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EXHIBIT 1.1
$50,000,000 Aggregate Principal Amount of 6.250% Senior Notes due 2003
$50,000,000 Aggregate Principal Amount of 6.500% Senior Notes due 2005
$50,000,000 Aggregate Principal Amount of 6.625% Senior Notes due 2008
BAY APARTMENT COMMUNITIES, INC.
UNDERWRITING AGREEMENT
January 14, 1998
PAINEWEBBER INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
UBS SECURITIES LLC
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 (collectively, the "Underwriters")
as follows:
1. Description of Securities. The Company proposes to issue and sell to
you the principal amount of its debt securities identified on Schedule A hereto
(the "Securities") to be issued under that certain Indenture, dated as of
January 20, 1998, as supplemented by the First Supplemental Indenture, dated as
of January 20, 1998, each between the Company and State Street Bank and Trust
Company (the "Trustee"), as trustee (as so supplemented, the "Indenture").
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, as amended (File No. 333-41511), with
respect to the Securities, 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, to the Company's knowledge, no proceeding for
that purpose has been instituted or threatened by the Commission. 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
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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 may be supplemented by one
or more forms of preliminary prospectus supplement, as contemplated by Rule 430
or Rule 430A of the Rules and Regulations, to be used in connection with the
offering and sale of the Securities (each a "Preliminary Prospectus"). Copies of
such registration statement, any such amendments, and each related 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 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 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; the Indenture, 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 Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission thereunder (the "TIA"); each part of the
Registration Statement, when such part became or becomes effective, did not or
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; 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, 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 (i) that part of the Registration Statement which constitutes
the Statement of Eligibility and Qualification under the TIA (the "Form T-1")
and (ii) the statements in or omissions from any such document in reliance upon,
and in conformity with, written information relating to any Underwriter
furnished to the Company by any Underwriter, specifically for use in the
preparation thereof. The Company acknowledges that the only information
furnished to the Company by any 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 Securities other than the Registration Statement, any
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 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
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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 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 (the "Series A Preferred Stock"), Series B Preferred Stock (the
"Series B Preferred Stock"), 8.50% Series C Cumulative Redeemable Preferred
Stock (the "Series C Preferred Stock") and 8.00% Series D Cumulative Redeemable
Preferred Stock (the "Series D Preferred Stock") have been duly authorized and
are validly issued, fully
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paid and nonassessable by the Company and conform to the description thereof in
the Prospectus. There are no requirements, restrictions or limitations in the
terms of the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock or the Series D Preferred Stock applicable to the issuance and
sale of the Securities. The shareholders of the Company have no preemptive or
similar rights with respect to the Securities. 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, and shares of unrestricted stock
to be issued to certain employees in connection with the deferment of income,
pursuant to the Company's 1994 Stock Incentive Plan, as amended and restated,
stock issuable under the 1996 Non-Qualified Employee Stock Purchase Plan and
stock issuable under the Company's Dividend Reinvestment and 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 and its subsidiaries, taken as a whole, 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 to be 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.
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(j) The Securities will be, as of the Closing Date, duly authorized
by the Company for issuance and sale pursuant to this Underwriting Agreement and
the Indenture, and when duly authenticated and delivered by the Trustee in
accordance with the terms of the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee), and delivered to, and
paid for in full by, the Underwriters pursuant to this Underwriting Agreement,
will be valid and legally binding obligations of the Company entitled to the
benefit of the Indenture and will be enforceable against the Company in
accordance with their terms, subject to (a) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, (b) general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or law), (c) the discretion of
the court before which any proceeding therefor may be brought, and (d)
applicable Federal and state securities laws and public policy which may limit
the application of provisions relating to indemnification and contribution with
respect to securities law matters (clauses (a), (b), (c) and (d) are
collectively referred to as the "Enforceability Limitations"); the Indenture has
been duly qualified under the TIA and prior to the issuance of the Securities
will be duly authorized, executed and delivered by the Company, and assuming due
authorization, execution and delivery thereof by the Trustee, will constitute a
valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the Enforceability Limitations;
the Securities and the Indenture will conform in all material respects to the
statements relating thereto contained in the Prospectus; and the Securities are,
in all material respects, in the form contemplated by the Indenture.
(k) The Company has the corporate power and authority to enter into
this Agreement and the Indenture. 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 Indenture and the consummation of the
transactions herein and therein 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 Securities 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 Securities to be sold by the Company.
The Company has the power and authority to authorize, issue, offer and sell the
Securities, as contemplated by this Agreement.
(l) Each of the Company and its subsidiaries has complied in all
material respects with all laws, regulations and orders applicable to it or
their respective businesses and properties where the failure to comply would,
individually or in the aggregate, have a material adverse effect on the Company
and its subsidiaries taken as a whole; neither the Company nor any of its
subsidiaries is, and upon consummation of the offering of the Securities, none
of them will be, in default under any Contract, the
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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.
(m) 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.
(n) 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.
(o) 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).
(p) 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
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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.
(q)(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 Underwriters or referred to in the Prospectus,
or such as would not individually or in the aggregate have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
Neither the Company nor its subsidiaries intends to use the Communities or
any subsequently acquired properties described in the Prospectus for the
purpose of handling, burying, storing, retaining, refining, transporting,
processing, manufacturing, generating, producing, spilling, seeping,
leaking, escaping, leaching, pumping, pouring, emitting, emptying,
discharging, releasing, injecting, dumping, transferring or otherwise
disposing of or dealing with Hazardous Materials, except for the use,
storage and transportation of small quantities of substances that are
regularly used as office supplies, household cleaning supplies, gardening
supplies, or pool maintenance supplies in compliance with applicable
Environmental Laws and in accordance with prudent business practices and
good hazardous materials storage and handling practices.
(ii) None of the Company or the Partnerships, to the best
knowledge of the Company after due inquiry and investigation, knows of any
seepage, leak, escape, leach, discharge, injection, release, emission,
spill, pumping, pouring, emptying or dumping of Hazardous Materials into
waters on, under or adjacent to the Communities or onto lands from which
such hazardous or toxic waste or substances might seep, flow or drain into
such waters, except as disclosed in the environmental reports previously
delivered to the Underwriters 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 Underwriters 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
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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.
(r) In the ordinary course of its business, each of the Company and
the Partnerships conducts a periodic review of the effect of Environmental Laws
on its business, operations and properties in the course of which it identifies
and evaluates associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for investigation, clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review and on the
basis of the reviews conducted by the Company in connection with the
Communities, the Company has reasonably concluded that such associated costs and
liabilities would not individually or in the aggregate, have a material adverse
effect on the Company and its subsidiaries taken as a whole.
(s) 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").
(t) 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").
(u) 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.
(v) 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
Securities to facilitate the sale or resale of the Securities.
(w) 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
Securities, will not distribute any offering material in connection with the
offering and sale of the Securities other than the Registration Statement, the
Prospectus or other materials, if any, permitted by the Act.
(x) 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.
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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 Securities.
(a) On the basis of the representations, warranties and agreements
contained herein, but subject to the terms and conditions set forth herein, the
Company agrees to issue and sell the Securities to the Underwriters as
hereinafter provided, and the Underwriters agree to purchase from the Company
the Securities at the purchase price set forth on Schedule A hereto plus accrued
interest, if any, from the date specified on Schedule A hereto to the date of
payment and delivery.
(b) The Company understands that the Underwriters intend (i) to make
a public offering of the Securities, and (ii) initially to offer the Securities
upon the terms set forth in the Prospectus.
(c) Payment for the Securities shall be made to the Company or to
its order in immediately available funds in the amount, on the date and at the
place set forth on Schedule A hereto (or at such other time and place on the
same date or such other date, not later than the third Business Day thereafter,
as the Underwriters and the Company may agree in writing). Such payment will be
made against delivery to the Underwriters of the Securities registered in such
names and in such denominations as the Underwriters shall request no less than
two full Business Days prior to the date of delivery, with transfer taxes, if
any, payable in connection with transfer to the Underwriters duly paid by the
Company. As used herein, the term "Business Day" means any day other than a day
on which banks are permitted or required to be closed in New York City. The time
and date of such payment and delivery with respect to the Securities are
referred to herein as the "Closing Date." The Securities will be delivered
through the book entry facilities of The Depository Trust Company ("DTC") and
will be made available for inspection by the Underwriters by 1:00 P.M. New York
City time on the Business Day prior to the Closing Date at such place in New
York City as the Underwriter, DTC and the Company shall agree.
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 the Underwriters 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 the Underwriters promptly of such filing;
it will notify the Underwriters 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 Securities 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.
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(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 Securities 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
Securities 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 Securities 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 counsel for the Underwriters 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 Securities 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
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 ninety (90) 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
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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, any Preliminary Prospectus, and all amendments or
supplements to any of them as may be reasonably requested for use in connection
with the offering and sale of the Securities; (iii) the preparation, printing,
authentication, issuance and delivery of notes for the Securities, including any
stamp taxes in connection with the original issuance and sale of the Securities;
(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 Securities; (v) 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; (vi) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company; (vii) the Trustee under the Indenture, and (viii)
Moody's Investors Service, Inc. ("Moody's") and Standard and Poor's Rating
Services ("S&P" and, together with Moody's, the "Rating Agencies") in connection
with the rating of the Securities at the request of the Company.
(g) The Company will apply the net proceeds from the offering and
sale of the Securities 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 Securities 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 Securities to
facilitate the sale or resale of any of the Securities.
(j) 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 Securities 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, to the knowledge of the Company or any Underwriter, no
proceeding for that purpose shall have been instituted or threatened by the
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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) Subsequent to the execution and delivery of this Underwriting
Agreement and prior to the Closing Date, there shall not have occurred any
downgrading in the rating accorded the Securities or any other debt securities
of the Company by any Rating Agency nor shall any notice have been given to the
Company of (i) any intended or potential downgrading by any Rating Agency in
such securities, or (ii) any review or possible change by any Rating Agency that
does not indicate a stable, positive or improving rating accorded such
securities.
(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
sole judgment of the Underwriters any of the foregoing makes it impractical or
inadvisable to offer or deliver the Securities on the terms and in the manner
contemplated in the Prospectus.
(d) The Underwriters 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;
(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
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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
statements in the Prospectus set forth under the caption "Certain Federal
Income Tax Considerations," to the extent such information constitutes
matters of law, summaries of legal matters, or legal conclusions, have
been reviewed by such counsel and are accurate in all material respects;
(v) The Company is not (after giving effect to the sale of the
Securities) 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 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 have been duly
authorized and are validly issued, fully paid and nonassessable and
conform to the description thereof in the Prospectus; and the shareholders
of the Company have no preemptive or similar rights with respect to the
Securities 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) (A) The Securities have been duly authorized and executed
by the Company and, when duly authenticated in accordance with the terms
of the Indenture and delivered to and paid for in full by the Underwriters
in accordance with the terms of the Underwriting Agreement, will
constitute valid and binding obligations of the Company entitled to the
benefits provided by the Indenture and enforceable against the Company in
accordance with their terms;
(B) The Company has full corporate power and authority
to enter into the Indenture; the Indenture has been duly authorized,
executed and delivered by the Company and
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constitutes a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms;
(C) the Indenture has been duly qualified under the TIA;
(D) the Indenture and the Securities conform in all
material respects to the descriptions thereof in the Registration
Statement and the Prospectus.
(xi) 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 execution, delivery and performance of the Indenture and the issuance
and sale of the Securities to the Underwriters on the terms contemplated
herein will not (A) 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
any contract (i) which such counsel has prepared or negotiated on behalf
of the Company and (ii) to which 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 (B) result in a
breach or violation of any of the terms or provisions of, or constitute a
default or result in the acceleration of any obligation under, (i) the
articles of incorporation or by-laws of the Company, (ii) the articles or
certificate of incorporation 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;
(xii) 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
Securities by the Company, except (i) such as have been obtained under the
Act, the Exchange Act or the TIA, 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 Securities by the Underwriters; and
(xiii) 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
such counsel or any statute,
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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 and the Trustee's Statement of Eligibility and
Qualification on Form T-1 (the "T-1"), 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 and the
T-1, 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
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) The Underwriters shall have received the opinion of Cox, Castle
& Nicholson LLP, counsel for the Company, dated the Closing Date, to the effect
that to the best of their knowledge statements relating to the Communities and
the Current Development Communities (as defined in the Prospectus) and
tax-exempt bond financing in the Prospectus (but excluding the statistical and
financial data, physical condition and construction status of such communities
included therein) are materially fair and accurate.
(f) The Underwriters 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 Securities, 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.
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(g) 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 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.
(h) The Underwriters 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, to their knowledge, no
proceeding for that purpose has been instituted or is threatened, by the
Commission;
(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; and
(iv) Since the execution and delivery of the Underwriting
Agreement and prior to the Closing Date, there has not occurred any
downgrading in the rating accorded the Securities or any other debt
securities of the Company by any Rating Agency nor has any notice been
given to the Company of (A) any intended or potential downgrading by any
Rating Agency in such securities, or (B) any review or possible change by
any Rating Agency that does not indicate a stable, positive or improving
rating accorded such securities.
(i) The Company shall have filed with the Commission a Current
Report on Form 8-K disclosing all material acquisition activity occurring since
the Company's last public offering of securities which is required to be
disclosed on Form 8-K as of the date of the Prospectus Supplement and is not
otherwise disclosed in reports filed by the Company under the Exchange Act.
(j) 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.
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(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 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 Securities 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 Securities 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 Securities 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 any 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 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
Securities 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, 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 any Underwriter 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
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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 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
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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 of 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 to 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 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), 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). 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 Securities 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 pursuant hereto, and the
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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 Securities hereunder.
8. Substitution of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Securities which it or they have
agreed to purchase hereunder, and the aggregate principal amount of Securities
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the aggregate principal amount of the
Securities, the other Underwriters shall be obligated, severally, to purchase
the Securities which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase, in the proportions which the aggregate principal
amount of Securities which they have respectively agreed to purchase pursuant to
Section 3 bears to the aggregate principal amount of Securities which all such
non-defaulting Underwriters have so agreed to purchase, or in such other
proportions as the non-defaulting Underwriters may specify; provided that in no
event shall the maximum aggregate principal amount of Securities which any
Underwriter has become obligated to purchase pursuant to Section 3 be increased
pursuant to this Section 8 by more than one-ninth of the aggregate principal
amount of Securities agreed to be purchased by such Underwriter without the
prior written consent of such Underwriter. If any Underwriter or Underwriters
shall fail or refuse to purchase any Securities and the aggregate principal
amount of Securities which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase exceeds one-tenth of the aggregate principal
amount of the Securities and arrangements satisfactory to the Underwriters and
the Company for the purchase of such Securities are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Company for the purchase or sale of any
Securities under this Agreement. In any such case either the non-defaulting
Underwriters or the Company shall have the right to postpone the Closing Date,
but in no event for longer than seven days, in order that the required changes,
if any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken pursuant to this
Section 8 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
9. Termination. The Underwriters 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 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 Securities. Any such termination
shall be without liability of any party to any other party with respect to
Securities 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
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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 to the Underwriters shall be mailed, delivered, telexed or telecopied and
confirmed to the Underwriters at the offices of 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. 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 by them jointly 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 WITHOUT REGARD TO THE
CONFLICT OF LAWS PRINCIPLES OF SUCH STATE.
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 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.
[signature page follows]
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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
` --------------------
Gilbert M. Meyer
President
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
UBS SECURITIES LLC
By: PAINEWEBBER INCORPORATED
Acting on behalf of itself and
the other several Underwriters
named in Schedule A hereof
By: /s/ Frederick T. Caven, Jr.
---------------------------
Frederick T. Caven, Jr.
Managing Director
S - 1
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SCHEDULE A
Underwriters; Identification of Securities; Purchase Price
Aggregate Principal Aggregate Aggregate Principal
Amount of 2003 Principal Amount Amount of 2008
Notes to be of 2005 Notes to Notes to be
Purchased be Purchased Purchased
--------------------------------------------------------------
PaineWebber Incorporated.... 30,000,000 30,000,000 30,000,000
Morgan Stanley & Co.
Incorporated.......... 10,000,000 10,000,000 10,000,000
UBS Securities LLC.......... 10,000,000 10,000,000 10,000,000
--------------------------------------------------------------
Total................. 50,000,000 50,000,000 50,000,000
==============================================================
Title of Securities: 6.250% Senior Notes due 2003 (the "2003 Notes")
6.500% Senior Notes due 2005 (the "2005 Notes")
6.625% Senior Notes due 2008 (the "2008 Notes")
Aggregate principal
amount: $50,000,000 each of the 2003 Notes, the 2005 Notes
and the 2008 notes
Maturity Date: 2003 Notes: January 15, 2003
2005 Notes: January 15, 2005
2008 Notes: January 15, 2008
Interest Rate: 2003 Notes: 6.250% per annum from January 15, 1998
2005 Notes: 6.500% per annum from January 15, 1998
2008 Notes: 6.625% per annum from January 15, 1998
Coupon Payment Dates: January 15 and July 15
Price to Public: 2003 Notes: 99.969% plus accrued interest from
January 15, 1998
2005 Notes: 99.749% plus accrued interest from
January 15, 1998
2008 Notes: 99.710% plus accrued interest from
January 15, 1998
Schedule A - 1
24
Underwriting Discount: 2003 Notes: 0.550%
2005 Notes: 0.625%
2008 Notes: 0.650%
Net Price to Company: 2003 Notes: 99.419% plus accrued interest from
January 15, 1998
2005 Notes: 99.124% plus accrued interest from
January 15, 1998
2008 Notes: 99.060% plus accrued interest from
January 15, 1998
Accrued Interest from
January 15: 2003 Notes: $43,402.78
2005 Notes: $45,138.89
2008 Notes: $46,006.94
Purchase Price to be paid
to the Company: 2003 Notes: $49,752,902.78
2005 Notes: $49,607,138.89
2008 Notes: $49,576,006.94
total: $148,936,048.61
Closing Date and Time: January 20, 1998, 10:00 a.m. (New York City time)
Closing Location: Offices of Goodwin, Procter & Hoar LLP
Exchange Place, Boston MA 02109
Schedule A - 2
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EXHIBIT I
INFORMATION IN PRELIMINARY PROSPECTUS
AND PROSPECTUS FURNISHED BY
THE UNDERWRITERS
The following information appearing in the Preliminary Prospectus,
if any, and the Prospectus has been furnished by the Underwriters in writing
specifically for use in the preparation of such Preliminary Prospectus and the
Prospectus.
1. The following information contained in the Prospectus Supplement
under the heading "Underwriting:"
a. the allocation of Securities between the Underwriters in
table following the first paragraph;
b. the amounts of the selling concession and reallowance
set forth in the second paragraph;
c. the information in the second sentence of the third
paragraph; and
d. the information in the second sentence of the eighth
paragraph.
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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 general 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. There are third-party limited partners.
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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