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EXHIBIT 1.1
2,000,000 Shares
BAY APARTMENT COMMUNITIES, INC.
8.50% Series C Cumulative Redeemable Preferred Stock
UNDERWRITING AGREEMENT
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June 17, 1997
PAINEWEBBER INCORPORATED
MORGAN STANLEY DEAN WITTER
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
Bay Apartment Communities, Inc., a Maryland corporation (the "Company")
confirms its agreement with you (hereinafter the "Underwriters") as follows:
1. DESCRIPTION OF SECURITIES.
(a) The Company proposes to issue and sell to the Underwriters
2,000,000 shares of 8.50% Series C Cumulative Redeemable Preferred Stock, par
value $.01 per share (the "Firm Shares"), of the Company.
(b) In addition, the Company is granting to the Underwriters an option
to purchase up to an additional 300,000 shares of 8.50% Series C Cumulative
Redeemable Preferred Stock on the terms and for the purposes set forth in
Section 13 hereof (the "Option Shares"; and together with the Firm Shares, the
"Shares").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the Underwriters that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement on Form S-3 (File No. 333-15875) with respect to the
Shares, including a prospectus (the "Base Prospectus") has been carefully
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder and filed with the Commission and has become effective. Such
registration statement may have been amended prior to the date of this
Agreement; any such amendment was so prepared and filed, and any such amendment
filed after the effective date of such registration statement has become
effective. No stop order suspending the effectiveness of the registration
statement has been issued, and no proceeding for that purpose has been
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instituted or, to the Company's knowledge, threatened by the Commission. If such
registration statement has not become effective, a further amendment to such
registration statement, including a form of final prospectus, necessary to
permit such registration statement to become effective will be filed promptly by
the Company with the Commission. If such registration statement has become
effective, a prospectus supplement and a final prospectus containing information
permitted to be omitted at the time of effectiveness by Rule 430A of the Rules
and Regulations has been or will be so prepared and filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations on or before the second
business day after the date hereof (or such earlier time as may be required by
the Rules and Regulations); and the Rules and Regulations do not require the
Company to, and, without your consent, the Company will not, file a
post-effective amendment after the time of execution of this Agreement and prior
to the filing of such final form of prospectus. The registration statement will
be supplemented by the form of preliminary prospectus supplement to be used in
connection with the offering and sale of the Shares (the "Preliminary Prospectus
Supplement"). Copies of such registration statement, any such amendments, and
each related preliminary prospectus as contemplated by Rule 430 or Rule 430A of
the Rules and Regulations and each Preliminary Prospectus Supplement (a
"Preliminary Prospectus") have been delivered to the Underwriters and your
counsel. The term "Registration Statement" means such registration statement as
amended at the time it becomes or became effective (the "Effective Date"),
including financial statements and all exhibits and any information deemed by
virtue of Rule 430A of the Rules and Regulations to be included in such
Registration Statement at the Effective Date and any prospectus supplement filed
thereafter with the Commission and shall include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The term
"Prospectus" means, collectively, the Base Prospectus together with any
prospectus supplement, in the respective forms they are filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations. Any reference
herein to the terms "amend," "amendment" or "supplement" with respect to the
Registration Statement, the Base Prospectus, any Preliminary Prospectus
Supplement or the Prospectus shall be deemed to refer to and include the filing
of any document under the Exchange Act after the Effective Date, or the date of
any Preliminary Prospectus Supplement or the Prospectus, as the case may be,
that is incorporated therein by reference.
(b) Each part of the Registration Statement, when such part became or
becomes effective, each Preliminary Prospectus, on the date of filing thereof
with the Commission, and the Prospectus and any amendment or supplement thereto,
on the date of filing thereof with the Commission and at the Closing Date (as
hereinafter defined) conformed or will conform in all material respects with the
requirements of the Act and the Rules and Regulations; 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; each Preliminary Prospectus, on the date of filing
thereof with the Commission, and the Prospectus and any amendment or
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supplement thereto, on the date of filing thereof with the Commission and at the
Closing Date, 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; the
foregoing shall not apply to the statements in or omissions from any such
document in reliance upon, and in conformity with, written information furnished
to the Company by you or by any Underwriter through you specifically for use in
the preparation thereof. The Company acknowledges that the only information
furnished in writing to the Company by the Underwriters specifically for
inclusion in the Registration Statement is the information set forth in
EXHIBIT I hereto. The Company has not distributed any offering material in
connection with the offering or sale of the Shares other than the Registration
Statement, the preliminary prospectus, the Prospectus or any other materials, if
any, permitted by the Act.
(c) The financial statements and schedules included in the
Registration Statement 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). 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 form 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
Act or the Rules and Regulations to be included in the Registration Statement or
the Prospectus. Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), who have
reported on the financial statements and schedules which are audited, are
independent accountants with respect to the Company as required by the Act and
the Rules and Regulations.
(d) The Company has been duly organized and is validly existing as a
corporation, is in good standing under the laws of the State of Maryland, has
the power and authority to conduct its business as described in the Registration
Statement and Prospectus, and is duly qualified to do business in each
jurisdiction in which it owns or leases real property or in which the conduct of
its business requires such qualification, except where the failure to be so
qualified, considering all such cases in the aggregate, does not involve and
will not involve a material risk to the business, properties, financial position
or results of operations of the Company and its subsidiaries (as hereinafter
defined) taken as a whole.
(e) The only subsidiaries (as defined in the Rules and Regulations) of
the Company are the subsidiaries listed on EXHIBIT II attached hereto (the
"subsidiaries"). Each of the Company's subsidiaries existing as of the date
hereof is a corporation or partnership, as the case may be, duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation or organization. Each of the
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Company's subsidiaries existing as of the date hereof has the power and
authority to conduct its business as described in the Registration Statement and
Prospectus and is, or will be upon the Closing Date, duly qualified to do
business in each jurisdiction in which it owns or leases, or will own or lease,
real property or in which the conduct of its business requires such
qualification except where the failure to be so qualified, considering all such
cases in the aggregate, does not involve and will not involve a material risk to
the business, properties, financial position or results of operations of the
Company or any subsidiary taken as a whole. Except for the 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 articles or certificate of incorporation, partnership
agreements, and of the by-laws of each of the Company's subsidiaries and all
amendments thereto have been delivered to the Underwriters, and no changes
therein will be made subsequent to the date hereof and prior to the Closing
Date, except as heretofore disclosed in writing to the Underwriters. Except as
otherwise described in the Registration Statement or the Prospectus, or as
described in Exhibit II, all of the issued and 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, in each case free and clear of any security interest, mortgage,
pledge, lien, charge, encumbrance, claim, restriction or equity interest (each
of the foregoing, a "Lien").
(f) The outstanding securities of the Company, including the Common
Stock, $0.01 par value (the "Common Stock"), the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, and the Shares have been duly
authorized and are, or when issued and delivered to the Underwriters against
payment therefor as provided by this Agreement will be, validly issued, fully
paid and nonassessable by the Company and conform, or when so issued will
conform, to the description thereof in the Prospectus. The Shares have been
issued in conformance with the requirements of the Series A Preferred Stock and
the Series B Preferred Stock and do not conflict with any restrictions or
limitations granted to the holders of the Series A Preferred Stock or the Series
B Preferred Stock which have not been waived. The shareholders of the Company
have no preemptive or similar rights with respect to the Shares. Except as set
forth in the Registration Statement or the Prospectus, the Company does 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 securities, any shares of capital stock of any
subsidiary or any such warrants, convertible securities or obligations, except
for stock options and shares of restricted stock granted pursuant to the
Company's 1994 Stock Incentive Plan.
(g) 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 have not incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary
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course of business, that are material to the Company or its subsidiaries, and
there has not been any material change in the capital stock, partnership
interests, short-term debt or long-term debt of the Company or any of its
subsidiaries, 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.
(h) Except as set forth in 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
Communities (as defined in the Prospectus) 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 result in any 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, or materially and adversely affect the
properties or assets of the Company and its subsidiaries taken as a whole.
(i) There are no contracts or documents of a character required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Act or the 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,
constitute valid and binding agreements of the Company or such subsidiary and
are enforceable against the Company or such subsidiary in accordance with the
terms thereof, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or, in the case
of each such Contract which is to be executed and delivered on the Closing Date,
will on the Closing Date, be duly authorized, executed and delivered by the
Company or such subsidiary, constitute valid and binding agreements of the
Company or such subsidiary and be enforceable against the Company or such
subsidiary in accordance with the terms thereof, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally.
(j) The Company has the corporate power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company and
is enforceable against the Company in accordance with the terms hereof, except
as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally. Except as disclosed in the Prospectus,
the execution, delivery and the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in the
creation or imposition of any lien, charge or encumbrance upon the Communities
(as defined in the Prospectus) or any of the other assets of the Company or any
of its subsidiaries pursuant to the terms or provisions of, or result in a
breach or violation of any of the terms or provisions of, or constitute a
default
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under, or give any other party a right to terminate any of its obligations
under, or result in the acceleration of any obligation under, the articles of
incorporation of the Company or by-laws of the Company, the articles or
certificate of incorporation or by-laws or partnership agreements of any of the
Company's subsidiaries, or any Contract, or violate or conflict with any
judgment, ruling, decree, order, statute, rule or regulation of any court or
other governmental agency or body applicable to the Communities or business or
properties of the Company or any of its subsidiaries. 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
Agreement or in connection with the issuance or sale of the Shares by the
Company, except such as may be required under the Act, the Exchange Act or state
securities laws, or the by-laws and rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the purchase and
distribution by the Underwriters of the Shares to be sold by the Company. The
Company has the power and authority to authorize, issue, offer and sell the
Shares, as contemplated by this Agreement, free of any preemptive rights.
(k) 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; neither the Company nor any of its
subsidiaries is, and upon consummation of the offering of the Shares, none of
them will be in default under any Contract, 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 articles of incorporation or by-laws; the
Company and each of its subsidiaries have or, upon the Closing 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, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise.
(l) 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,
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.
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(m) 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
and intended 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.
(n) 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 as set forth in the Prospectus. The Company or its subsidiaries
has not 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).
(o) As of the Closing 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, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(p)(i) None of the Company or the Partnerships 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,
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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 Underwriters or referred to in the
Prospectus, or such as would not singly 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 of substances might
seep, flow or drain into such waters, except as disclosed in the
environmental reports previously delivered to the Underwriters or
referred to in the Prospectus or such as would not singly 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 Underwriters or referred to in the
Prospectus or such as would not singly or in the aggregate have a
material adverse effect on the Company and its subsidiaries, taken as
a whole.
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
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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.
(q) 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 singly or in the aggregate, have a material adverse effect
on the Company and its subsidiaries taken as a whole.
(r) 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").
(s) 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").
(t) 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.
(u) 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
Shares to facilitate the sale or resale of the Shares.
(v) 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 Shares,
will not distribute any offering material in connection with the offering and
sale of the Shares other than the Registration Statement, the Prospectus or
other materials, if any, permitted by the Act.
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(w) 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 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.
(x) The Company has applied to have the Shares duly authorized for
listing by the New York Stock Exchange and the Pacific Stock Exchange. The
Company shall use its best efforts to have the Shares listed by the New York
Stock Exchange and the Pacific Stock Exchange within thirty (30) days following
the Closing Date.
(y) Neither the Company nor any of its subsidiaries is involved in any
material labor dispute nor, to the best knowledge of the Company after due
inquiry and investigation, is any such dispute threatened.
(z) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement, except as set forth in that certain Registration Rights
Agreement dated March 16, 1994 among the Company and certain stockholders.
3. PURCHASE, SALE AND DELIVERY OF SHARES.
(a) On the basis of the representations, warranties and agreements of
the Company herein contained and subject to all the terms and conditions of this
Agreement, the Company agrees to sell to each Underwriter named below, and each
Underwriter, severally and not jointly, agrees to purchase from the Company at
the purchase price per share for the Shares to be agreed upon by the
Underwriters and the Company and set forth in the Price Determination Agreement,
as hereinafter defined, the number of Shares set forth opposite the name of such
Underwriter in Schedule A. If the Company elects to rely on Rule 430A (as
hereinafter defined), Schedule A may be attached to the Price Determination
Agreement.
(b) Delivery of the Shares shall be made to the Underwriters for the
accounts of the Underwriters against payment of the purchase price wire transfer
of immediately available funds to the order of the Company at the office of
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019.
Such payments shall be made at 10:00 a.m., New York City time, on the third
business day (or, if the Shares are priced as contemplated by Rule 15cb-1(c) of
the Exchange Act after 4:30 p.m., New York City time, the fourth business day)
following the date of this Agreement or, if the Company has elected to rely on
Rule 430A, the third or fourth business day, as applicable, after the date on
which the first bona fide offering of the
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Shares to the public is made by the Underwriters or at such time on such other
date, not later than seven business days after the date of this Agreement, as
may be agreed upon by the Company and the Underwriters (such date is herein
referred to as the "Closing Date").
(c) To the extent the Option is exercised, delivery of the Option
Shares against payment by the Underwriters (in the manner specified above) will
take place at the offices specified above for the Closing Date at the time and
date (which may be the Closing Date) specified in the Option Shares Notice.
(d) If requested by the Underwriter no later than the date of this
Agreement, certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the Underwriters
shall request at least two business days prior to the Closing Date or the Option
Closing Date, as the case may be, by written notice to the Company. For the
purpose of expediting the checking and packaging of certificates for the Shares,
the Company agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date or the Option Closing Date, as the case may
be.
(e) The initial public offering price per share for the Shares and the
purchase price per share for the Shares to be paid by the several Underwriters
shall be agreed upon by the Company and the Underwriters, acting on behalf of
the several Underwriters, and such agreement shall be set forth in a separate
written instrument substantially in the form of EXHIBIT III hereto (the "Price
Determination Agreement"). The Price Determination Agreement may take the form
of an exchange of any standard form of written telecommunication among the
Company and the Underwriters and shall specify such applicable information as is
indicated in EXHIBIT III hereto. The offering of the Shares will be governed by
this Agreement, as supplemented by the Price Determination Agreement. From and
after the date of the execution and delivery of the Price Determination
Agreement, this Agreement shall be deemed to incorporate, and, unless the
context otherwise indicates, all references contained herein to "this Agreement"
and to the phrase "herein" shall be deemed to include, the Price Determination
Agreement.
4. COVENANTS. The Company covenants and agrees with each Underwriter that:
(a) The Company will cause the Prospectus to be filed as required by
Section 2(a) hereof (but only if you have not reasonably objected thereto by
notice to the Company after having been furnished a copy a reasonable time prior
to filing) and will notify you promptly of such filing; it will notify you
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; it will
prepare and file with the Commission, promptly upon your
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request, any amendments or supplements to the Registration Statement or
Prospectus that, in your opinion, may be necessary or advisable in connection
with the distribution of the Shares by the Underwriters; and it will file no
amendment or supplement to the Registration Statement or Prospectus to which you
shall reasonably object by notice to the Company after having been furnished a
copy at a reasonable time prior to the filing.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any
purpose; and it 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) Within the time during which a prospectus relating to the Shares
is required to be delivered under the Act, the Company will comply with all
requirements imposed upon it by the Act and by the Rules and Regulations, as
from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Shares as contemplated by the provisions hereof and
the Prospectus. If during such period any event occurs as a result of which 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 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 Act, the Company will promptly notify
you 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) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and its counsel and each dealer,
without charge, as many copies of the Prospectus (and of any amendment or
supplement thereto) as you may reasonably request. The Company consents to the
use of the Prospectus (and of any amendment or supplement thereto) in accordance
with the provisions of the Act, both in connection with the offering and sale of
the Shares and for such period of time thereafter as the Prospectus is required
by the Act to be delivered in connection with sales by any Underwriter or
dealer. If during such period of time any event shall occur that in the judgment
of the Company or in the opinion of counsel for the Underwriters is required to
be set forth in the Prospectus (as then amended or supplemented) or should be
set forth therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus to comply with the Act or any other law,
the Company will forthwith prepare and, subject to the provisions of Section
4(a) hereof, file with the
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Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Underwriters and dealers a reasonable number of
copies thereof. In the event that the Company and you agree that the Prospectus
should be amended or supplemented, the Company, if requested by you, will
promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(e) The Company will make generally available to its security holders
as soon as practicable, but not later than fifty (50) days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations) covering a twelve-month period beginning not later than the first
day of the Company's fiscal quarter next following the "effective date" (as
defined in said Rule 158) of the Registration Statement and will advise you in
writing when such statement has been so made available.
(f) The Company agrees to pay the following costs and expenses and all
other costs and expenses incident to the performance by the Company of the
Company's obligations hereunder including, without limitation, its own travel
(including air fare) and lodging expenses related to the preparation of the
Prospectus and any sales efforts: (i) the preparation, printing or reproduction,
and filing with the Commission of the Registration Statement (including
financial statements and exhibits thereto), the Prospectus, and each amendment
or supplement to either of them; (ii) the printing or (reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Registration Statement, the Prospectus, and all
amendments or supplements to either of them as may be reasonably requested for
use in connection with the offering and sale of the Shares; (iii) the
preparation, printing, authentication, issuance and delivery of certificates for
the Shares, including any stamp taxes in connection with the original issuance
and sale of the Shares; (iv) the printing (or reproduction) and delivery of this
Agreement, and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Shares; (v) the registration of
the Shares under the Exchange Act and the listing of the Shares on the New York
Stock Exchange and the Pacific Stock Exchange; (vi) the filing fees and the fees
and expenses of counsel for the Underwriters in connection with any filings
required to be made with the NASD; and (vii) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company.
(g) The Company will apply the net proceeds from the offering and sale
of the Shares in the manner set forth in the Prospectus under "Use of Proceeds"
and shall file such reports with the Commission with respect to the sale of the
Shares and the application of the proceeds therefrom as may be required in
accordance with Rule 463 under the Act.
(h) Unless the Board of Directors of the Company determines in its
reasonable business judgment that continued qualification as a "real estate
investment
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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."
(i) The Company will not at any time, directly or indirectly, take any
action designed, or which might reasonably be expected to cause or result in, or
which will constitute, stabilization of the price of the Shares to facilitate
the sale or resale of any of the Shares.
(j) The Company will comply with all provisions of any undertakings
contained in Item 17 of the Registration Statement.
(k) The Company will comply with all provisions of any undertakings
contained in the Registration Statement.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the several
Underwriters to purchase and pay for the Shares as provided herein shall be
subject to the accuracy, as of the date hereof and the Closing Date (as if made
at the Closing Date), of the representations and warranties of the Company
herein, to the performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) Notification that the Registration Statement has become effective
shall be received by the Underwriters not later than 5:00 pm., New York City
time, on the date of this Agreement or at such later date and time as shall be
consented to in writing by the Underwriters and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made; no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been instituted or, to the
knowledge of the Company or any Underwriter, threatened by the Commission; and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to your satisfaction.
(b) No Underwriter shall have advised the Company that the
Registration Statement or Prospectus, or any amendment or supplement thereto,
contains an untrue statement of fact that in your opinion is material, or omits
to state a fact that in your opinion is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, (i) there shall not have been any change in the capital
stock, partnership interests, short-term debt or long-term debt of the Company
or its subsidiaries, (ii) there shall not have been any adverse change, or any
development involving a prospective 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, whether or
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not arising from transactions in the ordinary course of business, 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 Underwriters any of the foregoing makes it
impractical or inadvisable to offer or deliver the Shares on the terms and in
the manner contemplated in the Prospectus.
(d) You shall have received the opinion of Goodwin, Procter & Hoar
LLP, counsel for the Company dated the Closing Date, to the effect that:
(i) The Registration Statement has been declared effective
under the Act; the Prospectus has been filed with the Commission
pursuant to Rule 424; and to the best knowledge of such counsel (based
solely on oral representation of a member of the staff of the
Commission) no stop order suspending the effectiveness of the
Registration Statement has been issued under the Act and no proceeding
for that purpose has been instituted or threatened by the Commission;
(ii) 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 at the
Closing Date, complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations (other than (A)
the financial statements and supporting schedules and other financial
and statistical information and data included therein or omitted
therefrom, and (B) any documents incorporated therein by reference, as
to which such counsel need express no opinion), it being understood
that in passing upon compliance as to the form of the Registration
Statement, such counsel may assume that the statements made therein
are correct and complete;
(iii) The descriptions in the Registration Statement (other
than the documents incorporated therein by reference) and Prospectus
of statutes are accurate in all material respects and fairly present
the information required to be shown; and such counsel 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 described and filed as
required;
(iv) 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.
The discussion in the Prospectus under the caption "Federal Income Tax
Considerations" fairly
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summarizes the Federal income tax considerations that are material to
a holder of the Shares;
(v) The Company is not (after giving effect to the sale of
the Shares) required to be registered under the 1940 Act;
(vi) The Company is in good standing under the laws of the
State of California as a foreign corporation, has full power and
authority to conduct its business as described in the Registration
Statement and Prospectus; and, except as disclosed in Exhibit II to
this Agreement with respect to the subsidiaries of the Company, to the
knowledge of such counsel, the Company owns no capital stock or other
beneficial interest in any corporation, partnership, joint venture or
other business entity;
(vii) Each of the partnerships that owns a Community (the
"Partnerships") is a limited partnership duly organized, validly
existing and in good standing under the laws of its state of
incorporation and has the power under its partnership agreement and
the applicable Limited Partnership Act necessary to conduct its
business as described in the Registration Statement and Prospectus;
each of the corporate subsidiaries of the Company is duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has the corporate power and authority to conduct its
business as described in the Registration Statement and Prospectus;
(viii) The General Partners of each of the Partnerships are
duly qualified to do business in the State of California, except where
the failure to be so qualified, considering all such cases in the
aggregate, does not involve and will not involve a material risk to
the business, properties, financial position or results of operations
of such subsidiary;
(ix) All of the outstanding shares of Common Stock and the
Preferred Stock of the Company identified in the Prospectus (including
the Shares) have been duly authorized and are, or when issued as
contemplated hereby will be, validly issued, fully paid and
nonassessable and conform, or when so issued will 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;
(x) The Company has full corporate power and authority to
enter into this Agreement; this Agreement has been duly authorized,
executed and delivered by the Company; to the knowledge of such
counsel, the issuance and sale of the Shares to the Underwriters on
the terms contemplated herein will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets
of the Company, any of its subsidiaries or the Partnerships, pursuant
to the terms or provisions of, or result in a breach or violation of
any of
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the terms or provisions of, or constitute a default or result in the
acceleration of any obligation under, the articles of incorporation or
by-laws of the Company, the articles or certificate of incorporation
or by-laws of any of the Company's subsidiaries, or the partnership
agreements or other organizational documents of the Partnerships, any
Contract to which the Company, any of its subsidiaries or the
Partnerships is a party or by or pursuant to which any of them or
their respective properties is bound, affected or financed or any
statute, judgment, ruling, decree, order, rule or regulation of any
court or other governmental agency or body applicable to the business
or properties of the Company, any of its subsidiaries or the
Partnerships (except that such counsel need express no opinion as to
the securities or Blue Sky laws of any jurisdiction other than the
United States), 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 or any of its subsidiaries taken
as a whole;
(xi) To the knowledge of such counsel, 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 Shares by the Company, except (i) such as have been obtained under
the Act or the Exchange Act, or (ii) such as may be required under
state securities laws or the by-laws of the NASD in connection with
the purchase and distribution of the Shares by the Underwriters; and
(xii) To the knowledge of such counsel, none of the Company,
any of its subsidiaries or the Partnerships is in violation of its
articles or certificate of incorporation, by-laws, 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 such counsel to which the Company, any of its subsidiaries or
the Partnerships is a party will be a party, or by or pursuant to
which any of them or their respective properties is bound, affected or
financed will be bound, affected or financed, and, to the knowledge of
such counsel, none of the Company, any of its subsidiaries or the
Partnerships is in violation of any judgment, ruling, decree, order,
franchise, license or permit known to us or any statute, rule or
regulation of any court or other governmental agency or body
applicable to the business or properties of the Company, any of its
subsidiaries or the Partnerships; 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 or any of its
subsidiaries taken as a whole.
In connection with delivering such opinion such counsel shall also
state:
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(a) No facts have come to their attention which cause them to believe that
the Registration Statement (excluding (i) the financial statements and
notes thereto, financial schedules and other financial or statistical
information and data included therein or omitted therefrom and (ii)
any documents incorporated by reference into the Registration
Statement, as to which they need express no opinion), at the time it
became effective, 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; and
(b) No facts have come to their attention which cause them to believe that
the Prospectus (excluding (i) the financial statements and notes
thereto, financial schedules and other financial or statistical
information and data included therein or omitted therefrom and (ii)
any documents incorporated by reference into the Registration
Statement, as to which they need express no opinion), as of its date
or the date of such opinion, contained or contains an untrue
statements 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.
In rendering such opinions, such counsel may rely on certificates of public
officers, upon opinions of counsel reasonably satisfactory to the Underwriters,
copies of which shall be contemporaneously delivered to the Underwriters, and as
to matters of fact, upon certificates of officers of the Company; provided that
such counsel shall state that the opinion of any other counsel is in form
satisfactory to such counsel and, such counsel is unaware of any reason why it
and the Underwriters are not justified in relying on such opinions of other
counsel. Copies of all such opinions and certificates shall be furnished to
counsel to the Underwriters on the Closing Date.
(e) You shall have received from O'Melveny & Myers LLP, counsel for
the Underwriters (based upon Goodwin Procter & Hoar LLP's opinion respecting
Maryland law), such opinion or opinions, dated the Closing Date, with respect to
the organization of the Company, the validity of the Shares, the Registration
Statement, the Prospectus and other related matters as you reasonably may
request, and such counsel shall have received such papers and information as
they request to enable them to pass upon such matters. In rendering such
opinion, such counsel may rely upon certificates of public officers and upon
opinions of counsel, copies of which shall be contemporaneously delivered to the
Underwriters, and as to matters of fact, upon certificates of officers of the
Company.
(f) At the time of the execution of this Agreement, the Underwriters
shall have received from Coopers & Lybrand a letter dated such date, in form and
substance satisfactory to the Underwriters containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and other financial
information included in the Registration
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Statement and the Prospectus (the "initial comfort letter"). On the Closing
Date, you shall have received from Coopers & Lybrand a letter dated as of the
Closing Date to the effect that they reaffirm the statements made in the initial
comfort letter, except that the specified date referred to shall be a date not
more than five days prior to the Closing Date.
(g) You shall have received from the Company a certificate, signed by
the Chairman of the Board or the President and by the principal financial or
accounting officer of the Company, dated the Closing Date, to the effect that:
(i) The representations and warranties of the Company in
this Agreement were when originally made and are at the time such
certificate is delivered true and correct, as if made at and as of the
Closing Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that
purpose has been instituted or is threatened, by the Commission; and
(iii) Since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amendment or supplement to the Registration Statement or Prospectus
that has not been so set forth.
(h) The Company shall have applied to have the Shares approved for
listing on the New York Stock Exchange and the Pacific Stock Exchange.
(i) The Company shall have furnished to you such further certificates
and documents as you shall have reasonably requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you. The Company will furnish you with such conformed copies of
such opinions, certificates, letters and other documents as you shall reasonably
request.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person,
if any, who controls each Underwriter within the meaning of Section 15 of the
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
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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 any Underwriter, or any such person may become subject under
the 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
application or other document executed by the Company and filed in any
jurisdiction in order to qualify the Shares 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 any Underwriter in connection with, or relating
in any manner to, the Shares 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 such
underwriter through its gross negligence or willful misconduct); provided that
the Company will not be liable to the extent that such loss, claim, liability,
expense or damage (A) arises from the sale of the Shares in the public offering
to any person by an Underwriter 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 any Underwriter furnished to the Company by the
Underwriters expressly for inclusion in the Registration Statement, any
preliminary prospectus or the Prospectus or (B) results solely from an untrue
statement of a material fact contained in, or the omission of a material fact
from, such preliminary prospectus or Prospectus, which untrue statement or
omission was completely corrected in the Prospectus (as then amended or
supplemented) if the Company shall sustain the burden of proving that the
Underwriters sold Shares to the person alleging such loss, claim, liability,
expense or damage without sending or giving, at or prior to the written
confirmation of such sale, a copy of the Prospectus (as then amended or
supplemented) if the Company had previously furnished copies thereof to the
Underwriters within a reasonable amount of time prior to such sale or such
confirmation, and the Underwriters failed to deliver the corrected Prospectus,
if required by law to have so delivered it and if delivered would have been a
complete defense against the person asserting such loss, claim, liability,
expense or damage. This indemnity agreement will be in addition to any liability
that the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, each director of the Company and
each officer of the Company who signs the Registration Statement to the same
extent as the foregoing indemnity from the Company to each Underwriter, but only
insofar as losses, claims,
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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 any Underwriter furnished to
the Company by the Underwriters expressly for use in the Registration Statement,
the Preliminary Prospectus or the Prospectus. This indemnity will be in addition
to any liability that each Underwriter might otherwise have; provided, however,
that in no case shall any Underwriter be liable or responsible for any amount in
excess of the underwriting discounts and commissions received by such
Underwriter.
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 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 6, 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 6 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
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) 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, (3) 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 (4) 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 one time for all such indemnified party or
parties. All such fees, disbursements and other charges
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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 6 (whether or not any indemnified party
is a party thereto), unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising or
that may arise out of such claim, action or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Underwriters, the
Company and the Underwriters 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 the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company
and any one or more of the Underwriters may be subject in such proportion as
shall be appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. 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 the Underwriters, 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 or a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Company or the Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contributions pursuant to this Section 6(d) were top be
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. 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 6(d) shall be deemed to include, for purpose of this
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Section 6(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
ore claim. Notwithstanding the provisions of the Section 6(d), no Underwriter
shall be required to contribute any amount in excess of the underwriting
discounts and commissions received by it and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 6(d) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 6(d), any
person who controls a party to this Agreement within the meaning of the 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 6(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 6(d). Except for a settlement
entered into pursuant to the last sentence of Section 6(c) hereof, 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) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the Underwriters, (ii) acceptance
of the Shares and payment therefore or (iii) any termination of this Agreement.
7. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All representations,
warranties, agreements and covenants, of the Company herein or in certificates
delivered pursuant hereto, and the agreements of the several Underwriters
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any controlling persons, or the Company or any of its officers, directors or
any controlling persons, and shall survive delivery of and payment for the
Shares hereunder.
8. SUBSTITUTION OF UNDERWRITERS. Intentionally Omitted.
9. TERMINATION. You shall have the right, by giving notice as hereinafter
specified at any time at or prior to the Closing Date, to terminate this
Agreement if (i) the Company shall have failed, refused or been unable, at or
prior to the Closing Date, to perform any agreement on its part to be performed
hereunder, (ii) any other condition of the Underwriters' obligations hereunder
is not fulfilled, (iii) trading on the New York Stock Exchange shall have been
wholly suspended, (iv) minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall
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have been required, on the New York Stock Exchange by such exchange or by order
of the Commission or any other governmental authority having jurisdiction, (v) a
banking moratorium shall have been declared by Federal or New York authorities,
or (vi) 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, any outbreak or material escalation of hostilities in which the
United States is involved, a declaration of war by Congress, any other
substantial national or international calamity or any other event or occurrence
of a similar character shall have occurred since the execution of this Agreement
that, in your judgment, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Shares. Any such termination shall
be without liability of any party to any other party with respect to Shares not
purchased by reason of such termination except that the provisions of Section
4(f) and Section 6 hereof shall at all times be effective. If you elect to
terminate this Agreement as provided in this Section, the Company shall be
notified promptly by you by telephone, telex or telecopy, confirmed by letter.
10. NOTICES. All notices or communications hereunder shall be in writing
and if sent to you shall be mailed, delivered, telexed or telecopied and
confirmed to you, c/o PaineWebber Incorporated, 1285 Avenue of the Americas, New
York, New York 10019, Attention: Corporate Finance Department, or if sent to the
Company, shall be mailed, delivered, telexed or telecopied and confirmed to the
Company at 4340 Stevens Creek Boulevard, Suite 275, San Jose, California 95129.
Notice to any Underwriter pursuant to Section 6 hereof shall be mailed,
delivered, telexed or telecopied and confirmed to such Underwriter's address as
it appears in such Underwriter's questionnaire or other notice furnished to the
Company in writing for the purpose of communications hereunder. Any party to
this Agreement may change such address for notices by sending to the parties to
this Agreement written notice of a new address for such purpose.
11. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the Company and the Underwriters and their respective successors and the
persons or entities referred to in Section 6 hereof, and no other person will
have any right or obligation hereunder.
Any action required or permitted to be taken by the Underwriters under this
Agreement may be taken jointly by them or by PaineWebber Incorporated.
12. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
13. Over-allotment Option.
(a) In addition to the Shares being sold by the Company as described
in Section 1(a) hereof (which are referred to herein as the "Firm Shares"), the
Company hereby grants to the Underwriters an option to purchase, severally and
not jointly, up to an aggregate of 300,000 additional Shares (which are referred
to herein as the "Option
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Shares") on the terms and for the purposes set forth in Section 13(b). The first
two paragraphs of Section 3 hereof shall be deemed to apply only to the
purchase, sale and delivery of the Firm Shares. References in those two
paragraphs and in Schedule A hereto to the "Shares" shall be deemed to be
references to the "Firm Shares"; except as otherwise provided in this Section
13, other references in this Agreement to the "Shares" shall be deemed to
include the Firm Shares and the Option Shares.
(b) Upon written notice from you given to the Company not more than 30
days subsequent to the date of the initial public offering of the Shares, the
Underwriters may purchase all or any portion of the Option Shares at the
purchase price per share to be paid for the Firm Shares. The Company agrees to
issue and sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company, that Underwriter's proportionate
share (based upon the respective underwriting obligations of the several
Underwriters hereunder as set forth in Schedule A hereto except as may be
adjusted by you to eliminate fractions) of the number of Option Shares specified
in such notice. Such Option Shares may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Shares. No Option Shares shall be sold or delivered unless the Firm Shares
previously have been, or simultaneously are, sold and delivered. The right to
purchase the Option Shares or any portion thereof may be surrendered and
terminated at any time upon notice by you to the Company. The "Closing Date" as
defined in Section 3 hereof with respect to the Firm Shares, shall be deemed to
be the "First Closing Date," and the time for the delivery of and payment for
the Option Shares is herein referred to as the "Second Closing Date," (which may
be the same date as the First Closing Date). The Second Closing Date shall be
determined by you but shall be not later than 10 days after you give to the
Company written notice of election to purchase Option Shares. The preparation,
registration, checking and delivery of, and payment for, the Option Shares shall
occur or be made in the same manner as provided in Section 3 hereof for the Firm
Shares, except as you and the Company may otherwise agree.
(c) The conditions to the Underwriters' obligations set forth in
Section 5 shall be deemed to be conditions to the Underwriters' obligations to
purchase and pay for the Shares to be purchased on each of the First Closing
Date and the Second Closing Date, as the case may be; references in that Section
and in Sections 2, 8 and 9 hereof to the "Closing Date" shall be deemed to be
references to the First Closing Date or Second Closing Date, as the case may be,
and references to the "Securities" in Section 5 hereof shall be deemed to be
references to the Firm Shares and/or the Option Shares, as the case may be, to
be purchased by the Underwriters on such Closing Date. A termination of this
Agreement as to the Option Shares after the First Closing Date will not
terminate this Agreement as to the Firm Shares.
14. COUNTERPARTS. This Agreement may be signed in two or more counterparts
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
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15. SEVERABILITY. In case any provision in this 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.
16. WAIVERS OF TRIAL BY JURY. The Company and the Underwriters 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 Agreement or the transactions
contemplated hereby.
[remainder of page intentially left blank]
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If the foregoing correctly sets forth the understanding between the Company and
the several Underwriters, 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 Underwriters.
Very truly yours,
BAY APARTMENT COMMUNITIES, INC.
By: /s/ Gilbert M. Meyer
---------------------------------------
Name: Gilbert M. Meyer
Title: President
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
MORGAN STANLEY DEAN WITTER
By: PAINEWEBBER INCORPORATED
By: /s/ Frederick J. Caven
-------------------------
Name: Frederick J. Caven, JR.
------------------------
Title: Managing Director
-----------------------
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SCHEDULE A
Amount of Shares
Underwriter to be Purchased
----------- ---------------
PaineWebber Incorporated 1,000,000
Morgan Stanley & Co., Incorporated 1,000,000
Total 2,000,000
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EXHIBIT I
---------
INFORMATION IN PRELIMINARY PROSPECTUS
AND PROSPECTUS FURNISHED BY
THE UNDERWRITERS
The following information appearing in the Preliminary Prospectus and
the Prospectus has been furnished by the Underwriters in writing specifically
for use in the preparation of the Preliminary Prospectus and the Prospectus.
1. The following information contained in the Prospectus Supplement
under the heading "Underwriting:"
a. The allocation of shares between the Underwriters in the
first paragraph.
b. The information in the second paragraph.
c. The information in the second sentence of the fifth
paragraph.
I-1
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EXHIBIT II
LIST OF SUBSIDIARIES
Bay Apartment Communities, Inc. (the "Company") owns interests in the
following entities:
Subsidiaries
- ------------
1. Bay Asset Group, Inc., a Maryland corporation, is a wholly-owned subsidiary
of the Company.
2. Bay GP, Inc., a Maryland corporation, is a wholly-owned subsidiary of the
Company.
3. Bay Development Partners, Inc., a Maryland corporation, is a wholly-owned
subsidiary of Bay Asset Group, Inc.
4. Bay Waterford, Inc., a Maryland corporation, is a wholly-owned subsidiary
of Bay Asset Group, Inc.
Partnerships
- ------------
1. Bay GP, Inc. is the sole general partner of Bay Countrybrook, L.P., a
Delaware limited partnership. There are third-party limited partners.
2. Bay Development Partners, Inc. is the sole general partner of San Francisco
Bay Partners II, Ltd., a California limited partnership. There is one
third-party limited partner.
3. Bay Development Partners, Inc. is the sole general partner of San Francisco
Bay Partners III, L.P., a California limited partnership. The Company is
the sole limited partner.
4. Bay Development Partners, Inc. is the sole partner of Toyon Road San Jose
Partners, L.P., a California limited partnership. The Company is the sole
limited partner.
5. Bay Development Partners, Inc. is the sole general partner of Foxchase
Drive San Jose Partners II, L.P., a California limited partnership. The
Company is the sole limited partner.
6. The Company is the sole general partner of Bay Rincon, L.P., a California
limited partnership.
LIENS
-----
The Financial Guaranty Insurance Company has a lien on all of the
issued and outstanding capital stock of Bay Waterford, Inc. and Bay Development
Partners, Inc.
II-1
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EXHIBIT III
-----------
PRICE DETERMINATION AGREEMENT
-----------------------------
June 17, 1997
PAINEWEBBER INCORPORATED
MORGAN STANLEY DEAN WITTER
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated June 17, 1997
(the "Underwriting Agreement"), among Bay Apartment Communities, a Maryland
corporation (the "Company"), and PaineWebber Incorporated and Morgan Stanley
Dean Witter (the "Underwriters"). The Underwriting Agreement provides for the
purchase by the Underwriters from the Company, subject to the terms and
conditions set forth therein, of an aggregate of 2,000,000 shares (the "Firm
Shares") of the Company's 8.50% Series C Cumulative Redeemable Preferred Stock,
par value $.01 per share. This Agreement is the Price Determination Agreement
referred to in the Underwriting Agreement.
Pursuant to Section 3 of the Underwriting Agreement, the undersigned
agree with the Underwriters as follows:
The public offering price per share for the Firm Shares shall be
$25.00.
The purchase price per share for the Firm Shares to be paid by the
several Underwriters shall be $24.2125 representing an amount equal to the
public offering price set forth above, less $0.7875 per share.
The Company represents and warrants to the Underwriters that the
representations and warranties of the Company set forth in Section 2 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.
As contemplated by the Underwriting Agreement, attached as Schedule A
is a completed list of the several Underwriters, which shall be a part of this
Agreement and the Underwriting Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
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If the foregoing is in accordance with your understanding of the
agreement among the Underwriters and the Company, please sign and return to the
Company a counterpart hereof, whereupon this instrument along with all
counterparts and together with the Underwriting Agreement shall be a binding
agreement among the Underwriters and the Company in accordance with its terms
and the terms of the Underwriting Agreement.
Very truly yours,
BAY APARTMENT COMMUNITIES, INC.
By: _________________________
Name: Gilbert M. Meyer
Title: President
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
MORGAN STANLEY DEAN WITTER
By: PAINEWEBBER INCORPORATED
By:______________________
Name: __________________
Title: ___________________