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EXHIBIT 1.1
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4,000,000 SHARES
AVALONBAY COMMUNITIES, INC.
SERIES H CUMULATIVE REDEEMABLE PREFERRED STOCK
UNDERWRITING AGREEMENT
dated October 7, 1998
PAINEWEBBER INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER, INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
WHEAT FIRST UNION, A DIVISION OF WHEAT FIRST SECURITIES, INC.
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4,000,000 Shares
AVALONBAY COMMUNITIES, INC.
Series H Cumulative Redeemable Preferred Stock
UNDERWRITING AGREEMENT
October 7, 1998
PAINEWEBBER INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER, INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
WHEAT FIRST UNION, a division of
Wheat First Securities, Inc.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
AvalonBay Communities, Inc., a Maryland corporation (the
"Company"), confirms its agreement with you and the other underwriters listed in
SCHEDULE A (collectively, the "Underwriters"), for whom PaineWebber
Incorporated, A.G. Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated,
Morgan Stanley & Co. Incorporated, Prudential Securities Incorporated, Smith
Barney Inc., and Wheat First Union, a division of Wheat First Securities, Inc.
are acting as representatives (the "Representatives"), as follows:
1. DESCRIPTION OF SECURITIES.
(a) The Company proposes to issue and sell to the Underwriters
4,000,000 shares (the "Firm Shares") of its Series H Cumulative Redeemable
Preferred Stock, par value $.01 per share (the "Series H Preferred Stock").
(b) In addition, the Company is granting to the Underwriters an
option to purchase up to an additional 600,000 shares of the Series H Preferred
Stock on the terms and for the purposes set forth in Section 10 hereof (the
"Option Shares"; and together with the Firm Shares, the "Shares").
2. AGREEMENT TO SELL AND PURCHASE.
(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 to the
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Underwriters listed in SCHEDULE A, and the Underwriters agree to purchase from
the Company, at the purchase price per share for the Shares to be agreed upon by
the Representatives and the Company as 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 hereto plus such additional number of
Shares which such Underwriter may become obligated to purchase pursuant to
Section 9 hereof. If the Company elects to rely on Rule 430A (as hereinafter
defined), SCHEDULE A may be attached to the Price Determination Agreement.
(b) The Company understands that the Underwriters intend (i) to
make a public offering of the Shares, and (ii) initially to offer the Shares
upon the terms set forth in the Prospectus.
3. DELIVERY AND PAYMENT.
(a) Delivery of the Shares shall be made to the Representatives
for the accounts of the Underwriters, 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 or, if the Representatives so elect, through the book-entry
facilities of The Depository Trust Company. Such payments shall be made at 10:00
a.m., New York City time, on October 15, 1998, 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 Representatives (such date is herein
referred to as the "Closing Date").
(b) To the extent the Option is exercised, delivery of the
Option Shares against payment by the Underwriters (in the manner specified
above) will take place in the manner specified above for the Closing Date at the
time and date (which may be the Closing Date) specified in the Option Shares
Notice.
(c) If requested by the Representatives no later than the date
of this Agreement (or as to the Option Shares, the date of the Option Shares
Notice), certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the
Representatives shall request at least two full business days prior to the
Closing Date (or the Option Closing Date, as the case may be) by written notice
to the Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at least 24 hours prior to the Closing Date or the
Option Closing Date, as the case may be.
(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 several
Underwriters shall be agreed upon by the Company and the Representatives, and
such agreement shall be set forth in a separate written instrument substantially
in the form of EXHIBIT B 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 Representatives and shall
specify such applicable information as is indicated in EXHIBIT B 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.
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4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants and covenants to each Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and
a registration statement (Registration No. 333-60875) on Form S-3, as amended,
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 has been filed with the Commission
and has become effective. Such registration statement and prospectus may have
been amended or supplemented prior to the date of this Agreement; any such
amendment or supplement was so prepared and filed, and any such amendment or
supplement 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 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 the
Representatives' 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 Shares (each a "Preliminary Prospectus"). Copies of
such registration statement, any such amendments, and each related Preliminary
Prospectus and all documents incorporated by reference therein that were filed
with the Commission on or prior to the date of this Underwriting Agreement have
been delivered to the Representatives and their 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. For purposes of this
Underwriting Agreement, all references to the Registration Statement, the
Prospectus, any preliminary prospectus or any amendment or supplement thereto
shall be deemed to include any copy filed with the Commission pursuant to its
Electronic Data Gathering Analysis and Retrieval System (EDGAR), and such copy
shall be identical (except to the extent permitted by Regulation S-T) to any
Prospectus delivered to the Representatives for use in connection with the
offering of the Shares by the Company.
(b) Each part of the Registration Statement (excluding any
prospectus supplement with respect to an offering of securities other than the
offering of the Shares contemplated hereby), 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
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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
(excluding any prospectus supplement with respect to an offering of securities
other than the offering of the Shares contemplated hereby), 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 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 the Representatives, or by any Underwriter through the
Representatives, specifically for use in the preparation thereof. The Company
acknowledges that the only information furnished to the Company by the
Representatives specifically for inclusion in the Registration Statement is the
information set forth in SCHEDULE B hereto. The Company has not distributed any
offering material in connection with the offering or sale of the Shares other
than the Registration Statement, any Preliminary Prospectus, the Prospectus or
any other materials, if any, permitted by the Act.
(c) The documents incorporated by reference in the Registration
Statement, the Prospectus and any amendment or supplement to such Registration
Statement or such prospectus, when they became or become effective under the Act
or were or are filed with the Commission under the Exchange Act, as the case may
be, conformed or will conform in all material respects with the requirements of
the Act, the 1933 Act Rules and Regulations, the Exchange Act and the rules and
regulations of the Commission thereunder (the "Exchange Act Rules and
Regulations"), as applicable.
(d) The Company has been duly organized and is, and at the
Closing Date will be, validly existing as a corporation in good standing under
the laws of the State of Maryland with the power and authority to conduct all
the activities conducted by it, to own or lease all the assets owned or leased
by it and otherwise to conduct its business as described in the Registration
Statement and Prospectus. The Company is, and at the Closing Date will be, duly
licensed or qualified to do business and in good standing in each jurisdiction
in which the nature of the activities conducted by it or the character of the
assets owned or leased by it makes such licensing or qualification necessary
except where the failure to be so qualified, considering all such cases in the
aggregate, will not have a material adverse effect on the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company and its Subsidiaries (as hereinafter defined), taken as a whole.
(e) The only subsidiaries (as defined in the Rules and
Regulations) of the Company are the entities listed on SCHEDULE C attached
hereto. Each of such subsidiaries is, and at the Closing Date will be, an entity
duly organized or formed, as the case may be, and, in the case of each such
subsidiary that is a corporation, limited partnership or limited liability
company (each a "Subsidiary" and, collectively, the "Subsidiaries") is, and at
the Closing Date will be, validly existing and in good standing under the laws
of its respective jurisdiction of organization or incorporation. Each of the
subsidiaries listed in SCHEDULE C has, and at the Closing Date will have, full
power and authority to conduct all the activities conducted by it, to own or
lease all the assets owned or leased by it and otherwise to conduct its business
as described in the Registration Statement and the Prospectus. Each of the
Subsidiaries is, and at the Closing Date will be, duly licensed or qualified to
do business in good standing as a corporation, limited partnership or limited
liability company, as the case may be, in all jurisdictions in which the nature
of the activities conducted by it or the character of the assets owned or
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leased by it makes such licensing or qualification necessary except where the
failure to be so qualified will not have a material adverse effect on the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole.
Except for the stock or other interests in the subsidiaries and as disclosed in
the Registration Statement, the Company does not own, and at the Closing Date
will not own, directly or indirectly, any shares of stock or any other equity or
long-term debt securities of any corporation or have any equity interest in any
firm, partnership, joint venture, trust, association or other entity. Complete
and correct copies of the charter of the Company, as amended through the date
hereof (collectively, the "Charter"), and the bylaws of the Company, as amended
through the date hereof (the "Bylaws"), of the Company and the charter documents
of each of its subsidiaries and all amendments thereto have been delivered to
the Representatives, 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 Representatives. Except as otherwise described in the Registration
Statement or the Prospectus, or as described in SCHEDULE C, 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.
(f) The outstanding securities of the Company, including the
outstanding shares of common stock, $0.01 par value (the "Common Stock"), and
the outstanding shares of each series of preferred stock (the "Preferred
Stock"), and the Shares have been duly authorized and are or, in the case of the
Shares, when issued upon receipt of full payment therefor as contemplated hereby
will be, validly issued, fully paid and nonassessable by the Company and conform
or, in the case of the Shares, when issued will conform, to the description
thereof in the Prospectus. Upon issuance, the Shares will have been issued in
conformance with the requirements of the Preferred Stock and the issuance and
sale of the Shares as contemplated by this Agreement does not conflict with any
restrictions or limitations granted to the holders of the Preferred Stock which
have not been waived in writing. Copies of such waivers, if any, have been
delivered to the Representatives. 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 of its securities or any shares of capital
stock of any subsidiary or any such warrants, convertible securities or
obligations, except for shares of Common Stock to be issued to certain employees
in connection with the deferment of income, shares of Common Stock issuable
pursuant to awards granted or to be granted under the Company's 1994 Stock
Incentive Plan, as amended and restated, shares of Common Stock issuable under
the Company's 1996 Non-Qualified Employee Stock Purchase Plan, shares of Common
Stock issuable under the Company's Dividend Reinvestment and Stock Purchase Plan
and shares of Common Stock issuable upon redemption or conversion of units of
limited partnership interests.
(g) The financial statements and schedules included or
incorporated by reference in the Registration Statement and the Prospectus set
forth fairly the financial condition of the respective entity or entities
presented as of the dates indicated and the results of operations and changes in
financial position for the periods therein specified in conformity with
generally accepted accounting principles consistently applied throughout the
periods involved (except as otherwise stated therein and except to the extent
that Avalon Properties, Inc. applied different principles than the Company prior
to its merger with and into the Company and except, in the case of interim
periods, for the notes thereto and normal year-end adjustment). The pro forma
financial statements of the Company included in the Registration Statement and
the Prospectus comply in all material respects with the applicable requirements
of Rule 11-02 of Regulation S-X of the Commission and the pro forma adjustments
have been properly applied
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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. PricewaterhouseCoopers LLP (the
"Accountants"), who have reported on the financial statements and schedules
which are audited, are independent accountants with respect to the Company as
required by the Act and the Rules and Regulations. The statements included in
the Registration Statement with respect to the Accountants pursuant to Rule 509
of Regulation S-K of the Rules and Regulations are true and correct in all
material respects.
(h) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that: (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets and financial and
corporate books and records is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(i) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and prior to the
Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) there has not been and will not have been any
material change in the capitalization of the Company, or in the business,
properties, business prospects, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, arising for any reason
whatsoever, (ii) neither the Company nor any of its Subsidiaries has incurred
nor will it incur any material liabilities or obligations, direct or contingent,
nor has it entered into nor will it enter into any material transactions other
than pursuant to this Agreement and the transactions referred to herein and
(iii) the Company has not and will not have paid or declared any dividends or
other distributions of any kind on any class of its capital stock.
(j) 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").
(k) Except as set forth in the Registration Statement and the
Prospectus, there is not pending or, to the knowledge of the Company, threatened
any action, suit or proceeding against or affecting the Company or any of its
subsidiaries or any of their respective directors, partners or officers in their
capacity as such, or any of the Current Communities, the Development Communities
or the Redevelopment Communities (each as defined in the Prospectus and
collectively, the "Communities") before or by any Federal or state court,
commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, wherein an unfavorable ruling, decision or finding might,
individually or in the aggregate, have a material adverse effect on the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, taken as a whole.
(l) 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").
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(m) Each of the Company and its subsidiaries has complied in
all material respects with all laws, regulations and orders applicable to it or
their respective businesses and properties where the failure to comply would,
individually or in the aggregate, have a material adverse effect on the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, taken as a whole;
neither the Company nor any of its subsidiaries is, and upon consummation of the
Offering (as defined below), none of them will be, in default under any
Contract, the violation of which would individually or in the aggregate have a
material adverse effect on the Company and its subsidiaries taken as a whole,
and no other party under any such Contract to which the Company or any of its
subsidiaries is a party is, to the knowledge of the Company, in default in any
material respect thereunder; the Company is not in violation of its Charter or
Bylaws; except as disclosed in the Prospectus, the Company and each of its
subsidiaries have or, upon 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 have a material adverse effect on the business,
properties, business prospects, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole.
(n) 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 or Blue Sky laws, or the
By-Laws and Rules of the National Association of Securities Dealers, Inc. (the
"NASD") in connection with the purchase and distribution by the Underwriters of
the Shares to be sold by the Company.
(o) 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 (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, (ii) general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or law), (iii) the discretion of
the court before which any proceeding therefor may be brought, and (iv)
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 (i), (ii), (iii) and (iv) are
collectively referred to as the "Enforceability Limitations"). 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 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 Charter or Bylaws of the Company, the articles or
certificate of incorporation or by-laws or partnership agreement or operating
agreement 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, except as
disclosed in the Prospectus and except as will not have a material adverse
effect on the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries, taken
as a
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whole. The Company has the power and authority to authorize, issue, offer and
sell the Shares, as contemplated by this Agreement, free of preemptive rights.
(p) The Company, or its subsidiaries, as applicable, has good
and marketable title to the Communities, and the Communities are not subject to
any liens or encumbrances except for monetary liens as set forth in the
Prospectus or the Registration Statement, non-delinquent property taxes, utility
easements and other immaterial non-monetary liens or encumbrances of record. All
liens, charges, encumbrances, claims or restrictions on or affecting the
Communities which are required to be disclosed in the Prospectus are disclosed
therein. Except as is disclosed in the Registration Statement or the Prospectus
and except as would not, in the aggregate, have a material adverse effect on the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, taken as a whole, (i)
each of the Company and each of its subsidiaries has valid, subsisting and
enforceable leases with its tenants for the properties described in the
Prospectus as leased by it, (ii) no tenant under any of the leases pursuant to
which the Company or any subsidiary leases its properties has an option or right
of first refusal to purchase the premises demised under such lease, (iii) the
use and occupancy of each of the properties of the Company and its subsidiaries
complies in all material respects with all applicable codes and zoning laws and
regulations, (iv) the Company has no knowledge of any pending or threatened
condemnation or zoning change that will in any material respect affect the size
of, use of, improvements of, construction on, or access to any of the properties
of the Company or its subsidiaries, and (v) the Company has no knowledge of any
pending or threatened proceeding or action that will in any manner affect the
size of, use of, improvements on, construction on, or access to any of the
properties of the Company or its subsidiaries.
(q) Except as disclosed in the Registration Statement, the
mortgages and deeds of trust encumbering the Communities are not convertible nor
will the Company or any of its subsidiaries hold a participating interest
therein and such mortgages and deeds of trust are not cross-defaulted or
cross-collateralized to any property not to be owned directly or indirectly by
the Company. To the knowledge of the Company (i) the present use and occupancy
of each of the Communities complies with all applicable codes and zoning laws
and regulations, if any, except for such failures to comply which would not
individually or in the aggregate have a material adverse effect on the
condition, financial or otherwise, or on the earnings, business affairs or
business prospects of the Company and its subsidiaries taken as a whole; and
(ii) there is no pending or, to the Company's knowledge, threatened
condemnation, zoning change, environmental or other proceeding or action that
will in any material respect affect the size of, use of, improvements on,
construction on, or access to the Communities, except for such proceedings or
actions that would not individually or in the aggregate have a material adverse
effect on the condition, financial or otherwise, or on the earnings, business
affairs or business prospects of the Company and its subsidiaries taken as a
whole.
(r) 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, subject to the Enforceability Limitations.
(s) No statement, representation, warranty or covenant made by
the Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Representatives was or will be, when made,
inaccurate, untrue or incorrect.
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(t) 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.
(u) No labor dispute with the employees of the Company or
any subsidiary exists or, to the knowledge of the Company after due inquiry and
investigation, is threatened, which, in either case, would have a material
adverse effect on the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole.
(v) Neither the Company nor any of its subsidiaries nor, to
the Company's knowledge, any employee or agent of the Company of any subsidiary
has made any payment of funds of the Company or any subsidiary or received or
retained any funds in violation of any law, rule or regulation or of a character
required to be disclosed in the Prospectus which has not been so disclosed.
(w) 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.
(x)(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 Representatives 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,
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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 Representatives 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 Representatives 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.
(y) 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.
(z) The Company and its subsidiaries maintain property and
casualty insurance (other than earthquake insurance) in favor of the Company and
its subsidiaries with respect to each of the Communities, in an amount and on
such terms as is reasonable for businesses of the type proposed to be conducted
by the Company and its subsidiaries. The Company maintains earthquake insurance
on the Communities to the extent described in the Prospectus. Neither the
Company nor any subsidiary has received from any insurance company notice of any
material defects or deficiencies affecting the insurability of any of the
Communities (other than with respect to seismic activities).
(aa) 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
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"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.
(bb) 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").
(cc) 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.
(dd) The Company has applied to have the Shares authorized for
listing by the New York Stock Exchange and the Pacific Exchange. The Company
shall use its best efforts to have the Shares listed by the New York Stock
Exchange and the Pacific Exchange at such time as the Representatives request
within thirty (30) days following the Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company covenants and agrees
with the Underwriters as follows:
(a) The Company will cause the Prospectus Supplement to be
filed as contemplated by Section 4(a) hereof (but only if the Representatives
have not reasonably objected thereto by notice to the Company after having been
furnished a copy within a reasonable time prior to filing) and will notify the
Representatives promptly of such filing. The Company will not during such period
as the Prospectus is required by law to be delivered in connection with sales of
the Shares by any Underwriter or dealer (the "Prospectus Delivery Period"), file
any amendment or supplement to the Registration Statement or the Prospectus,
unless a copy thereof shall first have been submitted to the Representatives
within a reasonable period of time prior to the filing thereof and the
Representatives shall not have objected thereto in good faith.
(b) The Company will use its best efforts to cause the
Registration Statement to remain effective through the completion of the
Underwriters' distribution of the Shares, and will notify the Representatives
promptly, and will confirm such advice in writing, (i) of the preparation and
filing (subject to Section 5(a)) of any post-effective amendment and when any
such post-effective amendment to the Registration Statement becomes effective,
(ii) of any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information, (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that purpose
or the threat thereof, (iv) of the suspension of the qualification or
registration of the Shares for offering or sale in any jurisdiction, or of the
initiation or threat of any proceeding for any such purpose; (v) of the
happening of any event during the Prospectus Delivery Period that in the
judgment of the Company makes any statement made in the Registration Statement
or the Prospectus untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not misleading
and (vi) of receipt by the Company or any representative or attorney of the
Company of any other communication from the Commission relating to the Company,
the Registration Statement, any preliminary prospectus or the Prospectus. If at
any time the Commission or any jurisdiction shall threaten to issue, or shall
issue, any order suspending the effectiveness of the Registration Statement or
suspending the qualification or registration of the Shares for sale in any
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jurisdiction, the Company will make every reasonable effort to prevent the
issuance of such order and, if such an order should be issued, to obtain the
withdrawal of such order at the earliest possible moment. The Company will use
its best efforts to comply with the provisions of and make all requisite filings
with the Commission pursuant to Rule 430A and to notify the Representatives
promptly of all such filings.
(c) The Company will furnish to the Representatives without
charge two signed copies of the Registration Statement and of any post-effective
amendments thereto, including financial statements and schedules, and all
exhibits thereto (including any document filed under the Exchange Act and deemed
to be incorporated by reference into the Prospectus).
(d) The Company will comply with all requirements imposed upon
it by the Act, the 1933 Act Rules and Regulations, the Exchange Act, and the
Exchange Act 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.
(e) The Company will comply with all the provisions of any
undertakings contained, or incorporated by reference, in the Registration
Statement.
(f) During the Prospectus Delivery Period, the Company will
promptly furnish to the Underwriters, without charge, as many copies of each
preliminary prospectus, the Prospectus (containing the Prospectus Supplement)
and any amendment or supplement thereto as the Underwriters may from time to
time reasonably request. The Company consents to the use of the Prospectus, as
amended or supplemented from time to time, by the Underwriters and by all
dealers to whom the Shares may be sold, both in connection with the offering or
sale of the Shares and, thereafter, during the Prospectus Delivery Period. If
during the Prospectus Delivery Period any event shall occur which in the
judgment of the Company or counsel to the Underwriters should be set forth in
the Prospectus in order to make any statement therein, in the light of the
circumstances under which it was made, not misleading, or if, in the reasonable
opinion of counsel to the Underwriters, it is necessary to supplement or amend
the Prospectus to comply with law, the Company will forthwith prepare and duly
file with the Commission an appropriate supplement or amendment thereto. Except
as required by the Exchange Act or the Exchange Act Rules and Regulations, the
Company shall not file any document under the Exchange Act before the
termination of the Prospectus Delivery Period if such document would be deemed
to be incorporated by reference into the Prospectus to which the Representatives
reasonably object.
(g) Prior to any public offering of the Shares, the Company
will cooperate with the Representatives and their counsel in connection with the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States and
in or within Canada that require such registration or qualification as the
Representatives may reasonably request; provided, that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.
(h) 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.
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(i) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay,
or reimburse if paid by the Underwriters, all fees, costs and expenses incident
to the performance of the obligations of the Company under this Agreement,
including, but not limited to, fees, costs and expenses of or relating to (i)
the preparation, printing and filing of the Registration Statement and exhibits
to it, each preliminary prospectus, the Prospectus and any amendment or
supplement to the Registration Statement or the Prospectus and any other filing
made by the Company with the Commission, (ii) the preparation and delivery of
certificates representing the Shares, (iii) the printing of this Agreement and
any Dealer Agreements, (iv) furnishing (including costs of shipping and mailing)
such copies of the Registration Statement, the Prospectus and any preliminary
prospectus, and all amendments and supplements thereto, as may be reasonably
requested for use in connection with the offering and sale of the Shares by the
Underwriters or by dealers to whom Shares may be sold, (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 reasonable fees,
disbursements and other charges of counsel to the Underwriters in connection
with, and the preparation of, preliminary, supplemental and final Blue Sky
memoranda, (vii) counsel (including local and special counsel) to the Company
and any surveyors, engineers, appraisers, photographers, accountants and other
professionals engaged by the Company, (viii) the hotel, airfare and other travel
arrangements of the Company's employees in connection with preparation of the
Registration Statement and Prospectus and in connection with any "road show" or
other presentation to potential investors, (ix) the Accountants and any other
accountants engaged by the Company in connection with the offering of the
Shares; (x) the registration of the Shares under the Exchange Act and the
listing of the Shares on the New York Stock Exchange and the Pacific Exchange;
and (xi) the transfer agent and registrar for the Shares.
(j) The Company will not at any time, directly or indirectly,
take any action intended, 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.
(k) The Company will apply the net proceeds from the offering
and sale of the Shares to be sold by the Company in the manner set forth in the
Prospectus under the caption "Use of Proceeds."
(l) Unless the Board of Directors of the Company determines in
its reasonable business judgment and pursuant the Charter that continued
qualification as a "real estate investment trust" under the Code is not in the
Company's best interest, the Company will use its best efforts to, and will
continue to meet the requirements to, qualify as a "real estate investment
trust."
(m) 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 comply with section 2-210 and 2-211 of the MGCL.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
Underwriters' obligations hereunder are subject to the following conditions:
(a) All filings required by Rule 424 and Rule 430A of the Rules
and Regulations to be made by the Company prior to the Closing shall have been
made by the Company.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission,
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(ii) no order suspending the effectiveness of the Registration Statement or the
qualification or registration of the Shares under the securities or Blue Sky
laws of any jurisdiction shall be in effect and no proceeding for such purpose
shall be pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities, and (iv) after the date hereof no amendment or supplement
to the Registration Statement or the Prospectus shall have been filed unless a
copy thereof was first submitted to the Representatives and the Representatives
did not object thereto in good faith.
(c) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, (i) there shall not have been
a material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Registration Statement and the
Prospectus, (ii) there shall not have been any change on a consolidated basis,
in the equity capitalization, short-term debt or long-term debt of the Company,
or any adverse change in the rating assigned to any securities of the Company,
in each case other than as set forth in or contemplated by the Registration
Statement and the Prospectus, and (iii) neither the Company nor any of its
subsidiaries shall have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not set forth in the
Registration Statement and the Prospectus, if in the judgment of the
Representatives any such development makes it impracticable or inadvisable to
offer or deliver the Shares on the terms and in the manner contemplated in the
Prospectus.
(d) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
subsidiaries or any of their respective officers or directors in their
capacities as such, before or by any Federal, state or local court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding would materially and adversely affect the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company and its subsidiaries taken as a whole.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date, as if made at the Closing Date, and all covenants and agreements
contained herein to be performed on the part of the Company and all conditions
contained herein to be fulfilled or complied with by the Company at or prior to
the Closing Date, shall have been duly performed, fulfilled or complied with.
(f) The Representatives shall have received the opinion of
Goodwin, Procter & Hoar LLP, counsel to the Company, dated the Closing Date, to
the effect set forth in EXHIBIT A.
(g) The Representatives shall have received the opinion of
Goodwin, Procter & Hoar LLP, tax counsel to the Company, dated the Closing Date,
to the effect that, subject to the assumptions and qualifications historically
included by such counsel in opinions rendered in recent public offerings by the
Company and subject to changes in applicable laws and regulations and judicial
and regulatory developments, commencing with the taxable year ending
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December 31, 1994, the form of organization of the Company and its operations
are such as to enable the Company to qualify as a "real estate investment trust"
under the applicable provisions of the Code.
(h) The Representatives shall have received the statement 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
Current Communities, the Development Communities and the Redevelopment
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) which involved
transactions in which they represented the Company are materially fair and
accurate.
(i) The Representatives shall have received the statement of
Goulston & Storrs, P.C., special counsel to the Company, dated the Closing Date,
to the effect that to the best of their knowledge certain statements regarding
the Company's real estate operations in the Prospectus are materially fair and
accurate.
(j) The Representatives shall have received an opinion, dated
the Closing Date, from O'Melveny & Myers LLP, counsel to the Underwriters, with
respect to the Registration Statement, the Prospectus and this Agreement, which
opinion shall be satisfactory in all respects to the Representatives.
(k) Concurrently with the execution and delivery of this
Agreement, the Accountants shall have furnished to the Representatives a letter,
dated the date of its delivery, addressed to the Representatives and in form and
substance satisfactory to the Representatives, confirming that they are
independent accountants with respect to the Company as required by the Act and
the 1933 Act Rules and Regulations and with respect to the financial and other
statistical and numerical information contained in the Registration Statement or
incorporated by reference therein. At the Closing Date, the Accountants shall
have furnished to the Representatives a letter, dated the date of its delivery,
which shall confirm, on the basis of a review in accordance with the procedures
set forth in the letter from the Accountants, that nothing has come to their
attention during the period from the date of the letter referred to in the prior
sentence to a date (specified in the letter) not more than five days prior to
the Closing Date which would require any change in their letter dated the date
hereof if it were required to be dated and delivered at the Closing Date.
(l) On the Closing Date there shall have been furnished to the
Representatives an accurate certificate, dated the date of its delivery, signed
by each of the Chief Executive Officer and the Chief Financial Officer of the
Company, in form and substance satisfactory to the Representatives, to the
effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued and, to the best of such
officers' information and belief, no proceeding for that purpose is
pending or threatened by the Commission;
(ii) No order suspending the effectiveness of the
Registration Statement or the qualification or registration of the
Shares under the securities or Blue Sky laws of any jurisdiction is in
effect and, to the best of such officers' information and belief, no
proceeding for such purpose is pending before or threatened or
contemplated by the Commission or the authorities of any such
jurisdiction;
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(iii) Any request for additional information on the part of
the staff of the Commission or any such authorities has been complied
with to the satisfaction of the staff of the Commission or such
authorities;
(iv) Each signer of such certificate has carefully
examined the Registration Statement and the Prospectus (including any
documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus) and (A) as of the date of such
certificate, such documents, taken together, are true and correct in
all material respects and do not omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein not untrue or misleading and (B) no event has occurred as a
result of which it is necessary to amend or supplement the Prospectus
in order to make the statements therein not untrue or misleading in any
material respect and there has been no document required to be filed
under the Exchange Act and the Exchange Act Rules and Regulations that
upon such filing would be deemed to be incorporated by reference into
the Prospectus that has not been so filed;
(v) Each of the representations and warranties of the
Company contained in this Agreement were, when originally made, and
are, at the time such certificate is delivered, true and correct in all
material respects;
(vi) Each of the covenants required to be performed by
the Company herein on or prior to the delivery of such certificate has
been duly, timely and fully performed and each condition herein
required to be complied with by the Company on or prior to the date of
such certificate has been duly, timely and fully complied with; and
(m) The Shares shall be qualified for sale in the jurisdictions
designated pursuant to Section 5(g), each such qualification shall be in effect
and not subject to any stop order or other proceeding on the Closing Date.
(n) The Company shall have applied to have the Shares approved
for listing on the New York Stock Exchange and the Pacific Exchange, and such
applications shall not have been disapproved.
(o) The Company shall have furnished to the Representatives
such certificates, in addition to those specifically mentioned herein, as the
Representatives may have reasonably requested as to the accuracy and
completeness at the Closing Date of any statement in the Registration Statement
or the Prospectus or any documents filed under the Exchange Act and deemed to be
incorporated by reference into the Prospectus, as to the accuracy at the Closing
Date of the representations and warranties of the Company herein, as to the
performance by the Company of its obligations hereunder, or as to the
fulfillment of the conditions concurrent and precedent to the obligations of the
Underwriters hereunder.
(p) All such opinions, certificates, letters and other
documents will be in compliance with the provisions hereof only if they are
reasonably satisfactory in form and substance to the Representatives and their
counsel. The Company will furnish the Representatives with such conformed copies
of such opinions, certificates, letters and other documents as the
Representatives shall reasonably request.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless each
Underwriter, each of the
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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 Shares under the securities
laws thereof or filed with the Commission, (ii) the omission or alleged omission
to state in such document a material fact required to be stated in it or
necessary to make the statements in it not misleading or (iii) any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, liability, expense or damage arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall not be
liable under this clause (iii) to the extent it is finally judicially determined
by a court of competent jurisdiction that such loss, claim, liability, expense
or damage resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence or willful
misconduct); provided that the Company will not be liable to the extent that
such loss, claim, liability, expense or damage (A) arises from the sale of the
Shares in the public offering to any person by an Underwriter and is based on an
untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives on behalf of 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, which untrue statement or omission was
completely corrected in the Prospectus (as then amended or supplemented) if the
Company shall sustain the burden of proving that the Underwriters sold Shares to
the person alleging such loss, claim, liability, expense or damage without
sending or giving, at or prior to the written confirmation of such sale, a copy
of the Prospectus (as then amended or supplemented) if the Company had
previously furnished copies thereof to the Underwriters within a reasonable
amount of time prior to such sale or such confirmation, and the Underwriters
failed to deliver the corrected Prospectus, if required by law to have so
delivered it and if delivered would have been a complete defense against the
person asserting such loss, claim, liability, expense or damage. This indemnity
agreement will be in addition to any liability that the Company might otherwise
have.
(b) Each Underwriter will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signs the Registration Statement to
the same extent as the foregoing indemnity from the Company to each Underwriter,
but only insofar as losses, claims, liabilities, expenses or damages (or actions
in respect thereof) 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 in writing to
the Company by the Representatives on behalf of any Underwriter or its counsel
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
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case shall any Underwriter be liable or responsible for any amount in excess of
the underwriting discounts and commissions received by such Underwriter.
(c) Any party that proposes to assert the right to be
indemnified under this Section 7 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 7, 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 7 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party promptly after
receiving notice of the commencement of the action from the indemnified party,
jointly with any other indemnifying party similarly notified, to assume the
defense of the action, with counsel satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (i) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (ii) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (iii) a
conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (iv) the indemnifying
party has not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm admitted to practice in such jurisdiction at any 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 7 (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 7 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
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deducting any contribution received by the Company from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company
and any one or more of the Underwriters may be subject in such proportion as
shall be appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and the Underwriters, on the other, with respect to the statements or omissions
which resulted in such loss, claim, liability, expense or damage, or action in
respect thereof, as well as any other relevant equitable considerations with
respect to such offering. Such relative fault shall be determined by reference
to whether the untrue or alleged untrue statement 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 7(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 7(d) shall be deemed to include, for purpose of this Section 7(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 7(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 7(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 7(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 7(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 7(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 7 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the Underwriters, (ii) acceptance
of the Shares and payment therefor or (iii) any termination of this Agreement.
8. TERMINATION. The Representatives 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
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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
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 5(i) (regarding costs and expenses) and
Section 7 (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.
9. SUBSTITUTION OF UNDERWRITERS. If any one or more of the
Underwriters shall fail or refuse to purchase any of the Firm Shares which it or
they have agreed to purchase hereunder, and the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the aggregate number of Firm Shares,
the other Underwriters shall be obligated, severally, to purchase the Firm
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase, in the proportions which the aggregate number of Firm
Shares which they have respectively agreed to purchase pursuant to Section 2
bears to the aggregate number of Firm Shares 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 number of Firm Shares which any Underwriter has become
obligated to purchase pursuant to Section 2 be increased pursuant to this
Section 9 by more than one-ninth of the number of Firm Shares 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 Firm Shares and the aggregate number of Firm Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase exceeds
one-tenth of the aggregate number of Firm Shares and arrangements satisfactory
to the Representatives and the Company for the purchase of such Firm Shares 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 Shares under this Agreement. In any such case
either the Representatives 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 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. OVER-ALLOTMENT OPTION.
(a) In addition to the Shares being sold by the Company as
described in Section 1(a) hereof (which are referred to herein as the "Firm
Shares"), the Company hereby grants to the Underwriters an option to purchase,
severally and not jointly, up to an aggregate of 600,000 additional Shares
(which are referred to herein as the "Option Shares") on the terms and for the
purposes set forth in Section 10(b). The first paragraph of Section 3 hereof
shall be deemed to apply only to the purchase,
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sale and delivery of the Firm Shares. References in that paragraph and in
SCHEDULE A hereto to the "Shares" shall be deemed to be references to the "Firm
Shares"; except as otherwise provided in this Section 10, other references in
this Agreement to the "Shares" shall be deemed to include the Firm Shares and
the Option Shares.
(b) Upon written notice from the Representatives given to the
Company not more than 30 days subsequent to the date of the initial public
offering of the Shares, the Underwriters may exercise the option once, but only
once, to purchase all or any portion of the Option Shares at the purchase price
per share to be paid for the Firm Shares. The Company agrees to issue and sell
to each Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, that Underwriter's proportionate share (based upon
the respective underwriting obligations of the several Underwriters hereunder as
set forth in SCHEDULE A hereto except as may be adjusted by you to eliminate
fractions) of the number of Option Shares specified in such notice. Such Option
Shares may be purchased by the Underwriters only for the purpose of covering
over-allotments made in connection with the sale of the Firm Shares. No Option
Shares shall be sold or delivered unless the Firm Shares previously have been,
or simultaneously are, sold and delivered. The right to purchase the Option
Shares or any portion thereof may be surrendered and terminated at any time upon
notice by the Representatives to the Company. The "Closing Date" as defined in
Section 3 hereof with respect to the Firm Shares, shall be deemed to be the
"First Closing Date," and the time for the delivery of and payment for the
Option Shares is herein referred to as the "Second Closing Date," (which may be
the same date as the First Closing Date). The Second Closing Date shall be
determined by the Representatives but shall be not later than 10 days after you
give to the Company written notice of election to purchase Option Shares. The
preparation, registration, checking and delivery of, and payment for, the Option
Shares shall occur or be made in the same manner as provided in Section 3 hereof
for the Firm Shares, except as the Representatives and the Company may otherwise
agree.
(c) The conditions to the Underwriters' obligations set forth
in Section 6 shall be deemed to be conditions to the Underwriters' obligations
to purchase and pay for the Shares to be purchased on each of the First Closing
Date and the Second Closing Date, as the case may be; references in that Section
and in Sections 3, 8 and 9 hereof to the "Closing Date" shall be deemed to be
references to the First Closing Date or Second Closing Date, as the case may be,
and references to the "Shares" in Section 6 hereof shall be deemed to be
references to the Firm Shares and/or the Option Shares, as the case may be, to
be purchased by the Underwriters on such Closing Date. A termination of this
Agreement as to the Option Shares after the First Closing Date will not
terminate this Agreement as to the Firm Shares.
11. MISCELLANEOUS.
(a) NOTICE. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, 2900
Eisenhower Avenue, Suite 300, Alexandria, Virginia 22314, Attention: Thomas J.
Sargeant, or (b) if to the Representatives, care of PaineWebber Incorporated,
at the offices of PaineWebber Incorporated, 1285 Avenue of the Americas, New
York, New York 10019, Attention: Corporate Real Estate Department. Any such
notice shall be effective only upon receipt. Any notice under Section 8 hereof
may be made by telex or telephone, but if so made shall be subsequently
confirmed in writing.
(b) PARTIES. This Agreement has been and is made solely for the
benefit of the several Underwriters and the Company and of the controlling
persons, directors and officers referred to
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in Section 7, and their respective successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" as used in this Agreement shall not include a
purchaser, as such purchaser, of Shares from any of the several Underwriters.
(c) REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, agreements and covenants, of the Company herein or
in certificates delivered pursuant hereto, and the agreements of the several
Underwriters contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling persons, or the Company or any of its officers,
directors or any controlling persons, and shall survive delivery of and payment
for the Shares hereunder.
(d) ACTIONS BY REPRESENTATIVES. Any action required or
permitted to be taken by the Representatives under this Agreement may be taken
by them jointly or by PaineWebber Incorporated.
(e) 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.
(f) 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.
(g) 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.
(h) WAIVER 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.
(i) AMENDMENTS AND MODIFICATIONS. This Agreement may not be
amended or otherwise modified or any provision hereof waived except by an
instrument in writing signed by the Underwriters and the Company.
[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,
AVALONBAY COMMUNITIES, INC.
By: /s/ Thomas J. Sargeant
-------------------------------
Thomas J. Sargeant
Chief Financial Officer
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER, INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
WHEAT FIRST UNION, a division of
Wheat First Securities, Inc.
By: PAINEWEBBER INCORPORATED
By: /s/ Frederick T. Caven, Jr.
---------------------------------
Frederick T. Caven, Jr.
Managing Director
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