first Business
Day. Promptly after each Interest Determination Date
or Calculation Date, as applicable (as defined in or
pursuant to the applicable Note) for Floating Rate
Notes, the Issuer, upon receiving notice thereof,
will notify Standard & Poor's Ratings Services of
the interest rate determined on such Interest
Determination Date or Calculation Date, as
applicable.
Exhibit B--Page 57
Calculation of Interest: Interest on Fixed Rate Book-Entry Notes (including
- ----------------------- interest for partial periods) and interest rates
on Floating Rate Book-Entry Notes will be determined
as set forth in the form of Notes. With respect to
Floating Rate Book-Entry Notes, the Calculation
Agent shall determine the interest for each Interest
Reset Date and communicate such interest rate to the
Issuer and the Issuer will promptly notify the
Trustee and the Paying Agent of each such
determination.
Payments of Principal
- ---------------------
and Interest: Promptly after each Regular Record Date, the
- ------------ Trustee will deliver to the Issuer and DTC a
written notice specifying by CUSIP number the amount
of interest to be paid on each Global Note on the
following Interest Payment Date (other than an
Interest Payment Date coinciding with maturity) and
the total of such amounts. The Issuer will confirm
with the Trustee the amount payable on each Global
Note on such Interest Payment Date. DTC will confirm
the amount payable on each Global Note on such
Interest Payment Date by reference to the daily or
weekly bond reports published by Standard & Poor's
Ratings Services. The Issuer will pay to the
Trustee, as paying agent, the total amount of
interest due on such Interest Payment Date (other
than at maturity), and the Trustee will pay such
amount to DTC at the times and in the manner set
forth below under "Manner of Payment".
Payments at Maturity: On or about the first Business Day of each month,
- -------------------- the Trustee will deliver to the Issuer and DTC a
written list of principal and interest to be paid on
each Global Note maturing either at Stated Maturity
or on a Redemption or Repayment Date in the
following month. The Issuer, the Trustee and DTC
will confirm the amounts of such principal and
interest payments with respect to each such Global
Note on or about the fifth Business Day preceding
the maturity of such Global Note. The Issuer will
pay to the Trustee, as paying agent, the principal
amount of such Global Note, together with interest
due at such maturity. The Trustee will pay such
amounts to DTC at the times and in the manner set
forth below under "Manner of Payment." Promptly
after payment to DTC of the principal and interest
due at the maturity of such Global Note, the Trustee
will cancel and destroy such Global Note in
accordance with the terms of the Indenture and
deliver a certificate of destruction to the Issuer.
Manner of Payment: The total amount of any principal and interest due
- ----------------- on Global Notes on any Interest Payment Date or at
maturity shall be paid by the Issuer to the Trustee
in funds available for use by the Trustee as of 9:30
A.M. (New York City time), or as soon as practicable
thereafter on such date. The Issuer will confirm
instructions regarding payment in writing to the
Trustee. Prior
Exhibit B--Page 58
to 10:00 A.M. (New York City time) on each Maturity
Date or as soon as possible thereafter, following
receipt of such funds from the Issuer, the Trustee
will pay by separate wire transfer (using Fedwire
message entry instructions in a form previously
specified by DTC) to an account at the Federal
Reserve Bank of New York previously specified by
DTC, in funds available for immediate use by DTC,
each payment of principal (together with interest
thereon) due on Global Notes on any Maturity Date.
On each Interest Payment Date, interest payments
shall be made to DTC in same-day funds in accordance
with existing arrangements between the Trustee and
DTC. Thereafter, on each such date, DTC will pay, in
accordance with its SDFS operating procedures then
in effect, such amounts in funds available for
immediate use to the respective Participants in
whose names the Book-Entry Notes represented by such
Global Notes are recorded in the book-entry system
maintained by DTC. Neither the Issuer nor the
Trustee shall have any direct responsibility or
liability for the payment by DTC to such
Participants of the principal of and interest on the
Book-Entry Notes.
Withholding Taxes: The amount of any taxes required under applicable
- ----------------- law to be withheld from any interest payment on a
Book-Entry Note will be determined and withheld by
the Participant, indirect participant in DTC or
other Person responsible for forwarding payments and
materials directly to the beneficial owner of such
Note.
Acceptance of Offers: Each Agent will promptly advise the Issuer of each
- -------------------- reasonable offer to purchase Notes received by it,
other than those rejected by such Agent. Each Agent
may, in its discretion reasonably exercised, without
notice to the Issuer, reject any offer received by
it, in whole or in part. The Issuer will have the
right to withdraw, cancel or modify such offer
without notice and will have the sole right to
accept offers to purchase Notes and may reject any
such offer, in whole or in part. If the Issuer
rejects an offer, the Issuer will promptly notify
such Agent.
Settlement: The receipt by the Issuer of immediately available
- ---------- funds in payment for a Book-Entry Note and the
authentication and issuance of the Global Note or
Global Notes representing such Note shall constitute
"settlement" with respect to such Note. All orders
accepted by the Issuer will be settled on the third
Business Day from the date of the sale pursuant to
the timetable for settlement set forth below unless
the Issuer and the purchaser agree to settlement on
another day which shall be no earlier than the next
Business Day.
Exhibit B--Page 59
Settlement Procedures: Settlement Procedures with regard to each Book-Entry
- --------------------- Note sold by the For Issuer through an Agent as
agent, shall be as follows:
For each offer accepted by the Issuer, the
Presenting Agent shall communicate to the Issuer,
Attention: Thomas J. Sargeant, CFO (Fax No.: (703)
329-0060), who will provide a copy to the Trustee,
Attention: Robert J. Dunn (Fax No.: (617) 664-5151
and the Designated Agent, if any, by facsimile
transmission or other acceptable means, the
information set forth below:
* Principal amount.
* Maturity Date of Notes.
* In the case of a Fixed Rate Book-Entry
Note, the interest rate or, in the case of a Floating Rate Book-Entry Note, the
Interest Rate Formula, the Initial Interest Rate (if known at such time), Index
Maturity, Interest Reset Period, Interest Reset Dates, Spread or Spread
Multiplier (if any), Minimum Interest Rate (if any) and Maximum Interest Rate
(if any).
* Interest Payment Period and Interest
Payment Dates.
* Redemption provisions, if any.
* Repayment provisions, if any.
* Settlement date (Original Issue Date).
* Price to public of the Note (expressed
as a percentage).
* Agent's commission (to be paid in the
form of a discount from the proceeds remitted to the Issuer upon settlement).
* Original issue discount provisions
if any.
* In the case of Currency Indexed Notes,
the above-listed information, as applicable, and the Base Exchange Rate(s),
Base Interest Rate and Indexed Currencies.
* In the case of Dual Currency Notes, the
above-listed information, as applicable, and the Optional Payment Currency,
Designated Exchange Rate and Optional Election Dates.
* Net proceeds to the Issuer.
Exhibit B--Page 60
The Trustee will confirm the information set forth
in Settlement Procedure "A" above by telephone with
such Agent and the Issuer.
The Trustee will assign a CUSIP number to the Global Note
representing such Note and will telephone the Issuer
and advise the Issuer of such CUSIP number. The
Trustee will enter a pending deposit message through
DTC's Participant Terminal System, providing the
following settlement information to DTC (which shall
route such information to Standard & Poor's Ratings
Services) and the Presenting Agent:
* The applicable information set forth in
Settlement Procedure "A".
* Identification as a Fixed Rate
Book-Entry Note or a Floating Rate Book-Entry Note.
* Initial Interest Payment Date for such
Note, number of days by which such date succeeds the related DTC Record Date
(which, in the case of Floating Rate Notes which reset daily or weekly shall be
the date five calendar days immediately preceding the applicable Interest
Payment Date and in the case of all other Notes shall be the Regular Record Date
as defined in the Note), the amount of interest payable on such Interest Payment
Date per $1,000 principal amount of Notes at Maturity, and amount of interest
payable per $1,000 principal amount of Notes in the case of Fixed Rate Notes.
* CUSIP number of the Global Note
representing such Note.
* Whether such Global Note will
represent any other Book-Entry Note (to the extent known at such time).
To the extent the Issuer has not already done so, the
Issuer will deliver to the Trustee a Pricing
Supplement in a form that has been approved by the
Issuer and the Agents. The Issuer will also deliver
to the Trustee a Global Note representing such Note.
The Trustee will complete and authenticate the Global Note
representing such Note.
DTC will credit such Note to the Trustee's participant account
at DTC.
The Trustee will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC to (i)
debit such Note to the Trustee's participant account
and credit such Note to such Agent's participant
account and (ii) debit such Agent's settlement
account and credit the Trustee's settlement account
for an amount equal to the price of such Note less
such Agent's commission. The entry of such a deliver
order shall constitute a
Exhibit B--Page 61
representation and warranty by the Trustee to DTC
that (i) the Global Note representing such Book-
Entry Note has been executed, delivered and
authenticated and (ii) the Trustee is holding such
Global Note pursuant to the relevant Medium-Term
Note Certificate Agreement between the Trustee and
DTC.
An Agent will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC (i) to
debit such Note to such Agent's participant account
and credit such Note to the participant accounts of
the Participants with respect to such Note and (ii)
to debit the settlement accounts of such
Participants and credit the settlement account of
such Agent for an amount equal to the price of such
Note.
Transfers of funds in accordance with SDFS deliver orders
described in Settlement Procedures "G" and "H" will
be settled in accordance with SDFS operating
procedures in effect on the settlement date.
The Trustee, upon confirming receipt of such funds
in accordance with Settlement Procedure "G," will
wire transfer to the following account of the
Issuer:
Bank: Fleet National Bank
ABA Number: 011 900 571
Account Number: 1510350-03121
For Credit To: Fleet National Bank Loan
Clearance Account
Reference: AvalonBay Communities, Inc.
Attn: Kim Lewis (860) 986-5982
in funds available for immediate use, the amount transferred to
the Trustee in accordance with Settlement
Procedure "G."
An Agent will confirm the purchase of such Note to the purchaser
either by transmitting to the Participants with
respect to such Note a confirmation order or orders
through DTC's institutional delivery system or by
mailing a written confirmation to such purchaser.
Settlement
- -----------
Procedure Timetable: For orders of Book-Entry Notes solicited by the
- ------------------- Agent, as agent, and accepted by the Issuer for
settlement on the first Business Day after the sale
date, Settlement Procedures "A" through "K" set
forth above shall be completed as soon as possible
but not later than the respective times (New York
City time) set forth below:
Settlement Procedure Time
-------------------- ----
A 11:00 a.m. on the sale date
B 12:00 noon on the sale date
C 2:00 p.m. on the sale date
D 3:00 p.m. on the day
before settlement
E 9:00 a.m. on settlement date
F 10:00 a.m. on settlement
date
G-H 2:00 p.m. on settlement date
I 4:45 p.m. on settlement date
J-K 5:00 p.m. on settlement date
Exhibit B--Page 62
If a sale is to be settled two Business Days after the sale date,
Settlement Procedures "A," "B" and "C" shall be
completed as soon as practicable but not later than
11:00 a.m., 12:00 noon and 2:00 p.m., as the case
may be, on the first Business Day after the sale
date.
If a sale is to be settled more than two Business Days after the
sale date, Settlement Procedure "A" shall be
completed as soon as practicable but no later than
11:00 a.m. on the first Business Day after the sale
date and Settlement Procedures "B" and "C" shall be
completed as soon as practicable but no later than
12:00 noon and 2:00 p.m., as the case may be, on the
second Business Day before the settlement date. If
the initial interest rate for a Floating Rate Book-
Entry Note has not been determined at the time that
Settlement Procedure "A" is completed, Settlement
Procedures "B" and "C" shall be completed as soon as
such rate has been determined but not later than
12:00 noon and 2:00 p.m., respectively, on the
Business Day before the settlement date. Settlement
Procedure "I" is subject to extension in accordance
with any extension of Fedwire closing deadlines and
in the other events specified in the SDFS operating
procedures in effect on the settlement date.
If settlement of a Book-Entry Note is rescheduled or canceled,
the Trustee, upon receipt of notice from the Issuer,
will deliver to DTC, through DTC's Participant
Terminal System, a cancellation message to such
effect by no later than 2:00 p.m. on the Business
Day immediately preceding the scheduled settlement
date.
Failure to Settle: If an Agent or Trustee fails to enter an SDFS
- ----------------- deliver order with respect to a Book-Entry Note
pursuant to Settlement Procedure "G," the Trustee
may deliver to DTC, through DTC's Participant
Terminal System, as soon as practicable, a
withdrawal message instructing DTC to debit such
Note to the Trustee's participant account. DTC will
process the withdrawal message, provided that the
Trustee's participant account contains a principal
amount of the Global Note representing such Note
that is at least equal to the principal amount to be
debited. If a withdrawal message is processed with
respect to all the Book-Entry Notes represented by a
Global Note, the Trustee will mark such Global
Exhibit B--Page 63
Note "canceled", make appropriate entries in its
records and send such canceled Global Note to the
Issuer. The CUSIP number assigned to such Global
Note shall, in accordance with CUSIP Service Bureau
procedures, be canceled and not immediately
reassigned. If a withdrawal message is processed
with respect to one or more, but not all, of the
Book-Entry Notes represented by a Global Note, the
Trustee will exchange such Global Note for two
Global Notes, one of which shall represent such
Book-Entry Note or Notes and shall be canceled
immediately after issuance and the other of which
shall represent the remaining Book-Entry Notes
previously represented by the surrendered Global
Note and shall bear the CUSIP number of the
surrendered Global Note.
If the purchase price for any Book-Entry Note is not timely paid
to the Participants with respect to such Note by
the beneficial purchaser thereof (or a person,
including an indirect participant in DTC, acting on
behalf of such purchaser), such Participants and, in
turn, the Presenting Agent may enter SDFS deliver
orders through DTC's Participant Terminal system
reversing the orders entered pursuant to Settlement
Procedures "G" and "H," respectively. Thereafter,
the Trustee will deliver the withdrawal message and
take the applicable related actions described in the
preceding paragraph. If such failure shall have
occurred for any reason other than the failure of
the Presenting Agent to provide the Purchase
Information to the Issuer or to provide a
confirmation to the purchaser, the Issuer will
reimburse the Presenting Agent on an equitable basis
for its loss of the use of funds during the period
when they were credited to the account of the
Issuer.
Notwithstanding the foregoing, upon any failure to settle with
respect to a Book-Entry Note, DTC may take any
actions in accordance with its SDFS operating
procedures then in effect. In the event of a failure
to settle with respect to one or more, but not all,
of the Book-Entry Notes to have been represented by
a Global Note, the Trustee will provide, in
accordance with Settlement Procedures "D" and "E,"
for the authentication and issuance of a Global Note
representing the other Book-Entry Notes to have been
represented by such Global Note and will make
appropriate entries in its records.
Procedure for Rate Changes: The Issuer and each Agent will discuss from time to
- -------------------------- time the price of, and the rates to be borne by,
the Notes that may be sold as a result of the
solicitation of offers by any Agent. Once an Agent
has recorded any indication of interest in Notes
upon certain terms, and communicated with the
Issuer, if the Issuer plans to accept an offer to
purchase Notes upon such terms, it
Exhibit B--Page 64
will prepare a Pricing Supplement to the Prospectus,
as then amended or supplemented, reflecting the
terms of such Notes and will arrange to transmit
such Pricing Supplement to the Commission for filing
in accordance with and within the time prescribed by
the applicable paragraph of Rule 424(b) under the
Act. The Issuer will supply at least two copies of
the Prospectus as then amended or supplemented, and
bearing such Pricing Supplement, to the Presenting
Agent. The Issuer shall use its reasonable best
efforts to send such Pricing Supplement by telecopy
or overnight express (for delivery by the close of
business on the applicable trade date, but in no
event later than 11:00 a.m. New York City time, on
the Business Day following the applicable trade
date) to the Presenting Agent and the Trustee at the
following applicable address:
if to: PaineWebber Incorporated
to: Fixed Income Division
Attention: Mike Sabatino
1285 Avenue of the Americas, 11th Floor
New York, NY 10019
Telecopy Number: (212) 713-2233
Phone Number: (212) 713-4814
if to: First Union Capital Markets
to: Attn: Mark Adamson
301 South College Street, TW8
Charlotte, NC 28288
Telecopy Number: (704) 383-7727
if to: J.P. Morgan Securities Inc.
to: Attn: MTN Trading Desk
60 Wall Street, 3rd Floor
New York, NY 10260
Telephone Number: (212) 648-0591
Telecopy Number: (212) 648-5909/7/
if to: NationsBanc Montgomery Securities LLC
to both: Continuously Offered Products
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number: (704) 388-9939/8/
and
- ----------------------------
/7/ Please send by telecopy with original to follow by mail.
/8/ Please send by telecopy rather than mail.
Exhibit B--Page 65
Syndicate Operations
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number: (704) 388-9212/9/
if to: Warburg Dillon Read LLC
to: Attention: Jeff London
677 Washington Blvd.
Stamford, CT 06901
Telecopy Number: (212) 719-7139
if to: State Street Bank and Trust (the
Trustee)
to: Attention: Robert J. Dunn
2 International Place, 4th Floor
Boston, MA 02110
Telecopy Number: (617) 664-5151
and to: the Designated Agent, if any.
For record keeping purposes, one copy of such
Pricing Supplement shall also be mailed to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attention: Peter T. Healy, Esq.
Telecopy Number: (415) 984-8701
and to:
Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109-2281
Attention: John O. Newell, Esq.
Telecopy Number: (617) 523-1231
In each instance that a Pricing Supplement is
prepared, the Presenting Agent will provide a copy
of such Pricing Supplement to each investor or
purchaser of the relevant Notes or its agent.
Pursuant to Rule 434 of the Securities Act of 1933,
as amended, the Pricing Supplement may be delivered
separately from the Prospectus. No settlements with
respect to Notes upon such terms may occur prior to
such transmitting and
- ---------------------
/9/ Please send by telecopy rather than mail
Exhibit B--Page 66
such Agent will not, prior to such transmitting,
mail confirmations to customers who have offered to
purchase Notes upon such terms. After such
transmitting, sales, mailing of confirmations and
settlements may occur with respect to Notes upon
such terms, subject to the provisions of "Delivery
of Prospectus" below. Outdated Stickers, and copies
of the Prospectus to which they are attached (other
than those retained for files), will be destroyed.
Suspension of Solicitation;
- ---------------------------
Amendment or Supplement: As provided in the Agency Agreement, the Issuer may
- ----------------------- suspend solicitation of purchase at any time, and,
upon receipt of notice from the Issuer, the Agents
will as promptly as practicable, but in no event
later than one Business Day following such notice,
suspend solicitation until such time as the Issuer
has advised them that solicitation of purchases may
be resumed.
If the Agents receive the notice from the Issuer contemplated by
Section 4(b) of the Agency Agreement, they will
promptly suspend solicitation and will only resume
solicitation as provided in the Agency Agreement. If
the Issuer decides to amend or supplement the
Registration Statement or the Prospectus relating to
the Notes, it will promptly advise the Agents and
will furnish the Agents with the proposed amendment
or supplement in accordance with the terms of the
Agency Agreement. The Issuer will promptly file or
mail to the Commission for filing such amendment or
supplement, provide the Agents with copies of any
such amendment or supplement, confirm to the Agents
that such amendment or supplement has been filed
with the Commission and advise the Agents that
solicitation may be resumed. Any such suspension
shall not affect the Issuer's obligations under the
Agency Agreement; and in the event that at the time
the Issuer suspends solicitation of purchases there
shall be any offers already accepted by the Issuer
outstanding for settlement, the Issuer will have the
sole responsibility for fulfilling such obligations;
the Agents will make reasonable efforts to assist
the Issuer to fulfill such obligations, but the
Agents will not be obligated to fulfill such
obligations. The Issuer will in addition promptly
advise the Agents and the Trustee if such offers are
not to be settled and if copies of the Prospectus as
in effect at the time of the suspension may not be
delivered in connection with the settlement of such
offers.
Delivery of Prospectus: A copy of the Prospectus, as most recently amended
- ---------------------- or supplemented on the date of delivery thereof
(except as provided below), must be delivered to a
purchaser prior to or together with the earlier of
delivery of (i) the written confirmation
Exhibit B--Page 67
provided for above, and (ii) any Note purchased by
such purchaser at the following address:
if to: PaineWebber Incorporated
to: Fixed Income Division
Attention: Mike Sabatino
1285 Avenue of the Americas, 11th Floor
New York, NY 10019
Telecopy Number: (212) 713-2233
Phone Number: (212) 713-4814
if to: First Union Capital Markets
to: Attn: Mark Adamson
301 South College Street, TW8
Charlotte, NC 28288
Telecopy Number: (704) 383-7727
if to: J.P. Morgan Securities Inc.
to: Attn: MTN Trading Desk
60 Wall Street, 3rd Floor
New York, NY 10260
Telephone Number: (212) 648-0591
Telecopy Number: (212) 648-5909/10/
if to: NationsBanc Montgomery Securities LLC
to both: Continuously Offered Products
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number:
(704) 388-9939/11/
and
Syndicate Operations
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number:
(704) 388-9212/12/
if to: Warburg Dillon Read LLC
to: Attention: Jeff London
677 Washington Blvd.
Stamford, CT 06901
Telecopy Number: (212) 719-7139
- ---------------------
/10/ Please send by telecopy with original to follow by mail.
/11/ Please send by telecopy rather than mail.
/12/ Please send by telecopy rather than mail.
Exhibit B--Page 68
if to: State Street Bank and Trust (the Trustee)
to: Attention: Robert J. Dunn
2 International Place, 4th Floor
Boston, MA 02110
Telecopy Number: (617) 664-5151
and to: the Designated Agent, if any.
For record keeping purposes, one copy of such
Prospectus shall also be mailed to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attention: Peter T. Healy, Esq.
Telecopy Number: (415) 984-8701
and to:
Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109-2281
Attention: John O. Newell, Esq.
Telecopy Number: (617) 523-1231
The Issuer shall ensure that the Presenting Agent receives
copies of the Prospectus and each amendment or
supplement thereto (including appropriate Pricing
Supplements) in such quantities and within such time
limits as will enable the Presenting Agent to
deliver such confirmation or Note to a purchaser as
contemplated by these procedures and in compliance
with the preceding sentence. If, since the date of
acceptance of a purchaser's offer, the Prospectus
shall have been supplemented solely to reflect any
sale of Notes on terms different from those agreed
to between the Issuer and such purchaser or a change
in posted rates not applicable to such purchaser,
such purchaser shall not receive the Prospectus as
supplemented by such new supplement, but shall
receive the Prospectus as supplemented to reflect
the terms of the Notes being purchased by such
purchaser and otherwise as most recently amended or
supplemented on the date of delivery of the
Prospectus.
Exhibit B--Page 69
PART III
ADMINISTRATIVE PROCEDURES FOR MASTER NOTE
METHOD OF BOOK-ENTRY NOTES
The following explains the administrative procedures for the Master
Note method of the DTC book-entry system. Any reference to "Book-Entry Notes"
in this Part III refers to the Master Note method (for a discussion of the
Global Note method of the book-entry system, see Part II above). (Certain
generally applicable administrative procedures are set forth in Part I above.
See "Issue/Authentication Date," "Price to Public," "Minimum Purchase,"
"Authenticity of Signatures," "Advertising Cost," and "Business Day"). In
connection with the qualification of the Book-Entry Notes for eligibility in the
book-entry system maintained by DTC, the Trustee will perform the custodial,
document control and administrative functions described below, in accordance
with its respective obligations under a Letter of Representations (the "Letter")
from the Issuer and the Trustee to DTC dated as of the date hereof, and a
Medium-Term Note Certificate Agreement between the Trustee and DTC and its
obligations as a participant in DTC, including DTC's Same-Day Funds Settlement
System ("SDFS"). Both Fixed and Floating Rate Notes denominated and payable in
U.S. dollars may be issued in book-entry form. Single and Multi-Indexed Notes
may also be issued in book-entry form.
Issuance: On or before any date of settlement (as defined
- -------- under "Settlement" below) for one or more
Book-Entry Notes represented by one or more Master
Notes, the Issuer will deliver one or more Pricing
Supplements (with a Prospectus and a Prospectus
Supplement attached thereto unless previously
delivered to the Trustee) to the Trustee identifying
each issue of Book-Entry Notes that have the same
Stated Maturity, redemption provisions, if any,
Interest Payment Dates, Original Issue Date,
original issue discount provisions, if any, and, in
the case of Fixed Rate Notes, interest rate, or, in
case of Floating Rate Notes, interest rate formula,
initial interest rate, Index Maturity, Interest
Reset Period, Interest Reset Dates, Spread or Spread
Multiplier (if any), minimum interest rate (if any)
and maximum interest rate (if any) and, in the case
of Fixed Rate Notes or Floating Rate Notes that are
also Currency Indexed Notes, Specified Currency,
Indexed Currency, Face Amount and Base Exchange Rate
and the Base Interest Rate, if any, or that are also
Other Indexed Notes, the same terms (all of the
foregoing are collectively referred to as the
"Terms"). Each Pricing Supplement shall be
accompanied by a letter from the Issuer (i) advising
the Trustee that as of the date of such letter, the
Issuer has issued Notes pursuant to the Indenture
having the Terms specified in such Pricing
Supplement, (ii) confirming that such Notes are debt
obligations of the Issuer referred to and evidenced
by the Master Note registered in the name of Cede &
Co., as nominee for DTC and (iii) requesting the
Trustee to make an appropriate entry identifying
such debt obligations on the records of the Issuer
S-70
maintained by the Trustee. Each Book-Entry Note will
be deemed to have been dated and issued as of the
settlement date, which date shall be the Original
Issue Date. No Master Note will represent any
Certificated Note.
Identification Numbers: The Issuer has arranged with the CUSIP Service
- ---------------------- Bureau of Standard & Poor's Ratings Services (the
"CUSIP Service Bureau") for the reservation of a
series of CUSIP numbers, consisting of approximately
900 CUSIP numbers relating to Book-Entry Notes. The
Trustee, the Issuer and DTC have obtained from the
CUSIP Service Bureau a written list of such reserved
CUSIP numbers. The Trustee will assign CUSIP numbers
to each issue of Book-Entry Notes identified by a
Pricing Supplement as described below under
Settlement Procedure "B." DTC will notify the CUSIP
Service Bureau periodically of the CUSIP numbers
that the Trustee has assigned to each issue of Book-
Entry Notes. The Trustee will notify the Issuer at
any time when fewer than 100 of the reserved CUSIP
numbers remain unassigned to issue of Book-Entry
Notes, and, if it deems necessary, the Issuer will
reserve additional CUSIP numbers for assignment to
issues of Book-Entry Notes. Upon obtaining such
additional CUSIP numbers, the Issuer shall deliver a
list of such additional CUSIP numbers to the Trustee
and DTC.
Registration: The Master Note representing the Book-Entry Notes
- ------------ will be issued only in fully registered form
without coupons. The Master Note will be registered
in the name of Cede & Co., as nominee for DTC, on
the Securities Register maintained under the
Indenture. The beneficial owner of a Book-Entry Note
(or one or more indirect participants in DTC
designated by such owner) will designate one or more
direct participants in DTC (with respect to such
Book-Entry Note, the "Participants") to act as agent
or agents for such owner in connection with the
book-entry system maintained by DTC, and DTC will
record in book-entry form, in accordance with
instructions provided by such Participants, a credit
balance with respect to such Note in the account of
such Participants. The ownership interest of such
beneficial owner in such Book-Entry Note will be
recorded through the records of such Participants or
through the separate records of such Participants
and one or more indirect participants in DTC.
Transfers: Transfers of a Book-Entry Note will be accomplished
- --------- by book entries made by DTC and, in turn, by
Participants (and, in certain cases, one or more
indirect participants in DTC) acting on behalf of
beneficial transferors and transferees of such Note.
Exhibit B--Page 71
Exchanges: The Trustee may deliver to DTC and the CUSIP Service
- --------- Bureau at any time a written notice of consolidation
specifying (i) the CUSIP numbers set forth on two or
more Pricing Supplements that identify issues of
Book-Entry Notes having the same Terms and for which
interest has been paid to the same date, (ii) a
date, occurring at least thirty days after such
written notice is delivered and at least thirty days
before the next Interest Payment Date for such
issues of Book-Entry Notes, and (iii) a new CUSIP
number to be assigned to such issues of Book-Entry
Notes having the same terms. Upon receipt of such a
notice, DTC will send to its Participants (including
the Trustee) a written reorganization notice to the
effect that such exchange will occur on such date.
Prior to the specified exchange date, the Trustee
will deliver to the CUSIP Service Bureau a written
notice setting forth such exchange date and the new
CUSIP number and stating that, as of such exchange
date, the CUSIP numbers of the relevant issues of
Book-Entry Notes will no longer be valid. On the
specified exchange date, the CUSIP numbers of the
relevant issues of Book-Entry Notes will, in
accordance with CUSIP Service Bureau procedures, be
canceled and not immediately reassigned.
Maturities: Each Issue of Book-Entry Notes will mature on a
- ---------- Business Day nine months or more from the
settlement date for such issue of Book-Entry Notes.
Notice of Repayment: With respect to each Book-Entry Note that is
- ------------------- repayable at the option of the Holder the Trustee
will furnish DTC on the settlement date pertaining
to such Book-Entry Note a notice setting forth the
terms of such repayment option. Such terms shall
include the start date and end dates of the first
exercise period, the purchase date following such
exercise period, the frequency that such exercise
periods occur (e.g.., quarterly, semiannually,
annually, etc.) and if the repayment option expires
before maturity, the same information (except
frequency) concerning the last exercise period. It
is understood that the exercise period shall be at
least 15 calendar days long and that the purchase
date shall be at least seven calendar days after the
last day of the exercise period.
Redemption and Repayment: The Trustee will comply with the terms of the Letter
- ------------------------ with regard to redemptions and repayments of the
Notes. If an issue of Book-Entry Notes is to be
redeemed or repaid in part, the Trustee will make
appropriate entries in its records to reflect the
remaining portion of such issue of Book Entry Notes,
which portion shall bear the same CUSIP number as
prior to the redemption or repayment, as the case
may be.
Exhibit B--Page 72
Denominations: Book-Entry Notes will be issued in principal
- ------------- amounts of $1,000 or any amount in excess thereof
that is an integral multiple of $1,000.
Interest: General. Interest on each Book-Entry Note will
- -------- begin to accrue from the Original Issue Date of an
issue of Book-Entry Notes or from the most recent
date to which interest has been paid, as the case
may be, and will be calculated and paid in the
manner described in the Prospectus Supplement (as
defined in the Agency Agreement), as supplemented by
the applicable Pricing Supplement. Standard & Poor's
Ratings Services will use the information received
in the pending deposit message described under the
Settlement Procedure "C" below in order to include
the amount of any interest payable and certain other
information regarding the related issue of Book-
Entry Notes in the appropriate weekly bond report
published by Standard & Poor's Ratings Services.
Notice of Interest Payment
- --------------------------
and Regular Record Dates: On the first Business Day of January, April, July
- ------------------------ and October of each year, the Trustee will deliver
to the Issuer and DTC a written list of Regular
Record Dates and Interest Payment Dates that will
occur with respect to Book-Entry Notes during the
six-month period beginning on such first Business
Day. Promptly after each Interest Determination Date
or Calculation Date, as applicable (as set forth in
the Prospectus Supplement, as supplemented by the
applicable Pricing Supplement and pursuant to the
applicable Note) for Floating Rate Notes, the
Issuer, upon receiving notice thereof, will notify
Standard & Poor's Ratings Services of the interest
rate determined on such Interest Determination Date
or Calculation Date, as applicable.
Calculation of Interest: Interest on Fixed Rate Book-Entry Notes (including
- ----------------------- interest for partial periods) and interest rates
on Floating Rate Book-Entry Notes will be determined
as set forth in the Prospectus Supplement, as
supplemented by the applicable Pricing Supplement,
and pursuant to the applicable form of Notes. With
respect to Floating Rate Book-Entry Notes, the
Calculation Agent shall determine the interest for
each Interest Reset Date and communicate such
interest rate to the Issuer and the Issuer will
promptly notify the Trustee and the Paying Agent of
each such determination.
Payments of Principal
- ---------------------
and Payment of
- --------------
Interest Only Interest: Promptly after each Regular Record Date, the Trustee
- ---------------------- will deliver to the Issuer and DTC a written notice
specifying by CUSIP number the amount of interest
to be paid on each issue of Book-entry
Exhibit B--Page 73
Notes on the following Interest Payment Date (other
than an Interest Payment Date coinciding with
maturity) and the total of such amounts. The Issuer
will confirm with the Trustee the amount payable on
each issue of Book-Entry Notes on such Interest
Payment Date. DTC will confirm the amount payable on
each issue of Book-Entry Notes on such Interest
Payment Date by reference to the daily or weekly
bond reports published by Standard & Poor's Ratings
Services. The Issuer will pay to the Trustee, as
paying agent, the total amount of interest due on
such Interest Payment Date (other than the
maturity), and the Trustee will pay such amount to
DTC at the times and in the manner set forth below
under "Manner of Payment."
Payments at Maturity. On or about the first Business Day of each month,
- -------------------- the Trustee will deliver to the Issuer and DTC a
written list of principal and interest to be paid on
each issue of Book-Entry Notes represented by a
single CUSIP number maturing either at Stated
Maturity or on a Redemption or Repayment Date in the
following month. The Issuer, the Trustee and DTC
will confirm the amounts of such principal and
interest payments with respect to each such issue of
Book-Entry Notes on or about the fifth Business Day
preceding the maturity of such issue of Book-Entry
Notes. The Issuer will pay to the Trustee, as paying
agent, the principal amount of each issue of Book-
Entry Notes identified by a single CUSIP number,
together with interest due at such maturity. The
Trustee will pay such amounts to DTC at the times
and in the manner set forth below under "Manner of
Payment". Promptly after payment to DTC of the
principal and interest due at the maturity of each
issue of Book-Entry Notes, the Trustee will reduce
the principal amount of the Master Note representing
the issue of Book-Entry Notes and so advise the
Issuer.
Manner of Payment The total amount of any principal and interest due
- ----------------- on each issue of Book-Entry Notes identified by a
single CUSIP number on any Interest Payment Date or
at maturity shall be paid by the Issuer to the
Trustee in funds available for use by the Trustee as
of 9:30 A.M. (New York City time), or as soon as
practicable thereafter on such date. The Issuer will
confirm instructions regarding payment in writing to
the Trustee. Prior to 10:00 A.M. (New York City
time) on each Maturity Date or as soon as possible
thereafter, following receipt of such funds from the
Issuer, the Trustee will pay by separate wire
transfer (using Fedwire message entry instructions
in a form previously specified by DTC) to an account
at the Federal Reserve Bank of New York previously
specified by DTC, in funds available for immediate
use by DTC, each payment of principal (together
Exhibit B--Page 74
with interest thereon) due on each issue of Book-
Entry Notes on any Maturity Date. On each Interest
Payment Date, interest payments shall be made to DTC
in same-day funds in accordance with existing
arrangements between the Trustee and DTC.
Thereafter, on each such date, DTC will pay, in
accordance with its SDFS operating procedures then
in effect, such amounts in funds available for
immediate use to the respective Participants in
whose names the Book-Entry represented by the Master
Note are recorded in the book-entry system
maintained by DTC. Neither the Issuer nor the
Trustee shall have any direct responsibility or
liability for the payment by DTC to such
Participants of the principal of and interest on the
Book-Entry Notes.
Withholding Taxes The amount of any taxes required under applicable
- ----------------- law to be withheld from any interest payment on a
Book-Entry Note will be determined and withheld by
the Participant, indirect participant in DTC or
other Person responsible for forwarding payments and
materials directly to the beneficial owner of such
Note.
Acceptance of Offers: Each Agent will promptly advise the Issuer of each
reasonable offer to purchase Notes received by it,
other than those rejected by the Agent. Such Agent
may, in its discretion reasonably exercised, without
notice to the Issuer, reject any offer received by
it, in whole or in part. The Issuer will have the
sole right to accept offers to purchase Notes and
may reject any such offer, in whole or in part. If
the Issuer rejects an offer, the Issuer will
promptly notify such Agent.
Settlement: The receipt by the Issuer of immediately available
- ----------- funds in payment for a Book-Entry Note and receipt
by the Trustee of a property completed by the
Trustee of a properly completed Pricing Supplement
shall constitute "settlement" with respect to such
Book-Entry Note. All orders accepted by the Issuer
will be settled on the third Business Day from the
date of the sale pursuant to the timetable for
settlement set forth below unless the Issuer and the
purchaser agree to settlement on another day which
shall be no earlier than the next Business Day.
Settlement Procedures: Settlement Procedures with regard to each Book-Entry
- ---------------------- Note sold by the Issuer through an Agent as agent,
shall be as follows:
For each offer accepted by the Issuer, the
Presenting Agent shall communicate to the Issuer,
Attention: Thomas J. Sargeant, CFO (Fax No.: (703)
329-0060) who will provide a copy to the Trustee,
Attention: Robert J. Dunn (Fax No.: (617) 664-5151),
and the Designated Agent, if any, by facsimile
transmission or other acceptable
Exhibit B--Page 75
means, the information set forth below:
* Principal amount.
* Maturity Date of Notes.
* In the case of a Fixed Rate Book-Entry Note, the
interest rate or, in the case of a Floating Rate Book-Entry Note, the interest
rate formula, the Initial Interest Rate (if known at such time), Index Maturity,
Interest Reset Period, Interest Reset Dates, Spread or Spread Multiplier (if
any), minimum interest rate (if any) and maximum interest rate (if any).
* Interest Payment Period and Interest Payment Dates.
* Redemption provisions, if any.
* Repayment provisions, if any.
* Settlement date (Original Issue Date).
* Price to public of the Note (expressed as a
percentage).
* Agent's commission (to be paid in the form of a
discount from the proceeds remitted to the Issuer upon settlement).
* Original issue discount provisions if any.
* In the case of Currency Indexed Notes, the above-
listed information, as applicable, and the Base Exchange Rate(s), Base Interest
Rate and Indexed Currencies.
* In the case of Dual Currency Notes, the above-listed
information, as applicable, and the Optional Payment Currency, Designated
Exchange Rate and Optional Election Dates.
* Net proceeds to the Issuer.
The Trustee will confirm the information set forth
in Settlement Procedure "A" above by telephone with
such Agent and the Issuer.
The Trustee will assign a CUSIP number to the issue of Book-Entry
Notes and will telephone the Issuer and notify the
Issuer of such CUSIP number. The Trustee will enter
a pending deposit message through DTC's Participant
Terminal System, providing the
Exhibit B--Page 76
following settlement information to DTC (which shall
route such information to Standard & Poor's Ratings
Services) and the Presenting Agent:
* The applicable information set forth in Settlement
Procedure "A."
* Identification as a Fixed Rate Book-Entry Note or a
Floating Rate Book-Entry Note.
* Initial Interest Payment Date for each issue of
Book-Entry Notes of days by which such date succeeds the related DTC Record Date
(which, in the case of Floating Rate Notes which reset daily or weekly shall be
the date five calendar days immediately preceding the applicable Interest
Payment Date and in the case of all other Notes shall be the Regular Record Date
as defined in the Prospectus Supplement), the amount of interest payable on such
Interest Payment Date per $1,000 principal amount of Notes at Maturity, and
amount of interest payable per $1,000 principal amount of Notes in the case of
Fixed Rate Notes.
* CUSIP number of the such issue of Book-Entry Notes.
* Whether such CUSIP number will identify any other
issue of Book-Entry Notes (to the extent known at such time).
To the extent the Issuer has not already done so, the Issuer will
deliver to the Trustee a Pricing Supplement in a
form that has been approved by the Issuer and the
Agents and a letter advising of the relevant
Issuance.
DTC will credit such Book-Entry Notes to the Trustee's
participant account at DTC.
The Trustee will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC to (i)
debit such Book-Entry Notes to the Trustee's
participant account and credit such Book-Entry Notes
to such Agent's participant account and (ii) debit
such Agent's settlement account and credit the
Trustee's settlement account for an amount equal to
the price of such Book-Entry Notes less such Agent's
commission. The entry of such a deliver order shall
constitute a representation and warranty by the
Trustee to DTC that (i) such Book-Entry Notes have
been executed, delivered and authenticated and
(ii) the Trustee is holding the Master Note
representing such Book-Entry Notes pursuant to the
relevant Medium-Term Note Certificate Agreement
between the Trustee and DTC.
An Agent will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC (i) to
debit such Note to such Agent's
Exhibit B--Page 77
participant account and credit such Note to the
participant accounts of the Participants with
respect to such Note and (ii) to debit the
settlement accounts of such Participants and credit
the settlement account of such Agent for an amount
equal to the price of such Note.
Transfers of funds in accordance with SDFS deliver orders
described in Settlement Procedures "F" and "G" will
be settled in accordance with SDFS operating
procedures in effect on the settlement date.
The Trustee, upon confirming receipt of such funds
in accordance with Settlement Procedure "F," will
wire transfer to the following account of the
Issuer:
Bank: Fleet National Bank
ABA Number: 011 900 571
Account Number: 1510350-03121
For Credit To: Fleet National Bank Loan
Clearance Account
Reference: AvalonBay Communities, Inc.
Attn: Kim Lewis (860) 986-5982
in funds available for immediate use, the amount transferred to
the Trustee in accordance with Settlement Procedure
"F."
An Agent will confirm the purchase of such Note to the purchaser
either by transmitting to the Participants with
respect to such Note a confirmation order or orders
through DTC's institutional delivery system or by
mailing a written confirmation to such purchaser.
Settlement Procedures
- ---------------------
Timetable: For orders of Book-Entry Notes solicited by an
- --------- Agent, as agent, and accepted by the Issuer for
settlement on the first Business Day after the sale
date, Settlement Procedures "A" through "J" set
forth above shall be completed as soon as possible
but not later than the respective times (New York
City time) set forth below:
Settlement Procedure Time
-------------------- ----
A 11:00 a.m. on the sale date
B 12:00 noon on the sale date
C 2:00 p.m. on the sale date
D 3:00 p.m. on the day before
settlement
E 9:00 a.m. on settlement date
F-G 2:00 p.m. on settlement date
H 4:45 p.m. on settlement date
I-J 5:00 p.m. on settlement date
Exhibit B--Page 78
If a sale is to be settled two Business Days after the sale date,
Settlement Procedure "A," "B" and "C" shall be
completed as soon as practicable but not later than
11:00 a.m., 12:00 noon and 2:00 p.m., as the case
may be, on the first Business Day after the sale
date.
If a sale is to be settled more than two Business Days after the
sale date, Settlement Procedure "A" shall be
completed as soon as practicable but no later than
11:00 a.m. on the first Business Day after the sale
date and Settlement Procedures "B" and "C" shall be
completed as soon as practicable but no later than
12:00 noon and 2:00 p.m., as the case may be, on the
second Business Day before the settlement date. If
the initial interest rate for a Floating Rate Book-
Entry Note has not been determined at the time that
Settlement Procedure "A" is completed, Settlement
Procedures "B" and "C" shall be completed as soon as
such rate has been determined but not later than
12:00 noon and 2:00 p.m., respectively, on the
Business Day before the settlement date. Settlement
Procedure "H" is subject to extension in accordance
with any extension of Fedwire closing deadlines and
in the other events specified in the SDFS operating
procedures in effect on the settlement date.
If settlement of a Book-Entry Note is rescheduled or canceled,
the Trustee, upon receipt of notice from the Issuer,
will deliver to DTC, through DTC's Participant
Terminal System, a cancellation message to such
effect by no later than 2:00 p.m. on the Business
Day immediately preceding the scheduled settlement
date.
Failure to Settle: If an Agent or Trustee fails to enter an SDFS
- ----------------- deliver order with respect to a Book-Entry Note
pursuant to Settlement Procedure "F," the Trustee
may deliver to DTC, through DTC's Participant
Terminal System, as soon as practicable, a
withdrawal message instructing DTC to debit such
note to the Trustee's participant account. DTC will
process the withdrawal message, provided that the
Trustee's participant account contains a principal
amount of Book-Entry Notes represented by the Master
Note that is at least equal to the principal amount
to be debited. If a withdrawal message is processed
with respect to all the Book-Entry Notes identified
by a single CUSIP number, the Trustee will advise
the Issuer and will make appropriate entries in its
records. The CUSIP number assigned to such issue of
Book-Entry Notes shall, in accordance with CUSIP
Service Bureau procedures, be canceled and not
immediately reassigned. If a withdrawal message is
processed with respect to one or more, but not all,
of the issue of Book-Entry Notes identified by a
single CUSIP number, the Trustee will advise the
Issuer and will make appropriate entries in its
records.
Exhibit B--Page 79
If the purchase price for any Book-Entry Note is not timely paid
to the Participants with respect to such Note by the
beneficial purchaser thereof (or a person, including
an indirect participant in DTC, acting on behalf of
such purchaser), such Participants and, in turn, the
Presenting Agent may enter SDFS deliver orders
through DTC's Participant Terminal system reversing
the orders entered pursuant to Settlement Procedures
"F" and "G," respectively. Thereafter, the Trustee
will deliver the withdrawal message and take the
applicable related actions described in the
preceding paragraph. If such failure shall have
occurred for any reason other than the failure by
the Presenting Agent to provide the Purchase
Information to the Issuer or to provide a
confirmation to the purchaser, the Issuer will
reimburse the Presenting Agent on an equitable basis
for its loss of the use of the funds during the
period when they were credited to the account of the
Issuer.
Notwithstanding the foregoing, upon any failure to settle with
respect to a Book-Entry Note, DTC may take any
actions in accordance with its SDFS operating
procedures then in effect.
Periodic Statements
- -------------------
from the Trustee: Periodically, the Trustee will send to the Issuer a
- ---------------- statement setting forth the principal amount of
Book-Entry Notes outstanding as of that date and
setting forth a brief description of any sales of
Book-Entry Notes of which the Issuer has advised the
Trustee but which have not yet been settled.
Procedure for Rate Changes: The Issuer and each Agent will discuss from time to
- -------------------------- time the price of, and the rates to be borne by, the
Notes that may be sold as a result of the
solicitation of offers by any Agent. Once an Agent
has recorded any indication of interest in Notes
upon certain terms, and communicated with the
Issuer, if the Issuer plans to accept an offer to
purchase Notes upon such terms, it will prepare a
Pricing Supplement to the Prospectus, as then
amended or supplemented, reflecting the terms of
such Notes and will arrange to transmit such Pricing
Supplement to the Commission for filing in
accordance with and within the time prescribed by
the applicable paragraph of Rule 424(b) under the
Act. The Issuer will supply at least two copies of
the Prospectus as then amended or supplemented, and
bearing such Pricing Supplement, to the Presenting
Agent. No settlements with respect to Notes upon
such terms may occur prior to such transmitting and
such Agent will not, prior to such transmitting,
mail confirmations to customers who have offered to
purchase Notes upon such terms. After such
transmitting, sales and mailing of confirmations and
settlements may occur with respect to Notes upon
such terms, subject to the provisions of "Delivery
of Prospectus" below.
Exhibit B--Page 80
Outdated Stickers, and copies of the Prospectus to which they are
attached (other than those retained for files), will
be destroyed.
Suspension of Solicitation;
- ---------------------------
Amendment or Supplement: As provided in the Agency Agreement, the Issuer may
- ----------------------- suspend solicitation of purchase at any time, and,
upon receipt of notice from the Issuer, the Agents
will as promptly as practicable, but in no event
later than one Business Day following such notice,
suspend solicitation until such time as the Issuer
has advised them that solicitation of purchases may
be resumed.
If the Agents receive the notice from the Issuer contemplated by
Section 4(b) of the Agency Agreement, they will
promptly suspend solicitation and will only resume
solicitation as provided in the Agency Agreement. If
the Issuer decides to amend or supplement the
Registration Statement or the Prospectus relating to
the Notes, it will promptly advise the Agents and
will furnish the Agents with the proposed amendment
or supplement in accordance with the terms of the
Agency Agreement. The Issuer will promptly file or
mail to the Commission for filing such amendment or
supplement, provide the Agents with copies of any
such amendment or supplement, confirm to the Agents
that such amendment or supplement has been filed
with the Commission and advise the Agents that
solicitation may be resumed. Any such suspension
shall not affect the Issuer's obligations under the
Agency Agreement; and in the event that at the time
the Issuer suspends solicitation of purchases there
shall be any offers already accepted by the Issuer
outstanding for settlement, the Issuer will have the
sole responsibility for fulfilling such obligations;
the Agents will make reasonable efforts to assist
the Issuer to fulfill such obligations, but the
Agents will not be obligated to fulfill such
obligations. The Issuer will in addition promptly
advise the Agents and the Trustee if such offers are
not to be settled and if copies of the Prospectus as
in effect at the time of the suspension may not be
delivered in connection with the settlement of such
offers.
Delivery of Prospectus: A copy of the Prospectus, as most recently amended
- ---------------------- or supplemented on the date of delivery thereof
(except as provided below), must be delivered to a
purchaser prior to or together with the earlier of
delivery of (i) the written confirmation provided
for above, and (ii) any Note purchased by such
purchaser at the following address:
if to: PaineWebber Incorporated
to: Fixed Income Division
Attention: Mike Sabatino
1285 Avenue of the Americas, 11th Floor
New York, NY 10019
Telecopy Number: (212) 713-2233
Phone Number: (212) 713-4814
Exhibit B--Page 81
if to: First Union Capital Markets
to: Attn: Mark Adamson
301 South College Street, TW8
Charlotte, NC 28288
Telecopy Number: (704) 383-7727
if to: J.P. Morgan Securities Inc.
to: Attn: MTN Trading Desk
60 Wall Street, 3rd Floor
New York, NY 10260
Telephone Number: (212) 648-0591
Telecopy Number: (212) 648-5909/13/
if to: NationsBanc Montgomery Securities LLC
to both: Continuously Offered Products
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number: (704) 388-9939/14/
and
Syndicate Operations
100 North Tryon Street
Charlotte, NC 28255
Mail Code: NC 1007-07-01
Telecopy Number: (704) 388-9212/15/
if to: Warburg Dillon Read LLC
to: Attention: Jeff London
677 Washington Blvd.
Stamford, CT 06901
Telecopy Number: (212) 719-7139
- -------------------
/13/ Please send by telecopy with original to follow by mail.
/14/ Please send by telecopy rather than mail.
/15/ Please send by telecopy rather than mail
Exhibit B--Page 82
if to: State Street Bank and Trust
(the Trustee)
to: Attention: Robert J. Dunn
2 International Place, 4th Floor
Boston, MA 02110
Telecopy Number: (617) 664-5151
and to: the Designated Agent, if any.
For record keeping purposes, one copy of such
Prospectus shall also be mailed to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attention: Peter T. Healy, Esq.
Telecopy Number: (415) 984-8701
and to:
Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109-2281
Attention: John O. Newell, Esq.
Telecopy Number: (617) 523-1231
The Issuer shall ensure that the Presenting Agent receives copies
of the Prospectus and each amendment or supplement
thereto (including appropriate Pricing Supplements)
in such quantities and within such time limits as
will enable the Presenting Agent to deliver such
confirmation or Note to a purchaser as contemplated
by these procedures and in compliance with the
preceding sentence. If, since the date of acceptance
of a purchaser's offer, the Prospectus shall have
been supplemented solely to reflect any sale of
Notes on terms different from those agreed to
between the Issuer and such purchaser or a change in
posted rates not applicable to such purchaser, such
purchaser shall not receive the Prospectus as
supplemented by such new supplement, but shall
receive the Prospectus as supplemented to reflect
the terms of the Notes being purchased by such
purchaser and otherwise as most recently amended or
supplemented on the date of delivery of the
Prospectus.
Exhibit B--Page 83
EXHIBIT C
Form of Opinion of
Counsel to the Company
----------------------
In rendering the following opinion, counsel may rely, to the extent
they deem such reliance proper, on the opinions (in form and substance
reasonably satisfactory to counsel to the Agents) of other counsel reasonably
acceptable to counsel to the Agents as to matters governed by the laws of
jurisdictions other than the United States, and as to matters of fact, upon
certificates of officers of the Company and of government officials; provided
that counsel to the Company shall state that the opinion of any such other
counsel is in form satisfactory to counsel to the Company and, in the opinion of
counsel to the company, counsel to the Company and the Agents are justified in
relying on such opinions of other counsel. Copies of all such opinions and
certificates shall be furnished to counsel to the Agents.
* * * *
1. The Registration Statement has been declared effective under the
Securities Act. The Prospectus has been filed with the Commission pursuant to
Rule 424(b) under the 1933 Act. To the best of our knowledge (based solely on an
oral confirmation of a member of the Commission's staff), no stop order
suspending the effectiveness of the Registration Statement has been issued under
the 1933 Act and no proceeding for that purpose has been instituted or
threatened by the Commission.
2. Each part of the Registration Statement, when such part became
effective, and the Prospectus and any amendment or supplement thereto, on the
date of filing thereof with the Commission and as of the date hereof, complied
as to form in all material respects with the requirements of the 1933 Act and
the rules and regulations thereunder (other than (i) the financial statements
and supporting schedules and other financial and statistical information and
data included therein or omitted therefrom, and (ii) any documents incorporated
by reference into the Registration Statement, as to which we express no opinion)
it being understood that, in passing upon compliance as to the form of the
Registration Statement, we assume that the statements made therein are correct
and complete.
3. The descriptions in the Registration Statement (other than the
documents incorporated by reference) and the Prospectus of statutes are accurate
in all material respects and fairly present the information required to be
disclosed therein. We do not know of any statutes or legal or governmental
proceedings required to be described in the Prospectus that are not described as
required, or of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to be filed as exhibits
to the Registration Statement that are not so described or filed.
4. The Company is not and, after giving effect to the offering and
sale of the Notes and the application of the proceeds thereof as described in
the Prospectus, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
S-84
5. The Company is duly organized, validly existing and in good
standing under the laws of the State of Maryland. The Company is qualified to
transact intrastate business in the States of California, Connecticut, New
Jersey, Indiana, Michigan, Minnesota, Missouri, New York, Ohio, Oregon, Rhode
Island and Washington, the Commonwealths of Massachusetts and Virginia, and the
District of Columbia as a foreign corporation and has full power and authority
to conduct its business as described in the Registration Statement and
Prospectus.
6. Each of the Subsidiaries that owns a Current Community, a
Development Community or a Redevelopment Community is a corporation, limited
partnership, or limited liability company, as the case may be, that is validly
existing and in good standing under the laws of its state of organization and
has corporate or other power under its organizational documents and the
applicable statutory law necessary to conduct its business as described in the
Registration Statement and the Prospectus.
7. We have obtained certificates of governmental agencies or
officials in a list of specified jurisdictions stating that each Subsidiary is
duly qualified or registered as a foreign corporation, limited liability company
or limited partnership, as the case may be, to transact business, and is in good
standing, in each jurisdiction listed in Exhibit A hereto opposite such
Subsidiary's name (it being understood that Exhibit A will list for each
Subsidiary the jurisdictions in which such Subsidiary's conduct of business or
ownership or lease of property requires such qualification).
8. Subject to the completion of the exchange of the common stock, the
Series A Cumulative Redeemable Preferred Stock and the Series B Cumulative
Redeemable Preferred Stock of Avalon Properties, Inc. for the Common Stock,
Series F Cumulative Redeemable Preferred Stock and Series G Cumulative
Redeemable Preferred Stock, respectively, of the Company, as of the date of such
opinion, all of the outstanding shares of Common Stock and Preferred Stock of
the Company identified in the Prospectus have been duly authorized and are
validly issued, fully paid and nonassessable and conform to the description
thereof in the Prospectus; and the shareholders of the Company have no
preemptive or similar rights with respect to the Shares pursuant to the
Company's Charter, the MGCL or the Contracts.
9. (A) The Notes have been duly authorized by the Company and, when
duly executed by the Company and duly authenticated and delivered by the Trustee
in accordance with the terms of the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee), and issued and sold
pursuant to the Distribution Agreement and applicable resolutions of the Pricing
Committee appointed by the Board of Directors of the Comapny, such Notes will be
valid and legally binding obligations of the Company entitled to the benefits
provided by the Indenture and enforceable against the Company in accordance with
their terms, subject, as to enforcement, to the Enforceability Limitations.
(B) The Company has full corporate power and authority to enter
into the Indenture. The Indenture has been duly and validly authorized, executed
and delivered by the Company and constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in accordance with its
terms, subject to the Enforceability Limitations.
Exhibit C--Page 85
(C) The Indenture has been duly qualified under the TIA.
(D) The Indenture and the Notes conform in all material respects
to the descriptions thereof in the Registration Statement and the Prospectus.
10. The Company has full corporate power and authority to enter into
the Distribution Agreement and each Terms Agreement. The Distribution Agreement
has been duly and validly authorized, executed and delivered by the Company. The
due authorization, execution, delivery and performance of the Indenture and the
issuance and sale of the Notes on the terms contemplated in the Distribution
Agreement will not (A) result in the creation or imposition of any lien, charge
or encumbrance upon any of the assets of the Company or any of the Subsidiaries,
pursuant to the terms or provisions of any Contract (i) which we have prepared
or negotiated on behalf of the Company and (ii) to which the Company or any of
the Subsidiaries is a party or by or pursuant to which any of them or their
respective properties is bound, affected or financed or (B) result in a breach
or violation of any of the terms or provisions of, or constitute a default or
result in the acceleration of any obligation under, (i) the articles of
incorporation or by-laws of the Company, (ii) the articles or certificate of
incorporation, by-laws, limited partnership agreements or other organizational
documents of any of the Subsidiaries, (iii) any Contract to which the Company or
any of the Subsidiaries is a party or by or pursuant to which any of them or
their respective properties is bound, affected or financed or (iv) any statute,
rule or regulation or judgment, ruling, decree or order, known to us, of any
court or other governmental agency or body applicable to the business or
properties of the Company or any of the Subsidiaries (except that we express no
opinion as to the securities or Blue Sky laws of any jurisdiction other than the
United States), in each case where such violation or default, individually or in
the aggregate, might have a material adverse effect on the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company and the Subsidiaries taken as a whole.
11. Upon payment of the purchase price and delivery of the Notes in
accordance with this Distribution Agreement and the applicable Terms Agreement,
each of the purchasers thereof will receive good, valid and marketable title to
such Notes, free and clear of all liens, charges and encumbrances.
12. To our knowledge, no consent, approval, authorization or order
of, or filing with, any court or governmental agency or body is required in
connection with the issuance or sale of the Notes by the Company, except (i)
such as have been obtained under the 1933 Act or the Securities Exchange Act of
1934, as amended, or (ii) such as may be required under state securities laws or
the by-laws or rules of the NASD in connection with the purchase or distribution
of the Notes by the Agents.
13. To our knowledge, neither the Company nor any of the Subsidiaries
is in violation of its respective articles or certificate of incorporation, by-
laws, limited partnership agreements, or other organizational documents, as
applicable, or in default (nor has an event occurred which with notice or lapse
of time or both would constitute a default or acceleration) in the performance
of any obligation, agreement or condition contained in any Contract known to us
to which the Company or any of the Subsidiaries is a party, or by or pursuant to
which any of them or their respective properties is bound, affected or financed,
where such violation or
Exhibit C--Page 86
default, individually or in the aggregate, might have a material adverse effect
on the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company and the Subsidiaries taken as
a whole.
The limitations inherent in the independent verification of factual
matters and the character of determinations involved in the registration process
are such that we are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in or
incorporated by reference into the Registration Statement or the Prospectus and
we make no representation that we have independently verified the accuracy,
completeness or fairness of such statements. Without limiting the foregoing, we
assume no responsibility for, and have not independently verified, the accuracy,
completeness or fairness of the financial statements or notes thereto, financial
schedules and other financial and statistical data contained in or incorporated
by reference into the Registration Statement, and we have not examined the
accounting, financial or statistical records from which such statements and
notes, schedules and data are derived. However, in the course of our acting as
counsel to the Company in connection with the preparation of the Registration
Statement and the Prospectus and the public offering of the Notes, we have
conferred with representatives of the Company, PricewaterhouseCoopers LLP,
independent accountants for the Company, your representatives and
representatives of O'Melveny & Myers LLP, your counsel, during which conferences
and conversations the contents of the Registration Statement and the Prospectus
and related matters were discussed. In addition, we reviewed certain documents
made available to us by the Company or otherwise in our possession.
Based on our participation in the above-mentioned conferences and
conversations, our review of the documents described above and our understanding
of applicable law, we advise you that:
(a) No facts have come to our attention which cause us to believe that
the Registration Statement (excluding the financial statements and notes
thereto, financial schedules and other financial or statistical information
and data included therein or omitted therefrom and excluding that part of
the Registration Statement that constitutes the Form T-1 (the "Form T-1"),
as to each of which we express no opinion), at the time it became
effective, (or, if an amendment to the Registration Statement or an annual
report of Form 10-K has been filed by the Company with the Commission
subsequent to the effectiveness of the Registration Statement, then at the
time such amendment became effective or at the time of the most recent such
filing, as the case may be) or as of the date hereof contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
(b) No facts have come to our attention which cause us to believe that
the Prospectus (excluding the financial statements and notes thereto,
financial schedules and other financial or statistical information and data
included therein or omitted therefrom and the Form T-1, as to which we
express no opinion), as of its date or the date hereof, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Exhibit C--Page 87
Such opinion shall also state that it is being rendered to the agents
at the request of the Company and shall authorize the reliance of O'Melveny &
Myers LLP with respect to matters governed by the MGCL for the sole purpose of
rendering their opinion to the Agents under the Distribution Agreement.
Exhibit C--Page 88
SCHEDULE I
INFORMATION IN THE PROSPECTUS
FURNISHED BY ANY AGENT
----------------------
The following information appearing in the preliminary prospectus, if
any, and the Prospectus has been furnished by the Agents in writing specifically
for use in the preparation of such preliminary prospectus and the Prospectus:
1. The names of the Agents on the front and back covers.
2. The legend regarding stabilization on the inside front cover.
3. The following information under the caption "Supplemental Plan of
Distribution:"
a. the names of the Agents in the first paragraph
b. the information in the eighth full paragraph (regarding
transactions among the Company and affiliates of certain
Agents, among other matters) as to which each Agent supplied
only the information relating to such Agent and its
affiliates.
S-89
SCHEDULE II
List of Subsidiaries
--------------------
Transfer of
LIMITED PARTNERSHIP/LIMITED LIABILITY AVB Ownership Interests or Foreign
COMPANY/JOINT VENTURE INTEREST Interest Formation State Qualification
- -----------------------------------------------------------------------------------------------------------------------------
Falkland Partners, a MD general partnership*.............. 50% 7/1/85 MD
4100 Massachusetts Avenue Associates L.P.................. 100% 6/21/94 DOC
Town Run Associates, a NJ general Partnership*............
49% 11/3/94 NJ
Town Grove Limited Liability Company...................... 49% 12/27/94 CT
Town Close Associates L.P................................. 86.5% 4/10/92 CT
Avalon Lake Arbor Associates L.P.......................... 100% 8/4/95 MD
Avalon Decoverly Associates L.P........................... 100% 8/11/95 VA
Smithtown Galleria Associates L.P......................... 100% 7/25/91 CT NY
Avalon Fairway Hills I Associates (General Partnership),
a MD general partnership*................................ 100% 8/8/96 MD
Avalon Fairway Hills II Associates (General Partnership),
a MD general partnership*................................ 100% 8/8/96 MD
Bronxville West Limited Liability Company................. 60% 10/8/96 CT NY
Avalon Ballston II Limited Partnership.................... 99% 1/13/97 DE VA
Avalon DownREIT V Limited Partnership..................... 99% 11/7/97 DE IL, IN, MN, MO, OH
San Francisco Bay Partners II, LTD........................ 94% 7/2/84 CA
Toyon Road San Jose Partners, L.P......................... 100% 3/9/94 CA
San Francisco Bay Partners III, L.P....................... 100% 3/10/94 CA
Foxchase Drive San Jose Partners II, L.P.................. 100% 3/9/94 CA
Bay Countrybrook L.P...................................... 99% 6/12/96 DE CA
Bay Rincon, L.P........................................... 5/16/97 CA
Bay Pacific Northwest, L.P................................ 99% 8/29/97 DE WA
Avalon Bay Devonshire LLC................................. 99% 5/20/98 MN
Avalon Bay Edinburgh LLC.................................. 99% 5/20/98 MN
Avalon Bay BFG L. P....................................... 100% 5/21/98 MA
* A subsidiary of the Company but not included within the defined term
"Subsidiary" for purposes of this Agreement.
S-90
Transfer of
AVB Ownership Interests or Foreign
CORPORATE SUBSIDIARIES Interest Formation State Qualification
- ----------------------------------------------------------------------------------------------------------------------------
Bay Asset Group, Inc...................................... 100% 3/17/94 MD CA
Bay Waterford, Inc........................................ 100% 3/17/94 MD CA
Bay Development Partners, Inc............................. 100% 3/17/94 MD CA
Bay GP, Inc............................................... 100% 3/17/94 MD CA
Avalon Town Green II, Inc................................. 100% 8/24/93 MD NY
Avalon Chase Ridge, Inc................................... 100% 10/27/93 MD
Avalon Chase Glen, Inc.................................... 100% 10/27/93 MD
Avalon Chase Grove, Inc................................... 100% 3/18/94 MD
Avalon Chase Hampton II, Inc.............................. 100% 10/27/93 MD VA
Avalon Chase Heritage, Inc................................ 100% 10/27/93 MD VA
Avalon Town Meadows, Inc.................................. 100% 5/27/94 MD MA
Lexington Ridge-Avalon, Inc............................... 100% 10/27/93 MD MA
Avalon Town View, Inc..................................... 100% 10/27/93 MD NY
Avalon Development Services, Inc.......................... 100% 11/24/97 MD WA, OR
Avalon 4100 Mass. Avenue, Inc............................. 100% 6/15/94 MD DC
Town Cove Jersey City Urban Renewal, Inc.................. 100% 2/2/94 NJ
Town Cove II Jersey City Urban Renewal, Inc............... 100% 4/16/96 NJ
Avalon Transactions, Inc.................................. 100% 12/27/94 CT
Avalon Decoverly, Inc..................................... 100% 3/8/95 MD
Avalon Collateral, Inc.................................... 100% 3/1/96 MD VA, NJ
Avalon Lake Arbor, Inc.................................... 100% 7/14/95 MD
Avalon Fairway II, Inc.................................... 100% 6/27/97 MD
Avalon Commons, Inc....................................... 100% 2/1/96 MD NY
Avalon Ballston II, Inc................................... 100% 11/1/96 MD VA
Avalon DownREIT V, Inc.................................... 100% 11/7/97 MD DE, IL, IN, MN,
MO, OH
Avalon Oaks, Inc.......................................... 100% 9/4/97 MD MA
Avalon BFG, Inc........................................... 100% 5/14/98 MD MA
Avalon Bay Fairlane, Inc.................................. 100% 7/22/98 MD MI
AvalonBay Services I, Inc................................. 100% 8/28/98 MD
AvalonBay Services II, Inc................................ 100% 8/28/98 MD
Schedule II--Page 91
SCHEDULE III
COMMISSIONS
-----------
As compensation for the services of an Agent hereunder, the Company
shall pay such Agent, on a discount basis, a commission for the sale of each
Note equal to the principal amount of such Note multiplied by the appropriate
percentage set forth below:
MATURITY RANGES PERCENT OF
PRINCIPAL AMOUNT
From 9 months to less than 1 year .125%
From 1 year to less than 18 months .150%
From 18 months to less than 2 years .200%
From 2 years to less than 3 years .250%
From 3 years to less than 4 years .350%
From 4 years to less than 5 years .450%
From 5 years to less than 6 years .500%
From 6 years to less than 7 years .550%
From 7 years to less than 10 years .600%
From 10 years to less than 15 years .625%
From 15 years to less than 20 years .700%
From 20 years to 30 years .750%
Greater than 30 years *
* As agreed to by the Company and such Agent at the time of sale.
S-92