1
Exhibit 1.1
156,600 Shares
BAY APARTMENT COMMUNITIES, INC.
Common Stock
UNDERWRITING AGREEMENT
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December 8, 1997
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 PaineWebber (hereinafter the
"Underwriter") as follows:
1. DESCRIPTION OF SECURITIES.
The Company proposes to issue and sell to the Underwriter an aggregate
of 156,600 shares (the "Shares") of common stock, par value $0.01 per share of
the Company ("Common Stock").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement on Form S-3 (File No. 333-39037) 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. If such
registration statement has 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 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
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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. Copies of such
registration statement and any such amendments have been delivered to the
Underwriter 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, or the Prospectus shall be deemed
to refer to and include the filing of any document under the Act or the Exchange
Act after the Effective Date, or the date of 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, 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; the Prospectus and any amendment or 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 the Underwriter specifically for use in the preparation thereof. The
Company acknowledges that the only information furnished in writing to the
Company by the Underwriter 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 Prospectus or any other
materials, if any, permitted by the Act.
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(c) The financial statements and schedules included 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). 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 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 Underwriter, and no
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changes therein will be made subsequent to the date hereof and prior to the
Closing Date, except as heretofore disclosed in writing to the Underwriter.
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, the outstanding shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, and the Shares have been duly authorized and
are, or when issued and delivered to the Underwriter against full 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 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, as amended and restated, and stock issuable
under the 1996 Non-Qualified Employee Stock Purchase 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 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
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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 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 Underwriter 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.
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(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, 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 articles of incorporation or by-laws; except
as disclosed in the Prospectus, 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,
individually 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.
(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.
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(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, individually 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 any partnership that owns a
Community (each a "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 Underwriter 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.
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(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 Underwriter 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 Underwriter 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.
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.
(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
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liabilities would not individually 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.
(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 Shares have been duly authorized for listing by the New York
Stock Exchange and the Pacific Exchange, subject only to official notice of
issuance.
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(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 the Underwriter, and the Underwriter
agrees to purchase from the Company at the purchase price per share for the
Shares to be agreed upon by the Underwriter 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 accounts of the
Underwriter against payment of the purchase price by 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 15c6-1(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 Shares to the public is made by the
Underwriter 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 Underwriter (such date is herein referred to as the "Closing Date").
(c) 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 Underwriter
shall request at least two business days prior to the Closing Date, 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.
(d) The initial public offering price per share for the Shares and
the purchase price per share for the Shares to be paid by the Underwriter shall
be agreed upon by the Company and the Underwriter, and such agreement shall be
set forth in a
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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 Underwriter 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 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 Underwriter; 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
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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 Underwriter 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 counsel for the Underwriter and
each dealer, without charge, as many copies of the Prospectus (and of any
amendment or supplement thereto) as you or they 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 Underwriter 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
Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Underwriter 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
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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; (v) the listing of the Shares on the New York
Stock Exchange and the Pacific Exchange; (vi) the filing fees and the fees and
expenses of counsel for the Underwriter 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 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.
(l) In the event that any portion of the Shares is issued without
certificates pursuant to section 2-210 of the Maryland General Corporation Law
(the "MGCL"), at the time of issuance of such Shares the Company shall fully
comply with sections 2-210 and 2-211 of the MGCL.
5. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter 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:
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(a) Notification that the Registration Statement has become effective
shall be received by the Underwriter 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 Underwriter 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 the 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) The Underwriter shall not 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 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 Underwriter 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 (which may be based
solely on an 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;
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(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.
(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;
(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
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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 pursuant to the Company's Charter
or applicable statute or pursuant to any contract identified on an exhibit
to such opinion (which exhibit lists all contracts identified by the
Company in an officer's certificate as material under the standard set
forth in Item 601(b)(10) of Regulation S-K);
(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 Underwriter 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 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 or by-laws of any of the
Company's subsidiaries, or the partnership agreements or other
organizational documents of the Partnerships, (iii) any contract identified
on the schedule to such opinion referenced above 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 (iv) 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 Underwriter; and
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(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:
(a) No facts have come to their attention which cause them 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, 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 the financial statements and notes thereto,
financial schedules and other financial or statistical information and
data included therein or omitted therefrom, as to which they need
express no opinion), as of its date or the date of such opinion,
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.
In rendering such opinions, such counsel may rely on certificates of public
officers, upon opinions of counsel reasonably satisfactory to the Underwriter,
copies of which shall be contemporaneously delivered to the Underwriter, 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 Underwriter are not justified in relying on such
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opinions of other counsel. Copies of all such opinions and certificates shall be
furnished to counsel to the Underwriter on the Closing Date.
(e) You shall have received from O'Melveny & Myers LLP, counsel for
the Underwriter (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
Underwriter, and as to matters of fact, upon certificates of officers of the
Company.
(f) At the time of the execution of this Agreement, the Underwriter
shall have received from Coopers & Lybrand a letter dated such date, in form and
substance satisfactory to the Underwriter 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 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 Shares shall have been approved for listing on the New York
Stock Exchange and the Pacific Exchange, subject only to official notice of
issuance.
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(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 the
Underwriter, the directors, officers, employees and agents of the Underwriter
and each person, if any, who controls the 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 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 the
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 the 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 the
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 the Underwriter furnished to the Company by the Underwriter
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
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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 Underwriter 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
Underwriter within a reasonable amount of time prior to such sale or such
confirmation, and the Underwriter 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) The 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 the Underwriter, 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 the
Underwriter furnished to the Company by the Underwriter expressly for use in the
Registration Statement, the Preliminary Prospectus or the Prospectus. This
indemnity will be in addition to any liability that the Underwriter might
otherwise have; provided, however, that in no case shall the Underwriter be
liable or responsible for any amount in excess of the underwriting discounts and
commissions received by the 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
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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
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 Underwriter, the
Company and the Underwriter 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
Underwriter, 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 the Underwriter 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
Underwriter on the other. The relative benefits received by the Company on the
one hand and the Underwriter 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 Underwriter, in each case as set forth in the table
on the cover page of the Prospectus. If, but only if, the
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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 Underwriter, 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 the Underwriter, 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 Underwriter agree that it would not
be just and equitable if contributions pursuant to this Section 6(d) were to be
determined by pro rata allocation 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 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 this Section 6(d), the Underwriter shall not
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. 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 Underwriter, (ii) acceptance
of the Shares and payment therefor 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
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pursuant hereto, and the agreements of the Underwriter contained in Section 6
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the 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 Underwriter's 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 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) (costs
and expenses) and Section 6 (indemnification and contribution) 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,
Attention: President. 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 Underwriter 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.
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12. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
13. 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.
14. 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.
15. WAIVERS OF TRIAL BY JURY. The Company and the Underwriter 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 intentionally left blank]
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If the foregoing correctly sets forth the understanding between the
Company and Underwriter, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Company and the Underwriter.
Very truly yours,
BAY APARTMENT COMMUNITIES, INC.
By: /s/ Gilbert M. Meyer
----------------------------------------
Gilbert M. Meyer
President
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
By: /s/ Frederick T. Caven, Jr.
----------------------------------
Frederick T. Caven, Jr.
Managing Director
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SCHEDULE A
Amount of Shares
Underwriter to be Purchased
----------- ---------------
PaineWebber Incorporated 156,600
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EXHIBIT I
---------
INFORMATION IN PRELIMINARY PROSPECTUS
AND PROSPECTUS FURNISHED BY
THE UNDERWRITER
The following information appearing in the Prospectus has been
furnished by the Underwriter in writing specifically for use in the preparation
of the Prospectus:
None
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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.
7. The Company is the sole general partner of Bay Pacific Northwest, L.P., a
Delaware limited partnership. There are third-party limited partners.
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.
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EXHIBIT III
-----------
PRICE DETERMINATION AGREEMENT
-----------------------------
December 8, 1997
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated December 8,
1997 (the "Underwriting Agreement"), among Bay Apartment Communities, a Maryland
corporation (the "Company"), and PaineWebber Incorporated (the "Underwriter").
The Underwriting Agreement provides for the purchase by the Underwriter from the
Company, subject to the terms and conditions set forth therein, of an aggregate
of 156,600 shares (the "Shares") of the Company' common stock, par value $0.01
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
agrees with the Underwriter as follows:
The public offering price per share for the Firm Shares shall be
$39.125.
The purchase price per share for the Firm Shares to be paid by the
Underwriter shall be $[38.3425] representing an amount equal to the public
offering price set forth above, less $[0.7825 (2% of the public offering price)]
per share.
The Company represents and warrants to the Underwriter 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.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
If the foregoing is in accordance with your understanding of the
agreement between the Underwriter and the Company, please sign and return to the
Company a counterpart hereof, whereupon this instrument along with all
counterparts and together
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with the Underwriting Agreement shall be a binding agreement between the
Underwriter and the Company in accordance with its terms and the terms of the
Underwriting Agreement.
Very truly yours,
BAY APARTMENT COMMUNITIES, INC.
By: /s/ Gilbert M. Meyer
--------------------------------
Gilbert M. Meyer
President
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
By: /s/ Frederick T. Caven, Jr.
------------------------------
Frederick T. Caven, Jr.
Managing Director
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