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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): JANUARY 21, 1997
BAY APARTMENT COMMUNITIES, INC.
Exact name of Registrant as specified in charter)
MARYLAND 1-12672 77-0404318
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
4340 STEVENS CREEK BOULEVARD, SUITE 275, SAN JOSE, CA 95129
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(Address of principal executive offices) (Zip Code)
(408) 983-1500
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
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In 1996, Bay Apartment Communities, Inc. (the "Company") engaged the
services of two consulting firms to compile and analyze data to be used in the
daily operational and long-term strategic decision-making of the Company's
management. Together, these studies provide the Company with general market
overviews, demographic trends, and analyses of effective rents, historical
vacancy rates and projects in planning, primarily for counties within the San
Francisco Bay Area (defined to include Alameda, Contra Costa, Marin, Napa, San
Francisco, San Mateo, Sonoma, Santa Clara and Solano Counties) rental market.
One report, completed by Ann Roulac and Company, is based on an analysis of
the research compiled by RealData, Inc., the current producer of the Bay Area
Apartment Market Report (BAAMR), a detailed reference guide to the San Francisco
Bay Area apartment market. The scope of Ann Roulac and Company's engagement was
to identify 100 plus investment grade apartment properties from the BAAMR
database of 450 properties for the Alameda, San Francisco, San Mateo and Santa
Clara Counties. The data presented by Ann Roulac and Company are based on
surveys with managers of 100 properties in the four subject counties.
The second report, completed by the Rosen Consulting Group, focused its
analyses on five counties (i.e., San Mateo, Santa Clara, Alameda, San Francisco
and Orange), four of which are located in the San Francisco Bay Area. The
Company requested data on Orange County (located in southern California) in
order to evaluate its potential as a new submarket. In preparing its report, the
Rosen Consulting Group analyzed recent economic trends and forecasted employment
trends, demographic trends and the affordability and demand for rental units.
The reports prepared for the Company by Ann Roulac and Company and the
Rosen Consulting Group were attached as exhibits to the Company's current report
on Form 8-K dated July 5, 1996. A subsequent addendum to the report prepared by
Rosen Consulting Group is attached hereto as an exhibit. The foregoing
description of the contents of the two consulting reports does not purport to be
complete and is qualified in its entirety by reference to such exhibits.
In addition, the Company is filing as exhibits hereto an Employment
Agreement, dated June 19, 1996, between the Company and Jeffrey B. Van Horn, and
a Promissory Note, dated July 26, 1996, between the Company and Mr. Van Horn,
each of which was executed in connection with Mr. Van Horn's hiring as Chief
Financial Officer and Vice President Accounting/Finance of the Company.
ITEM 7. EXHIBITS
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(c) Exhibits
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10.1 Employment Agreement, dated June 19, 1996, between the Company
and Jeffrey B. Van Horn.
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10.2 Promissory Note, dated July 26, 1996, between the Company and
Jeffrey B. Van Horn.
23.1 Consent of Rosen Consulting Group.
23.2 Consent of Ann Roulac and Company.
99.1 Addendum to the report entitled The Apartment Markets in Orange,
Santa Clara, Alameda, San Francisco and San Mateo Counties, dated
June 28, 1996, and the addendum thereto, presented to the Company
by the Rosen Consulting Group.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized.
BAY APARTMENT COMMUNITIES, INC.
Dated: January 21, 1997 By: /s/ Gilbert M. Meyer
-----------------------------------
Gilbert M. Meyer
Chairman of the Board and President
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Exhibit 10.1
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is entered into as of
June 19, 1996, by and between Bay Apartment Communities, Inc., a Maryland
corporation having its principal place of business at 4340 Stevens Creek
Boulevard, Suite 275, San Jose, California 95129 (the "Company"), and Jeffrey
B. Van Horn, an individual residing at the address set forth below his name on
the signature page hereof ("Employee").
WHEREAS, the Company desires to employ Employee as a senior executive of
the Company, and Employee has agreed to become a senior executive of the
Company, on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company and Employee agree as follows:
1. TERM. The Company agrees to employ Employee, and Employee hereby agrees
to work for the Company as a full-time employee, for a period commencing on the
date first set forth above and ending on the third anniversary of such date (the
"Employment Period"), unless earlier terminated pursuant to the provisions of
Section 7 hereof.
2. EMPLOYMENT. During the Employment Period, Employee shall be employed as
a senior executive officer of the Company with the titles of Chief Financial
Officer and Vice President Accounting/Finance, or in such other executive
position as the Board of Directors of the Company (the "Board of Directors") may
from time to time determine and which position is acceptable to Employee. In the
performance of his duties, Employee shall be subject to the direction of the
President and the Board of Directors. Employee's duties and authority shall be
commensurate with his title and position with the Company. Employee agrees to
his employment as described in this Section 2 and agrees to devote substantially
all of his business time and efforts to the business and affairs of the Company.
Employee agrees to serve the Company faithfully and to the best of his ability,
and to perform such services and duties in connection with the business, affairs
and operations of the Company as may be assigned or delegated to him from time
to time by or under, and in accordance with, the authority and direction of the
Board of Directors, and to use his reasonable best efforts in the promotion and
advancement of the Company and its welfare.
3. NONCOMPETITION DURING EMPLOYMENT PERIOD. Because Employee's services to
the Company are essential and because Employee has access to the Company's
confidential information, Employee covenants and agrees that during the
Employment Period, Employee will be a full-time employee of the Company as
provided in Section 2 hereof and Employee
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will not, without the express prior written consent of the Board of Directors
invest in any property or any business or venture which competes, directly or
indirectly, with the Company in the development, construction, acquisition,
management, leasing or marketing of multifamily apartment communities or which
investment would require Employee's active involvement in such business or
venture or would materially impair Employee's ability to perform fully his
obligations under this Agreement. Notwithstanding anything contained herein to
the contrary, Employee is not prohibited by this Section 3 from making
investments in any entity that owns, invests in, refurbishes, manages, leases or
markets multi-family apartment communities if the shares of such entity are
publicly traded and Employee's aggregate investment in such entity constitutes
less than 1% of the equity ownership of such entity or from making passive
investments in any properties or other businesses provided that such investments
are first offered to the Company and refused by the Board of Directors.
4. BASE SALARY. During the Employment Period, Employee's salary will be at
the rate of $170,000 per year ("Base Salary"). Base Salary shall be payable in
accordance with the Company's normal business practices for senior executive
officers, but no less frequently than bi-weekly. Employee's Base Salary shall be
reviewed no less frequently than annually by the Compensation Committee of the
Board of Directors and may be increased, but not decreased, during the
Employment Period.
5. PERFORMANCE INCENTIVE BONUS PLAN AND STOCK INCENTIVE PLAN. Beginning in
fiscal year 1996 of the Employment Period, Employee will be eligible for annual
bonus compensation (generally payable during the first quarter of the following
year) in an amount up to 30% of the annual Base Salary ("Bonus Compensation"),
subject to proration for any period less than a full year. The amount of Bonus
Compensation to be paid to Employee in a particular year will be determined
pursuant to the Company's 1994 Performance Incentive Bonus Plan (the "Bonus
Plan") and the 1994 Stock Incentive Plan and any other stock option or incentive
compensation plan that is adopted by the Company and in which the Employee
participates (the "Other Plans"). Awards, if any, made under the Bonus Plan, the
1994 Stock Incentive Plan, or the Other Plans shall be determined in the
discretion of the Compensation Committee of the Board of Directors. Upon
commencement of the Employment Period, Employee will receive 1,000 restricted
shares of common stock of the Company (the "Restricted Stock"), which will vest
20% on each anniversary of the date hereof so long as Employee remains employed
by the Company. Employee will also receive stock options to purchase 25,000
shares of common stock of the Company (the "Stock Options"), which will vest 25%
on each anniversary of the date hereof so long as Employee remains employed by
the Company. The Restricted Stock and Stock Options will be granted pursuant to,
and governed by, the Company's 1994 Stock Incentive Plan. The exercise price and
other terms applicable to the Stock Options and the Restricted Stock will be
determined by the Compensation Committee of the Board of Directors in its
discretion pursuant to the 1994 Stock Incentive Plan.
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6. Other Benefits.
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(a) Employee will be reimbursed for all properly documented reasonable
moving costs and closing costs in connection with the sale of Employee's
house in Concord, California up to a maximum reimbursement amount of
$25,000. The Company will also loan $140,000 to Employee which, during the
term of employment, shall not bear interest (the "Company Loan"). The
Company Loan shall be repaid in installments equal to 90% of any Bonus
Compensation (after the deduction of taxes) received by Employee pursuant
to Section 5 hereof concurrently with Employee's receipt of such Bonus
Compensation. In the event that Employee's employment with the Company is
terminated by the Company (i) pursuant to Section 7(a) hereof without Good
Reason (as defined in Section 7(d)) or (ii) pursuant to Section 7(e) hereof
within one year following a Change-in-Control, any outstanding balance
under the Company Loan shall be forgiven by the Company. In the event that
Employee's employment with the Company is terminated under any
circumstances other than as described in the preceding sentence, the
Company Loan will be converted to a fifteen-year amortization schedule with
a five-year balloon payment and will bear interest at the average market
rate applicable at such time for a fifteen-year first mortgage residential
loan. The Company's obligation to extend the Company Loan is subject to
Employee and the Company entering into mutually satisfactory loan
documents, including, without limitation, a second mortgage on Employee's
house to be purchased with the Company Loan proceeds.
(b) During the Employment Period, Employee shall be entitled to a
monthly car allowance in such amount as the Board of Directors may
determine and shall have the right to participate in the Company's 401(k)
Savings Plan, and any health, dental, retirement, pension or other benefit
plans that are made generally available to the executive officers of the
Company from time to time. Employee shall be entitled to reasonable paid
vacation time in accordance with the then regular procedures of the Company
for senior executive officers.
7. Termination.
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(a) AT-WILL EMPLOYMENT. Employee's employment hereunder is "at will"
and may be terminated by the Company at any time without Good Reason, by a
majority vote of all of the members of the Board of Directors upon written
notice to Employee, subject only to the severance provisions set forth in
Section 7(c) hereof.
(b) TERMINATION BY EMPLOYEE UNDER CERTAIN CIRCUMSTANCES. Employee's
employment hereunder may be terminated effective immediately by Employee by
written notice to the Board of Directors in the event of (i) a failure by
the Board of Directors to elect Employee to offices with the same or
substantially the same duties and responsibilities as set forth in Section
2 or (ii) a failure by the Company to comply
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with the provisions of Sections 4, 5 or 6 or (iii) a material breach by the
Company of any other provision of this Agreement.
(c) CERTAIN BENEFITS UPON TERMINATION BY EMPLOYEE. Unless otherwise
specifically provided in this Agreement or otherwise required by law, all
compensation and benefits to Employee under this Agreement shall terminate
on the date of termination of the Employment Period. Notwithstanding the
foregoing, in the event of termination of the Employment Period pursuant to
Sections 7(a) or 7(b), the Company shall continue to pay the Employee's
Base Salary, and no other compensation or benefits, for the period
determined in accordance with the following:
If Employee is terminated within the first full twelve (12) months of
the Employment Period, then the Company shall continue to pay
Employee's Base Salary for the twelve (12) months immediately
following the date of termination, at the rate in effect on the date
of termination and on the same periodic payment dates as payment would
have been made to Employee had the Employment Period not been
terminated. If Employee is terminated after the twelfth full month of
the Employment Period, but prior to the end of the twenty-fourth full
month of the Employment Period, then the Company shall continue to pay
Employee's Base Salary for the nine (9) months immediately following
the date of termination, at the rate in effect on the date of
termination and on the same periodic payment dates as payment would
have been made to Employee had the Employment Period not been
terminated. If Employee is terminated after the twenty-fourth full
month of the Employment Period, but prior to the thirty-sixth full
month of the Employment Period, then the Company shall continue to pay
Employee's Base Salary for the six (6) months immediately following
the date of termination, at the rate in effect on the date of
termination and on the same periodic payment dates as payment would
have been made to Employee had the Employment Period not been
terminated.
(d) TERMINATION BY THE COMPANY FOR GOOD REASON OR BY EMPLOYEE WITHOUT
CAUSE. If (A) Employee is terminated for Good Reason (as defined below) or
(B) if Employee shall voluntarily terminate his employment hereunder (other
than pursuant to Sections 7(b) or 7(e) hereof), then the Employment Period
shall terminate as of the effective date set forth in the written notice of
such termination (the "Termination Date") and (i) Employee shall be
entitled to receive only his Base Salary at the rate provided pursuant to
Section 4 which is payable prior to the Termination Date, (ii) any
outstanding stock options, including any Stock Options, shall expire at the
close of business on the thirtieth day following such Termination Date and
(iii) other unvested stock awards, including any unvested Restricted Stock
(but in no event vested Restricted Stock), shall cease vesting and be
forfeited in accordance with the terms of the 1994 Stock Incentive Plan or
other stock option plan under which they were
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granted. "Good Reason" shall mean a finding by the Board of Directors that
the Employee has (a) acted with gross negligence or willful misconduct in
connection with the performance of his material duties hereunder, (b)
defaulted in the performance of his material duties hereunder and has not
corrected such action within fifteen (15) days of receipt of written notice
thereof; (c) committed a material act of common law fraud against the
Company or its employees, which act has had an adverse impact on the
financial affairs of the Company; or (d) been convicted of a felony and
such conviction has had an adverse effect on the interests of the Company.
(e) TERMINATION FOLLOWING A CHANGE-IN-CONTROL. Notwithstanding
anything to the contrary set forth herein, if Employee's employment is
terminated (i) by the Company without Employee's consent other than for
Good Reason within one year following a Change-in-Control, or (ii) by
Employee as a result of a Force Out which occurs within one year following
a Change-in-Control, then the Employment Period shall terminate on the
later of the termination date set forth in the written notice of
termination or the date of receipt of such notice and Employee shall be
entitled to (i) immediately vest in any outstanding stock options or other
stock awards, including Stock Options or Restricted Stock, and (ii) the
payment by the Company of an amount (the "Severance Amount") equal to his
Base Salary under Section 4 in effect during the immediately preceding
fiscal year plus a pro rated amount of his Bonus Compensation under Section
5 for the immediately preceding fiscal year and (iii) for a period of 18
months commencing on the Termination Date, the Company shall make
provisions so that medical and dental benefits, life insurance and accident
insurance plan coverage will continue in effect on terms and on levels
substantially the same as those terms and levels existing on the
Termination Date. In the event that the 1994 Stock Incentive Plan or any
other stock plan or agreement of the Company provides terms for the
acceleration or exercise of stock options or other stock awards, including
acceleration of Restricted Stock or the acceleration or exercise of Stock
Options, following a termination of employment that vary from or are
otherwise inconsistent with the foregoing, the foregoing provisions shall
govern and the Company shall use its best efforts to amend such plan or
agreement. It is the intention of the Executive and of the Company that no
payments by the Company to or for the benefit of the Executive under this
Agreement or any other agreement or plan pursuant to which he is entitled
to receive payments or benefits shall be non-deductible to the Company by
reason of the operation of Section 280G of the Internal Revenue Code
relating to parachute payments. Accordingly, and notwithstanding any other
provision of this Agreement or any such agreement or plan, if by reason of
the operation of said Section 280G, any such payments exceed the amount
which can be deducted by the Company, such payments shall be reduced to the
maximum amount which can be deducted by the Company. For purposes of this
Agreement, a "Change-in-Control" shall be deemed to have occurred with
respect to the Company if, after the date of this Agreement:
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(1) any natural person, corporation or other entity (a "Person")
directly or indirectly through one or more other Persons
beneficially owns, controls, or has power to vote fifty percent
(50%) or more of the voting securities of the Company, which
securities were acquired in one or more transactions not approved
by the Board of Directors; or
(2) a Person acquires or agrees to acquire all or substantially all
of the assets and business of the Company; or
(3) during any period of two (2) consecutive years (not including any
period prior to the date of this Agreement), (A) individuals who
at the beginning of such period constitute the Board of Directors
of the Company, and (B) any new directors whose election by the
Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors of the
Company.
For purposes of this Agreement, a "Force Out" shall be deemed to
have occurred following a Change-In-Control, in the event of any
of the following: (A) a change in duties, responsibilities,
status or position(s) with the Company, which in Employee's
reasonable judgment, does not represent a promotion from or
maintaining of Employee's duties, responsibilities, status or
position(s) as in effect immediately prior to the
Change-In-Control, or any removal of Employee from or any failure
to reappoint or reelect Employee to such position(s), except in
connection with the termination of Employee's employment for Good
Reason, disability, retirement or death; (B) a reduction by the
Company in Employee's Base Salary as in effect immediately prior
to the Change-In-Control; (C) the failure by the Company to
continue in effect any of the Plans in which Employee is
participating at the time of the Change-In-Control of the Company
(unless Employee is permitted to participate in any substitute
benefit plan with substantially the same terms and to the same
extent and with the same rights as Employee had with respect to
the Plan that is discontinued) other than as a result of the
normal expiration of any such Plan in accordance with its terms
as in effect at the time of the Change-In-Control, or the taking
of any action, or the failure to act, by the Company which would
adversely affect Employee's continued participation in any such
Plans on at least as favorable a basis to Employee as in the case
on the date of the Change-In-Control or which would materially
reduce Employee's benefits in the future under
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any of such Plans or deprive Employee of any material benefits
enjoyed by Employee at the time of the Change-In-Control; (D) the
Company's requiring Employee to be based in an office, located
beyond a reasonable commuting distance from Employee's residence
immediately prior to the Change-In-Control except for a required
travel relating to the Company's business to an extent
substantially consistent with the business travel obligations
which Employee undertook on behalf of the Company prior to the
Change-In-Control; or (E) any refusal by the Company to continue
to allow Employee to attend to matters or engage in activities
not directly related to the business of the Company which, prior
to the Change-In-Control, Employee was permitted by the Board to
attend to or engage in.
(f) TERMINATION BY REASON OF DEATH. The Employment Period shall
terminate upon Employee's death and in such event, the Company will pay
Employee's Base Salary for a period of three (3) months from the date of
his death or such other period as the Board of Directors may determine, to
Employee's estate or a beneficiary designated by Employee in writing prior
to his death. Any unexercised or unvested stock options or other stock
awards, including unexercised or unvested Stock Options or unvested
Restricted Stock, shall remain exercisable or vest upon Employee's death
only to the extent provided in the applicable option plan and agreements.
(g) TERMINATION BY REASON OF DISABILITY. In the event that Employee
shall become unable to efficiently perform his duties hereunder because of
any physical or mental disability or illness, Employee shall be entitled to
be paid his Base Salary until the later of such time when (i) the period of
disability or illness (whether or not the same disability or illness) shall
exceed 180 consecutive days during the Employment Period and (ii) Employee
becomes eligible to receive benefits under a comprehensive disability
insurance policy obtained by the Company (the "Disability Period").
Following the expiration of the Disability Period, the Company may
terminate this Agreement upon written notice of such termination. Any
unexercised or unvested stock options or other stock awards, including
unexercised or unvested Stock Options or unvested Restricted Stock shall
remain exercisable or vest upon such termination only to the extent
provided in the applicable option plan and option agreements.
8. REMEDIES FOR BREACH. If Employee breaches the terms of this Agreement,
in addition to any other remedies which it may have, the Company may terminate
Employee's employment and any further participation in any employee plan in
accordance with employment policies of the Company, as in effect from time to
time, and Employee shall forfeit any further compensation. In addition, the
provisions of this Agreement may be specifically enforced if not performed
according to their terms. Without limiting the generality of the foregoing, the
parties acknowledge that the Company would be irreparably damaged and there
would be no adequate remedy at law for Employee's breach of Sections 3
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and 9 hereof and, accordingly, Employee hereby consents to the entry of any
temporary restraining order or preliminary or ex parte injunction, in addition
to any other remedies available at law or in equity, to enforce the provisions
thereof. This Section shall survive the termination of this Agreement.
9. RECORDS AND NONDISCLOSURE OF CONFIDENTIAL INFORMATION. All records,
financial statements and similar documents obtained, reviewed or compiled by
Employee in the course of the performance by him of services for the Company,
whether or not confidential information or trade secrets, shall be the exclusive
property of the Company. Employee shall have no rights in such documents upon
any termination of this Agreement. Employee agrees to comply with and be bound
by the Company's Policy on Securities Trading and Disclosure of Confidential
Information attached as EXHIBIT A hereto and made a part hereof. The agreement
set forth in this Section 9 shall survive the expiration of the Employment
Period and any termination of this Agreement.
10. WAIVER. The failure of the Company to require the performance of any
term or obligation provided for herein, or the waiver by the Company of any
breach of this Agreement, shall not prevent enforcement of such term or
obligation or be deemed a waiver of any subsequent breach.
11. CONFLICTING AGREEMENTS. Employee hereby represents and warrants that
the execution of this Agreement and the performance of his duties and
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants in favor of any other person
or entity which could affect the performance of his duties hereunder.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof. This Agreement
supersedes and replaces any prior agreement or arrangement relative to
Employee's employment by the Company, and all such prior agreements and
arrangements are hereby terminated.
13. GOVERNING LAW AND SEVERABILITY. This Agreement shall be governed by and
construed under the laws of the State of California and shall not be modified or
discharged in whole or in part except by an agreement in writing signed by the
parties hereto. In case any one or more of the provisions or parts of a
provision contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, but this Agreement shall be construed as if such invalid or
illegal or unenforceable provision or part of a provision had been limited or
modified (consistent with its general intent) to the extent necessary so that it
shall be valid, legal and enforceable, or if it shall not be possible to so
limit or modify such invalid, illegal or unenforceable provision or part of a
provision, this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or part of a provision had never been contained herein,
and the parties will use their
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best efforts to substitute a valid, legal and enforceable provision which,
insofar as practicable, implements the purpose and intent of the provision or
part of such provision originally contained herein.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns; PROVIDED, HOWEVER, that this Agreement may not be assigned by
Employee without the prior written consent of the Company. The Company shall
require any successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets of the Company, by an agreement in form and
substance satisfactory to Employee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as an instrument under seal as of the date first set forth above.
BAY APARTMENT COMMUNITIES, INC.
By: /s/ Max L. Gardner
--------------------------------
Title: Chief Operating Officer
--------------------------------
EMPLOYEE
/s/ Jeffrey B. Van Horn
--------------------------------------
Name: Jeffrey B. Van Horn
Address: 1472 Soccer Court
Concord, CA 94518
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Exhibit 10.2
PROMISSORY NOTE
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San Jose, California
$140,000.00 July 26, 1996
FOR VALUE RECEIVED, Jeffrey B. Van Horn, an individual with an address of
1472 Soccer Court, Concord, California 94518 (the "Borrower"), hereby promises
to pay to Bay Apartment Communities, Inc., a Maryland corporation (together with
any successor holder or holders of this Note, the "Holder"), at its office at
4340 Stevens Creek Blvd., Suite 275, San Jose, California 95129, or such other
place as the Holder may designate, the principal amount of One Hundred Forty
Thousand and no/100 Dollars ($140,000.00), together with interest thereon,
subject to the terms and conditions set forth herein. Reference is made to that
certain Employment Agreement between Holder and Borrower dated as of June 19,
1996 (the "Employment Agreement"). Capitalized terms used herein without
definition shall have the same meanings as in the Employment Agreement.
1. PAYMENT. All payments of principal and interest shall be made by the
Borrower in lawful money of the United States of America in immediately
available funds. During the term of Borrower's employment with the Holder (the
"Employment Period"), principal shall be repaid in installments equal to 90% of
any Bonus Compensation (as defined in the Employment Agreement) (after the
deduction of taxes) received by Borrower pursuant to Section 5 of the Employment
Agreement, which installments shall be due and payable concurrently with
Borrower's receipt of such Bonus Compensation. Following termination of
Borrower's employment with the Holder under any circumstances other than
pursuant to (a) Section 7(a) of the Employment Agreement without Good Reason (as
defined in the Employment Agreement) or (b) Section 7(e) of the Employment
Agreement within one year following a Change-in-Control (as defined in the
Employment Agreement) and after written notice thereof from the Holder hereof to
the Borrower, (i) payments of principal and interest under this Note will be due
and payable on the first business day of each calendar month in equal monthly
installments sufficient to repay the entire outstanding principal balance and
all interest over a fifteen-year term, (ii) this Note will bear interest at the
rate provided in Section 2 of this Note, and (iii) all amounts due and payable
under this Note shall be repaid in full on the fifth anniversary of the
Borrower's termination of employment. In the event that Borrower's employment
with Holder is terminated by the Holder pursuant to Section 7(a) of the
Employment Agreement without Good Reason or Section 7(e) of the Employee
Agreement within one year following a Change-in-Control, any outstanding
principal balance under this Note shall thereupon be deemed to be repaid in full
for all purposes.
2. INTEREST. No interest shall accrue on the outstanding principal
balance of this Note, except as follows. Following termination of Borrower's
employment with the Holder under any circumstances other than pursuant to (a)
Section 7(a) of the Employment Agreement without Good Reason or (b) Section 7(e)
of the Employment Agreement within one year following a Change-in-Control, this
Note shall bear interest at a rate per annum equal to the
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LOWER of: (a) the average of the rates (assuming no points) quoted on the
employment termination date for a 15-year fully amortizing conventional fixed
rate residential mortgage by the main headquarters of each of CitiBank, N.A.,
Bank of Boston and Chase Bank (or their successor), and (b) ten percent per
annum. Any interest shall be computed on the basis of a three hundred and sixty
(360)-day year and shall be paid for the actual number of days on which
principal is outstanding following Borrower's termination of employment. All
payments shall be applied first to interest (when accrued or accruing) and the
balance to principal, except that in the event of a default hereunder, any
payment may be applied first to principal, at the option of the Holder.
3. SECURITY. Borrower represents and warrants to the Holder that the
proceeds of the loan evidenced by this Note shall be used to purchase a new
residence for Borrower. Borrower shall notify Holder as soon as Borrower has
purchased Borrower's new residence, and, within ten (10) days after the Holder's
request, Borrower (and Borrower's wife, if Borrower takes title to the new
residence in his and his wife's name or his wife's name alone) shall execute and
deliver a Deed of Trust on the residence securing this Note and an amendment to
this Note affirming that this Note is secured by the Deed of Trust, both in form
and substance satisfactory to the Holder in its reasonable discretion. Without
limiting the generality of the foregoing, this Note shall be amended to include
the following provision, and the Deed of Trust shall include a similar
provision:
This Note is secured by a Deed of Trust dated _________, 1996 (the "Deed of
Trust") encumbering that certain real property located in
_________________, California and more fully described in the Deed of Trust
(the "Property"). Except as otherwise provided by the applicable provisions
of California Civil Code Section 2924.6, if Borrower sells, contracts to
sell, gives an option to purchase, conveys, leases, encumbers, or alienates
the Property, or any interest in the Property, or suffers Borrower's title,
or any interest in the Property, to be divested, whether voluntarily or
involuntarily; or if title to such property be subject to any lien or
charge, voluntarily or involuntarily, contractual or statutory, without the
written consent of the Holder being first had and obtained, the Holder, at
the Holder's option, may, without prior notice, declare the outstanding
balance of this Note, irrespective of its stated due date, immediately due
and payable, and may exercise all rights and remedies provided hereunder or
in the Deed of Trust.
4. PREPAYMENT. The Borrower may prepay at its option the whole or any part
of the principal balance at any time without premium or penalty by payment of
all or a part of the unpaid balance of the principal balance and may in its
discretion direct that such prepayments be applied to any subsequent
installments of principal.
2
<PAGE> 3
5. DEFAULT. (a) The occurrence of any of the following events shall
constitute a Default under this Note:
(i) the failure by the Borrower to pay when due any payment of
principal herein required, which failure continues unremedied after written
notice thereof from the Holder hereof to the Borrower (a "Payment
Default"); or
(ii) the failure of the Borrower to fulfill the Borrower's obligations
under paragraph 3 above; or
(iii) the making of an assignment for the benefit of the creditors by,
the appointment of a receiver of any part of the property of, or the filing
of a petition in bankruptcy or the commencement of any proceeding under any
bankruptcy law or any law relating to the relief of debtors, readjustment
of indebtedness, reorganization, composition or extension (which, in the
case of an involuntary petition or proceeding, is not dismissed within
sixty (60) days of such filing or commencement) by or against, the
Borrower.
(b) Upon the occurrence of a Default under this Note, the outstanding
principal balance hereof, together with all reasonable costs of collection,
including reasonable attorney's fees, shall become immediately due and payable
at the option of the Holder hereof. Failure on the part of the Holder hereof to
exercise said option shall not constitute a waiver of the right of the Holder to
exercise said option in the event of any subsequent Default.
6. WAIVERS. The Borrower hereby waives demand, presentment for payment,
notice of dishonor, protest and notice of protest and diligence and agrees that
the Holder hereof may extend the time for payment or accept partial payment
without discharging or releasing the Borrower. The Borrower hereby agrees that
no delay or omission on the part of the Holder hereof in exercising any right or
remedy hereunder shall constitute a waiver of such right or remedy or of any
other right or remedy hereunder.
7. NOTICES. All notices hereunder shall be in writing and shall be deemed
to have been duly given if delivered by hand, or mailed, certified or registered
mail with first class postage pre-paid, (a) if to the Holder, to Bay Apartment
Communities, Inc., 4340 Stevens Creek Boulevard, Suite 275, San Jose, California
95129, or to such other address as the Holder shall direct in writing; (b) if to
the Borrower, to 1472 Soccer Court, Concord, CA 94518, or to such other address
as the Borrower shall direct in writing.
8. GOVERNING LAW. This Note shall take effect as an instrument under seal
and shall be governed by and construed in accordance with the laws of the State
of California.
9. USURY. All agreements between Borrower and the Holder of this Note are
expressly limited, so that in no event or contingency whatsoever, whether by
reason of the advancement of the proceeds of this Note, acceleration of maturity
of the unpaid principal balance, or otherwise, shall the amount paid or agreed
to be paid to the Holder of this Note for
<PAGE> 4
the use, forbearance, or detention of the money to be advanced under this Note
exceed the highest lawful rate permissible under applicable usury laws. If,
under any circumstance whatsoever, fulfillment of any provision of this Note or
of any deed of trust securing this Note or any other agreement pertaining to it,
after timely performance of such provision is due, shall involve transcending
the limit of validity prescribed by law which a court of competent jurisdiction
deems applicable, then, ipso facto, the obligations to be fulfilled shall be
reduced to the limit of such validity, and if, under any circumstances
whatsoever, the Holder shall ever receive as interest an amount that exceeds the
highest lawful rate, the amount that would be excessive interest shall be
applied to the reduction of the unpaid principal balance under this Note and not
to the payment of interest, or, if such excessive interest exceeds the unpaid
balance of principal under this Note, such excess shall be refunded to Borrower.
This provision shall control each other provision of all agreements between
Borrower and the Holder regarding the loan evidenced by this Note.
IN WITNESS WHEREOF the Borrower has caused this Note to be executed under
seal as of the date set forth above.
/s/ Jeffrey B. Van Horn
---------------------------------
Jeffrey B. Van Horn
ATTEST:
/s/ AnnaMaria Kintzer
- ---------------------------
4
<PAGE> 1
Exhibit 23.1
CONSENT OF ROSEN CONSULTING GROUP
---------------------------------
We consent to the incorporation by reference in the Registration Statement of
Bay Apartment Communities, Inc. (the "Company") on Form S-3 (File No. 333-15875)
(the "Registration Statement") of our report dated June 28, 1996, entitled the
Apartment Markets in Orange, Santa Clara, Alameda, San Francisco and San Mateo
counties, and any addendum thereto, which report and addendum are included in
the Company's report on Form 8-K dated July 5, 1996 and in the Company's report
on Form 8-K to which this consent is an exhibit. We also consent to being named
as an expert in any Prospectus Supplement to the Registration Statement with
respect to demographics and market information.
ROSEN CONSULTING GROUP
By: /s/ Kenneth T. Rosen
----------------------------
Kenneth T. Rosen
<PAGE> 1
Exhibit 23.2
CONSENT OF ANN ROULAC AND COMPANY
---------------------------------
We consent to the incorporation by reference in the Registration Statement of
Bay Apartment Communities, Inc. (the "Company") on Form S-3 (File No. 333-15875)
(the "Registration Statement") of our report dated June 30, 1996, entitled San
Francisco Bay Area Rental Analysis, which report was included in the Company's
report on Form 8-K dated July 5, 1996. We also consent to being named as an
expert in any Prospectus Supplement to the Registration Statement.
ANN ROULAC AND COMPANY
By: /s/ Ann N. Roulac
------------------------
Ann N. Roulac
<PAGE> 1
Exhibit 99.1
<TABLE>
- --------------------------------------------------------------------------------------------------------------
PRIMARY MARKETS POPULATION
<CAPTION>
Comp Ann Growth Rate
------------------------
County 1980 1990 1995 2000 1980-1990 1990-2000
------ ---- ---- ---- ---- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Santa Clara 1,295,073 1,497,577 1,594,900 1,705,900 1.5% 1.3%
Alameda 1,105,379 1,276,702 1,349,600 1,430,000 1.5% 1.1%
San Francisco 678,974 723,959 750,984 775,900 0.6% 0.7%
San Mateo 587,329 649,623 681,200 715,800 1.0% 1.0%
Total 3,666,755 4,147,861 4,376,684 4,627,600 1.2% 1.1%
Absolute Change 481,106 479,739
% Change 13.1% 11.6%
Sources: Historical-U.S. Census Bureau, Calculations & Forecasts-Rosen Consulting Group
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
MEAN HOUSEHOLD INCOME
BAY AREA VS. U.S.
<CAPTION>
1995e 1996f
----- -----
<S> <C> <C>
Primary Markets n.a. 87,354
San Francisco Bay Area 80,432 84,040
U.S. 44,589 46,027
- --------------------------------------------------------------------------------------------------------------
Sources: historical data U.S. Census Bureau, forecasts and
calculations Rosen Consulting Group
</TABLE>
Rosen Consulting Group 1
<PAGE> 2
<TABLE>
- --------------------------------------------------------------------------------
LIMITED SUPPLY
MULTIFAMILY PERMITS ISSUED
NINE-COUNTY BAY AREA
<CAPTION>
Year Permits, Units
---- --------------
<S> <C>
1986 25,197
1987 18,452
1988 12,499
1989 11,924
1990 8,596
1991 6,738
1992 4,265
1993 4,158
1994 4,521
1995 4,098
1996e 6,707
Sources: Historical data-U.S. Census
Bureau, 1996e-RCG.
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
PRIMARY MARKETS MULTIFAMILY
PERMITS
<CAPTION>
Year Multifamily Permits
---- -------------------
<S> <C>
80 6,915
81 4,810
82 4,639
83 7,540
84 9,366
85 12,031
86 14,548
87 13,391
88 8,224
89 7,723
90 5,404
91 4,750
92 3,171
93 3,206
94 4,158
95 2,798
96e 5,164
Sources: Historical-U.S. Census Bureau;
1996e-Rosen Consulting Group
- --------------------------------------------------------------------------------
</TABLE>
Rosen Consulting Group 2
<PAGE> 3
<TABLE>
- --------------------------------------------------------------------------------
RENTAL TENURE
PERCENTAGE OF HOUSEHOLDS WHICH RENT
<CAPTION>
1990
----
<S> <C>
Primary Markets 47%
9-County Bay Area 44%
U.S. 36%
Sources: 1990 Census, calculations Rosen Consulting Group
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
LIMITED HOME AFFORDABILITY
PERCENTAGE OF HOUSEHOLDS ABLE TO AFFORD
THE MEDIAN-PRICED HOME
<CAPTION>
1995
----
<S> <C>
Primary Markets 41%
9-County Bay Area 36%
U.S. 55%
Sources: U.S. Census Bureau, California Association of Realtors,
Rosen Consulting Group
- --------------------------------------------------------------------------------
</TABLE>
Rosen Consulting Group 3
<PAGE> 4
<TABLE>
Existing Median Home Price
<CAPTION>
MSA 1990 1991 1992 1993 1994 1995 1996e Upd. 9/96
- --- ---- ---- ---- ---- ---- ---- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oakland
Price 259,000 262,420 259,250 256,200 255,600 254,400 258,979 263,050
Stock 534.7 538.7 544.3 549.0 554.9 560.3 566.1 566.3
San Francisco
Price 259,000 262,420 259,250 256,200 255,600 254,400 258,216 263,813
Stock 340.5 341.5 342.2 342.9 343.9 345.1 346.5 346.1
San Jose
Price 268,890 256,640 248,260 246,510 254,390 253,372 260,878 265,534
Stock 353.6 355.3 357.1 358.9 361.0 363.2 365.7 366.9
Santa Rosa
Price 201,400 208,776 218,094 214,284 212,170 214,749 221,191 215,823
Stock 122.1 124.1 125.9 127.6 129.8 131.5 133.4 133.1
Vallejo-Fairfield-Napa
Price 179,178 185,740 194,030 190,640 188,760 192,743 196,983 188,695
Stock 120.9 122.7 124.7 126.4 128.2 129.5 131.2 131.1
Total Bay Area-3 MSA 261,846 260,758 256,095 253,420 255,253 254,106 259,315 263,969
Total Bay Area-5 MSA 250,041 250,196 247,713 244,828 245,953 245,527 250,719 253,424
Note: Total Bay Area is a weighted average calculation based on single family
stock for each of three or five metropolitan areas: Oakland (Alameda,
Contra Costa Counties); San Francisco (Marin, SF, San Mateo Counties); San
Jose (Santa Clara County); Santa Rosa (Sonoma County);
Vallejo-Fairfield-Napa (Napa, Solano Counties)
Sources: U.S. Census Bureau, National Association of Realtors,
Rosen Consulting Group
</TABLE>
