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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): JULY 1, 1998
AVALON BAY 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.)
2900 EISENHOWER AVENUE, SUITE 300, ALEXANDRIA, VIRGINIA 22314
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(Address of principal executive offices) (Zip Code)
(703) 329-6300
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
DEBT OFFERING
On July 7, 1998 Avalon Bay Communities, Inc. (the "Company") completed
an underwritten public offering of $100,000,000 aggregate principal amount of
its 6.50% Senior Notes due 2003 (the "2003 Notes") and $150,000,000 aggregate
principal amount of its 6.80% Senior Notes due 2006 (the "2006 Notes" and,
together with the 2003 Notes, the "Notes"). The offering of the Notes was made
pursuant to a Prospectus Supplement dated July 1, 1998 relating to the
Prospectus dated June 26, 1998, which is a part of the Company's registration
statement on Form S-3, as amended (File No. 333-41511).
The 2003 Notes bear interest at 6.50% per annum and will mature on
July 15, 2003 and the 2006 Notes bear interest at 6.80% per annum and will
mature on July 15, 2006. The Notes bear interest from July 7, 1998 or from
the immediately preceding Interest Payment Date (as defined below) to which
interest had been paid, payable semi-annually in arrears on January 15 and July
15 of each year, commencing January 15, 1999 (each, an "Interest Payment Date"),
to the persons in whose name the applicable Notes are registered in the security
register for each series on the preceding December 31 or June 30 (whether or not
a business day), as the case may be. Interest on the Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
The Notes may be redeemed at any time at the option of the Company, in
whole or in part, at a redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed plus accrued interest thereon to the
redemption date, and (ii) the Make-Whole Amount (as defined in the Second
Supplemental Indenture referenced below), if any, with respect to such Notes.
The Notes were issued under an Indenture and Second Supplemental
Indenture, each between the Company and State Street Bank and Trust Company, as
Trustee. The underwriting discount for the 2003 Notes was 0.550% and the price
to the public was 99.719% of the principal amount of the 2003 Notes. The
underwriting discount for the 2006 Notes was 0.625% and the price to the public
was 99.723% of the principal amount of the 2006 Notes.
The net proceeds to the Company from the sale of the Notes, after all
anticipated issuance costs, will be approximately $247.6 million. The Company
intends to use the net proceeds to reduce borrowings under its $600 million
unsecured line of credit from Fleet National Bank, Morgan Guaranty Trust Company
of New York, Union Bank of Switzerland and other participating banks (the
"Unsecured Credit Facility").
Delivery of the Notes was made on July 7, 1998 through the facilities
of The Depository Trust Company, against payment therefor in immediately
available funds.
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ITEM 7. FINANCIAL STATEMENTS
EXHIBIT NUMBER EXHIBIT
1.1 Underwriting Agreement, dated July 1, 1998, between the
Company and PaineWebber Incorporated, First Union
Capital Markets, J.P. Morgan Securities Inc. and
NationsBank Montgomery Securities LLC.
4.1 Indenture, dated as of January 16, 1998 between the
Company and State Street Bank and Trust Company, as
Trustee. (Incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 21, 1998.)
4.2 Second Supplemental Indenture, between the Company and
State Street Bank and Trust Company, as Trustee.
4.3 The Company's 6.50% Senior Note due 2003.
4.4 The Company's 6.80% Senior Note due 2006.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf by
the undersigned hereunto duly authorized.
AVALON BAY COMMUNITIES, INC.
Dated: July 8, 1998 By: /s/ Jeffrey B. Van Horn
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Name: Jeffrey B. Van Horn
Title: Senior Vice President--
Investments and Secretary
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EXHIBIT 1.1
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$100,000,000 AGGREGATE PRINCIPAL AMOUNT OF 6.50% SENIOR NOTES DUE 2003
$150,000,000 AGGREGATE PRINCIPAL AMOUNT OF 6.80% SENIOR NOTES DUE 2006
AVALON BAY COMMUNITIES, INC.
UNDERWRITING AGREEMENT
dated July 1, 1998
PAINEWEBBER INCORPORATED
FIRST UNION CAPITAL MARKETS
J.P. MORGAN SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
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$100,000,000 Aggregate Principal Amount of 6.50% Senior Notes due 2003
$150,000,000 Aggregate Principal Amount of 6.80% Senior Notes due 2006
AVALON BAY COMMUNITIES, INC.
UNDERWRITING AGREEMENT
July 1, 1998
PAINEWEBBER INCORPORATED
FIRST UNION CAPITAL MARKETS, a division
of Wheat First Securities, Inc.
J.P. MORGAN SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Painewebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
Avalon Bay Communities, Inc., a Maryland corporation (the
"Company"), confirms its agreement with you (collectively, the "Underwriters")
as follows:
1. DESCRIPTION OF SECURITIES. The Company proposes to issue and
sell to the Underwriters the principal amount of its debt securities identified
on SCHEDULE A hereto (the "Securities") to be issued under that certain
Indenture, dated as of January 16, 1998, as supplemented by the First
Supplemental Indenture, dated as of January 20, 1998 (collectively, the
"Original Indenture"), and the Second Supplemental Indenture, to be dated July
7, 1998 (the "Supplemental Indenture" and, together with the Original Indenture,
the "Indenture"), each between the Company and State Street Bank and Trust
Company, as trustee (the "Trustee").
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 the Securities to the Underwriters
as hereinafter provided, and the Underwriters agree to purchase from the Company
the Securities at the purchase price set forth on SCHEDULE A hereto plus accrued
interest, if any, from the date specified on SCHEDULE A hereto to the date of
payment and delivery.
(b) The Company understands that the Underwriters intend (i)
to make a public offering of the Securities, and (ii) initially to offer the
Securities upon the terms set forth in the Prospectus.
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3. DELIVERY AND PAYMENT. Payment for the Securities shall be made
to the Company or to its order in immediately available funds in the amount, on
the date and at the place set forth on SCHEDULE A hereto (or at such other time
and place on the same date or such other date, not later than the third Business
Day thereafter, as the Underwriters and the Company may agree in writing). Such
payment will be made against delivery to the Underwriters of the Securities
registered in such names and in such denominations as the Underwriters shall
request no less than two full Business Days prior to the date of delivery, with
transfer taxes, if any, payable in connection with transfer to the Underwriters
duly paid by the Company. As used herein, the term "Business Day" means any day
other than a day on which banks are permitted or required to be closed in New
York City. The time and date of such payment and delivery with respect to the
Securities are referred to herein as the "Closing Date." If the Underwriters so
request, the Securities will be delivered through the book entry facilities of
The Depository Trust Company ("DTC") and will be made available for inspection
by the Underwriters by 1:00 P.M. New York City time on the Business Day prior to
the Closing Date at such place in New York City as the Underwriter, DTC and the
Company shall agree.
4. 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. 333-41511) on Form S-3, as amended,
with respect to the Securities, including a prospectus (the "Base Prospectus"),
has been carefully prepared by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and 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
Underwriters' consent, the Company will not, file a post-effective amendment
after the time of execution of this Agreement and prior to the filing of such
final form of prospectus. The registration statement may be supplemented by one
or more forms of preliminary prospectus supplement, as contemplated by Rule 430
or Rule 430A of the Rules and Regulations, to be used in connection with the
offering and sale of the Securities (each a "Preliminary Prospectus"). Copies of
such registration statement, any such amendments, and each related Preliminary
Prospectus 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 Underwriters or 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
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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 Underwriters for use in
connection with the offering of the Securities 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 Securities 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 thereof with the Commission and at the Closing Date (as
hereinafter defined) conformed or will conform in all material respects with the
requirements of the Act and the Rules and Regulations; the Indenture, on the
date of filing thereof with the Commission and at the Closing Date (as
hereinafter defined) conformed or will conform in all material respects with the
requirements of the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission thereunder (the "TIA"); each part of the
Registration Statement (excluding any prospectus supplement with respect to an
offering of securities other than the offering of the Securities 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 (i)
that part of the Registration Statement which constitutes the Statement of
Eligibility and Qualification under the TIA (the "Form T-1") and (ii) the
statements in or omissions from any such document in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by any Underwriter, specifically for use in the preparation thereof.
The Company acknowledges that the only information furnished to the Company by
any Underwriter specifically for inclusion in the Registration Statement is the
information set forth in SCHEDULE B hereto. The Company has not distributed any
offering material in connection with the offering or sale of the Securities
other than the Registration Statement, any Preliminary Prospectus, the
Prospectus or any other materials, if any, permitted by the Act.
(c) The 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.
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(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 merger (the "Merger") between Bay Apartment
Communities, Inc. and Avalon Properties, Inc. ("Avalon") has been validly
consummated in accordance with the Agreement and Plan of Merger by and between
Bay Apartment Communities, Inc. and Avalon Properties, Inc. dated as of March 9,
1998 (the "Agreement") and Maryland law.
(f) 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 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 Amended and Restated Articles of Incorporation and the
Articles of Merger (collectively, the "Charter") and the Amended and Restated
Bylaws (the "Bylaws") of the Company and the charter documents of each of its
subsidiaries and all amendments thereto have been delivered to the Underwriters,
and no changes therein will be made subsequent to the date hereof and prior to
the Closing Date, except as heretofore disclosed in writing to the Underwriters.
Except as otherwise described in the Registration Statement or the Prospectus,
or as described in 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.
(g) 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
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of preferred stock (the "Preferred Stock"), have been duly authorized and are
validly issued, fully paid and nonassessable by the Company and conform to the
description thereof in the Prospectus. There are no requirements, restrictions
or limitations in the terms of the Preferred Stock applicable to the issuance
and sale of the Securities. The shareholders of the Company have no preemptive
or similar rights with respect to the Securities. Except as set forth in the
Registration Statement or the Prospectus, the Company does not have outstanding
any option to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, any 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.
(h) 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 applied different principles than the Company prior to the Merger
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 to the
historical amounts in the compilation of such statements. No other financial
statements (or schedules) of the Company or any predecessor of the Company are
required by the Act or the Rules and Regulations to be included in the
Registration Statement or the Prospectus. Coopers & Lybrand L.L.P. (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.
(i) 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.
(j) 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
change in the capitalization of the Company, or in the business, properties,
business
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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.
(k) 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").
(l) 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.
(m) 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").
(n) 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.
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(o) No consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the consummation
of the transactions contemplated by this Agreement or in connection with the
issuance or sale of the Securities by the Company, except such as may be
required under the Act, the Exchange Act or state securities 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 Securities to be sold by the Company.
(p) The Company has the corporate power and authority to enter
into this Agreement and the Indenture. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company and is enforceable against the Company in accordance
with the terms hereof, except as limited by (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 Indenture and the
consummation of the transactions herein and therein contemplated will not result
in the creation or imposition of any lien, charge or encumbrance upon the
Communities 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 whole. The Company has the power and authority to
authorize, issue, offer and sell the Securities, as contemplated by this
Agreement.
(q) On the Closing Date, the Securities will be duly
authorized by the Company for issuance and sale pursuant to this Agreement and
the Indenture and, when duly authenticated and delivered by the Trustee in
accordance with the terms of the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee) and delivered to, and
paid for in full by, the Underwriters pursuant to this Underwriting Agreement,
will be valid and legally binding obligations of the Company entitled to the
benefit of the Indenture and will be enforceable against the Company in
accordance with their terms, subject to the Enforceability Limitations; the
Indenture has been duly qualified under the TIA and the execution, delivery and
performance of the Indenture has been, duly authorized by the Company; the
Original Indenture has been and, prior to the issuance of the Securities the
Supplemental Indenture will be, duly executed and delivered by the Company;
assuming due authorization, execution and delivery thereof by the Trustee, the
Original Indenture constitutes and, upon execution and delivery by the Company
the Supplemental Indenture will constitute, a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to the Enforceability Limitations; the Original Indenture
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conforms and, upon issuance of the Securities, the Securities and the
Supplemental Indenture will conform, in all material respects to the statements
relating thereto contained in the Prospectus; and upon issuance the Securities
will be, in all material respects, in the form contemplated by the Indenture.
(r) 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.
(s) 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.
(t) 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.
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(u) 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 Underwriters was or will be,
when made, inaccurate, untrue or incorrect.
(v) Except as stated in the Prospectus, neither the
Company nor any of its directors, officers or controlling persons has taken, nor
will it take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Securities to facilitate the sale or resale of the Securities.
(w) 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.
(x) 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.
(y) 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.
(z)(i) None of the Company or any partnership that
owns a Community (each a "Partnership") has at any time, and, to the
best knowledge of the Company after due inquiry and investigation, no
other party has, at any time, handled, buried, stored, retained,
refined, transported, processed, manufactured, generated, produced,
spilled, allowed to seep, leak, escape or leach, or be pumped, poured,
emitted, emptied, discharged, released, injected, dumped, transferred
or otherwise disposed of or dealt with, Hazardous Materials (as
hereinafter defined) on, to, above under, in, into or from the
Communities, except as disclosed in the environmental reports
previously delivered to the Underwriters or referred to in the
Prospectus, or such as would not individually or in the aggregate have
a material adverse effect on the Company and its subsidiaries, taken as
a whole. Neither the Company nor its subsidiaries intends to use the
Communities or any subsequently acquired properties described in the
Prospectus for the purpose of handling, burying, storing, retaining,
refining, transporting, processing, manufacturing, generating,
producing, spilling, seeping, leaking, escaping, leaching, pumping,
pouring, emitting, emptying, discharging, releasing, injecting,
dumping, transferring or otherwise disposing of or dealing with
Hazardous Materials, except for the use, storage and transportation of
small quantities of substances that are regularly used
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<PAGE> 11
as office supplies, household cleaning supplies, gardening supplies, or
pool maintenance supplies in compliance with applicable Environmental
Laws and in accordance with prudent business practices and good
hazardous materials storage and handling practices.
(ii) None of the Company or the Partnerships, to
the best knowledge of the Company after due inquiry and investigation,
knows of any seepage, leak, escape, leach, discharge, injection,
release, emission, spill, pumping, pouring, emptying or dumping of
Hazardous Materials into waters on, under or adjacent to the
Communities or onto lands from which such hazardous or toxic waste or
substances might seep, flow or drain into such waters, except as
disclosed in the environmental reports previously delivered to the
Underwriters or referred to in the Prospectus or such as would not
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(iii) None of the Company or the Partnerships to
the best knowledge of the Company after due inquiry and investigation,
has received notice of, or has knowledge of any occurrence or
circumstance which, with notice or passage of time or both, would give
rise to, any claim under or pursuant to any Environmental Law
pertaining to Hazardous Materials, hazardous or toxic waste or
substances on or originating from the Communities arising out of the
conduct of any such party, including, without limitation, pursuant to
any Environmental Law, except as disclosed in the environmental reports
previously delivered to the Underwriters or referred to in the
Prospectus or such as would not individually or in the aggregate have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
As used herein, "Hazardous Material" shall include, without
limitation, any flammable materials or explosives, petroleum or petroleum-based
products, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances, or related materials, asbestos or any material as
defined by any Federal, state or local environmental law, ordinance, rule, or
regulation including, without 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.
(aa) 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.
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<PAGE> 12
(bb) 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).
(cc) The Company has elected to be taxed as a REIT under
the Code and will use its best efforts to continue to be organized and will
continue to operate in a manner so as to qualify as a "real estate investment
trust" ("REIT") under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"), unless the Board of Directors determines that it
is no longer in the best interest of the Company to continue to be so qualified.
(dd) 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").
(ee) The Company has not distributed and, prior to the
later to occur of (i) the Closing Date and (ii) completion of the distribution
of the Securities, will not distribute any offering material in connection with
the offering and sale of the Securities other than the Registration Statement,
the Prospectus or other materials, if any, permitted by the Act.
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 Underwriters
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
Underwriters 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 Securities 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
Underwriters within a reasonable period of time prior to the filing thereof and
the Underwriters 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 Securities, and will notify the Underwriters
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 Securities 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
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<PAGE> 13
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
Securities for sale in any 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 Underwriters promptly of all such filings.
(c) The Company will furnish to the Underwriters 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, the
Exchange Act Rules and Regulations and the TIA, as from time to time in force,
so far as necessary to permit the continuance of sales of, or dealings in, the
Securities as contemplated by the provisions hereof and the Prospectus.
(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 Securities may be sold, both in connection with
the offering or sale of the Securities 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
Underwriters reasonably object.
(g) Prior to any public offering of the Securities, the
Company will cooperate with the Underwriters and their counsel in connection
with the registration or qualification of the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States that require such registration or qualification as the Underwriters may
reasonably request; provided, that in no event shall the Company be obligated to
qualify to do business in any
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<PAGE> 14
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.
(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 Securities, (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
Securities by the Underwriters or by dealers to whom Securities 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
Securities, (x) the Trustee under the Indenture, (xi) Moody's Investors Service,
Inc. ("Moody's") and Standard and Poor's Rating Services ("S&P" and, together
with Moody's, the "Rating Agencies") in connection with the rating of the
Securities at the request of the Company.
(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
Securities to facilitate the sale or resale of any of the Securities.
(k) The Company will apply the net proceeds from the
offering and sale of the Securities 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."
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<PAGE> 15
(m) The Company will execute and deliver the Supplemental
Indenture on or prior to the Closing Date as authorized by the Board of
Directors, which shall designate the Securities as the debt securities to be
offered and their terms and provisions in accordance with the provisions of the
Indenture; and the Company shall perform its obligations under the Indenture.
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, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Securities 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 Underwriters and the Underwriters did
not object thereto in good faith.
(c) Subsequent to the execution and delivery of this
Underwriting Agreement and prior to the Closing Date, there shall not have
occurred any downgrading in the rating accorded the Securities or any other debt
securities of the Company by any Rating Agency nor shall any notice have been
given to the Company of (i) any intended or potential downgrading by any Rating
Agency in such securities, or (ii) any review or possible change by any Rating
Agency that does not indicate a stable, positive or improving rating accorded
such securities.
(d) 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
Underwriters any such development makes it impracticable or inadvisable to offer
or deliver the Securities on the terms and in the manner contemplated in the
Prospectus.
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<PAGE> 16
(e) 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.
(f) 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.
(g) The Underwriters 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.
(h) The Underwriters 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 Bay
Apartment Communities, Inc. and subject to changes in applicable laws and
regulations and judicial and regulatory developments, commencing with the
taxable year ending 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.
(i) The Underwriters shall have received the opinion of
Cox, Castle & Nicholson LLP, counsel for the Company, dated the Closing Date, to
the effect that to the best of their knowledge statements relating to the
Communities and the Current Development Communities (as defined in the
Prospectus) and tax-exempt bond financing in the Prospectus (but excluding the
statistical and financial data, physical condition and construction status of
such communities included therein) are materially fair and accurate.
(j) The Underwriters 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 Underwriters.
(k) Concurrently with the execution and delivery of this
Agreement, the Accountants shall have furnished to the Underwriters a letter,
dated the date of its delivery, addressed to the Underwriters and in form and
substance satisfactory to the Underwriters, 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 Underwriters 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
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<PAGE> 17
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 Underwriters 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 Underwriters, 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
Securities 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;
(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
(vii) Subsequent to the execution and delivery of the
Underwriting Agreement and through the date of such certificate, there
has not occurred any downgrading in the rating accorded the Securities
or any other debt securities of the Company by any Rating Agency nor
has any notice been given to the Company of (A) any intended or
potential downgrading
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<PAGE> 18
by any Rating Agency in such securities, or (B) any review or possible
change by any Rating Agency that does not indicate a stable, positive
or improving rating accorded such securities.
(m) The Securities 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 furnished to the Underwriters
such certificates, in addition to those specifically mentioned herein, as the
Underwriters 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.
(o) 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 Underwriters and their
counsel. The Company will furnish the Underwriters with such conformed copies of
such opinions, certificates, letters and other documents as the Underwriters
shall reasonably request.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless
each Underwriter, each of the directors, officers, employees and agents of each
Underwriter and each person, if any, who controls each Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any and all losses, claims, liabilities, expenses and damages
(including, but not limited to, any and all investigative, legal and other
expenses reasonably incurred in connection with, and any and all amounts paid in
settlement of, any action, suit or proceeding between any of the indemnified
parties and any indemnifying parties or between any indemnified party and any
third party, or otherwise, or any claim asserted), as and when incurred, to
which any Underwriter, or any such person, may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based on (i) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus, or in any application or other
document executed by the Company and filed in any jurisdiction in order to
qualify the Securities under the securities laws thereof or filed with the
Commission, (ii) the omission or alleged omission to state in such document a
material fact required to be stated in it or necessary to make the statements in
it not misleading or (iii) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Securities or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, liability, expense or damage arising
out of or based upon matters covered by clause (i) or (ii) above (provided that
the Company shall not be liable under this clause (iii) to the extent it is
finally judicially determined by a court of competent jurisdiction that such
loss, claim, liability, expense or damage resulted directly from any such acts
or failures to act undertaken or omitted to be taken by such Underwriter through
its gross negligence or willful misconduct); provided that the
17
<PAGE> 19
Company will not be liable to the extent that such loss, claim, liability,
expense or damage (A) arises from the sale of the Securities in the public
offering to any person by an Underwriter and is based on an untrue statement or
omission or alleged untrue statement or omission made in reliance on and in
conformity with information relating to any Underwriter furnished in writing to
the Company by such 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 Securities to the person alleging such loss, claim, liability,
expense or damage without sending or giving, at or prior to the written
confirmation of such sale, a copy of the Prospectus (as then amended or
supplemented) if the Company had previously furnished copies thereof to the
Underwriters within a reasonable amount of time prior to such sale or such
confirmation, and the Underwriters failed to deliver the corrected Prospectus,
if required by law to have so delivered it and if delivered would have been a
complete defense against the person asserting such loss, claim, liability,
expense or damage. This indemnity agreement will be in addition to any liability
that the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signs the Registration Statement to
the same extent as the foregoing indemnity from the Company to each Underwriter,
but only insofar as losses, claims, liabilities, expenses or damages (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 or on behalf of such 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 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
18
<PAGE> 20
(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
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
19
<PAGE> 21
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 Securities and payment therefor or (iii) any termination of
this Agreement.
8. TERMINATION. The Underwriters shall have the right, by giving
notice as hereinafter specified at any time at or prior to the Closing Date, to
terminate this Agreement if (i) the Company shall have failed, refused or been
unable, at or prior to the Closing Date, to perform any agreement on its part to
be performed hereunder, (ii) any other condition of the Underwriters'
obligations hereunder is not fulfilled, (iii) trading on the New York Stock
Exchange shall have been wholly suspended, (iv) minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for securities shall
have been required, on the New York Stock Exchange by such exchange or by order
of the Commission or any other governmental authority having jurisdiction, (v) a
banking moratorium shall have been declared by Federal or New York authorities,
or (vi) any material adverse change in the financial or securities markets in
the United States or in political, financial or economic conditions in the
United States, any outbreak or material escalation of hostilities in which the
United States is involved, a declaration of war by Congress, any other
substantial national or international calamity or any other event or occurrence
of a similar character shall have occurred since the execution of this Agreement
that, in your judgment, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Securities. Any such termination
shall be without liability of any party to any other party with respect to
Securities not purchased by reason of such termination except that the
provisions of Section 5(j) (regarding costs and expenses) and Section
20
<PAGE> 22
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 Securities which it or
they have agreed to purchase hereunder, and the aggregate principal amount of
Securities which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase is not more than one-tenth of the aggregate principal
amount of the Securities, the other Underwriters shall be obligated, severally,
to purchase the Securities which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase, in the proportions which the aggregate
principal amount of Securities which they have respectively agreed to purchase
pursuant to Section 2 bears to the aggregate principal amount of Securities
which all such non-defaulting Underwriters have so agreed to purchase, or in
such other proportions as the non-defaulting Underwriters may specify; provided
that in no event shall the maximum aggregate principal amount of Securities
which any Underwriter has become obligated to purchase pursuant to Section 2 be
increased pursuant to this Section 9 by more than one-ninth of the aggregate
principal amount of Securities agreed to be purchased by such Underwriter
without the prior written consent of such Underwriter. If any Underwriter or
Underwriters shall fail or refuse to purchase any Securities and the aggregate
principal amount of Securities which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase exceeds one-tenth of the aggregate
principal amount of the Securities and arrangements satisfactory to the
Underwriters and the Company for the purchase of such Securities are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company for the
purchase or sale of any Securities under this Agreement. In any such case either
the non-defaulting Underwriters or the Company shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. Any action taken
pursuant to this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. 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 Underwriters, 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 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
Securities from any of the several Underwriters.
21
<PAGE> 23
(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 Securities hereunder.
(d) ACTIONS BY UNDERWRITERS. Any action required or permitted
to be taken by the Underwriters 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]
22
<PAGE> 24
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,
AVALON BAY COMMUNITIES, INC.
By: /s/ Thomas J. Sargeant
-------------------------------
Thomas J. Sargeant
Chief Financial Officer
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
FIRST UNION CAPITAL MARKETS, A DIVISION
OF WHEAT FIRST SECURITIES, INC.
J.P. MORGAN SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: PAINEWEBBER INCORPORATED
By: /s/ Frederick T. Caven, Jr.
------------------------------------
Frederick T. Caven, Jr.
Managing Director
S - 1
<PAGE> 25
SCHEDULE A
UNDERWRITERS; IDENTIFICATION OF SECURITIES; PURCHASE PRICE
<TABLE>
<CAPTION>
Aggregate Principal Aggregate Principal
Amount of 2003 Amount of 2006
Notes to be Notes to be
Purchased Purchased
---------------------------------------------
<S> <C> <C>
PaineWebber Incorporated............................... $100,000,000 $37,500,000
First Union Capital Markets............................ 0 37,500,000
J.P. Morgan Securities Inc............................. 0 37,500,000
NationsBanc Montgomery Securities LLC.................. 0 37,500,000
--------------------------------------
Total......................................... $100,000,000 $150,000,000
======================================
</TABLE>
Title of Securities: 6.50% Senior Notes due 2003 (the "2003 Notes")
- ------------------- 6.80% Senior Notes due 2006 (the "2006 Notes")
Aggregate principal amount: 2003 Notes: $100,000,000
2006 Notes: $150,000,000
Maturity Date: 2003 Notes: July 15, 2003
- ------------- 2006 Notes: July 15, 2006
Interest Rate: 2003 Notes: 6.500% per annum from July 7, 1998
- ------------- 2006 Notes: 6.800% per annum from July 7, 1998
Coupon Payment Dates: January 15 and July 15
- --------------------
Price to Public: 2003 Notes: 99.719%
- --------------- 2006 Notes: 99.723%
Schedule A - Page 1
<PAGE> 26
Underwriting Discount: 2003 Notes: 0.550%
- --------------------- 2006 Notes: 0.625%
Net Price to Company: 2003 Notes: 99.169%
- -------------------- 2006 Notes: 99.098%
Purchase Price to be paid
- -------------------------
to the Company: 2003 Notes: $ 99,169,000
-------------- 2006 Notes: 148,647,000
------------
total: $247,816,000
============
Closing Date and Time: Tuesday, July 7, 1998, 9:45 a.m.
- --------------------- (New York City time)
Closing Location: Offices of Goodwin, Procter & Hoar LLP
- ---------------- Exchange Place, Boston MA 02109
Schedule A - Page 2
<PAGE> 27
SCHEDULE B
INFORMATION IN PRELIMINARY PROSPECTUS
AND PROSPECTUS FURNISHED BY THE UNDERWRITERS
The following information appearing in the Preliminary Prospectus, if
any, and the Prospectus has been furnished by the Underwriters in writing
specifically for use in the preparation of such Preliminary Prospectus and the
Prospectus:
1. The legend on the inside front cover page (concerning
stabilization and other matters); and
2. The following information under the heading "Underwriting:"
a. the information appearing in the table following the
first paragraph;
b. the information in the second full paragraph
(regarding the concession and reallowance, among
other matters);
c. the information in the third full paragraph
(regarding market making, among other matters); and
d. the information in the eighth full paragraph
(regarding transactions among the Company and
affiliates of certain Underwriters, among other
matters).
Schedule B - Page 1
<PAGE> 28
SCHEDULE C
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
AVB Transfer of
LIMITED PARTNERSHIP/LIMITED LIABILITY Ownership Interests or Foreign
COMPANY/JOINT VENTURE INTEREST Interest Formation State Qualification
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Falkland Partners, a general partnership*.... 50% 7/1/85 MD
4100 Massachusetts Avenue Associates L.P..... 100% 6/21/94 DOC
Town Run Associates*......................... 49% 11/3/94 NJ
Town Grove Limited Liability Company......... 49% 12/27/94 CT
Town Close Associates L.P.................... 86.5% 4/10/92 CT
Avalon Lake Arbor Associates L.P............. 100% 8/4/95 MD
Avalon Decoverly Associates L.P.............. 100% 8/11/95 VA MD
Smithtown Galleria Associates L.P............ 100% 7/25/91 CT NY
Avalon Fairway Hills I Associates, a
general partnership*......................... 100% 8/8/96 MD
Avalon Fairway Hills II Associates, a
general partnership*......................... 100% 8/8/96 MD
Bronxville West Limited Liability Company.... 60% 10/8/96 CT NY
Avalon Ballston II Limited Partnership....... 99% 1/13/97 DE MD, VA
Avalon DownREIT V Limited Partnership........ 99% 11/7/97 DE
San Francisco Bay Partners II, LTD........... 94% 7/2/84 CA
Toyon Road San Jose Partners, L.P............ 100% 3/9/94 CA
San Francisco Bay Partners III, L.P.......... 100% 3/10/94 CA
Foxchase Drive San Jose Partners II, L.P..... 100% 3/9/94 CA
Bay Countrybrook L.P......................... 99% 6/12/96 DE OR
Bay Rincon, L.P.............................. 5/16/97 CA
Bay Pacific Northwest, L.P................... 99% 8/29/97 DE WA
Avalon Bay Devonshire LLC.................... 99% 5/20/98 MN
Avalon Bay Edinburgh LLC..................... 99% 5/20/98 MN
Avalon Bay BFG L. P. ........................ 100% 5/21/98 MA
</TABLE>
- ----------------------
* A subsidiary of the Company but not included within the defined term
"Subsidiary" for purposes of this Agreement.
<PAGE> 29
<TABLE>
<CAPTION>
AVB Transfer of
CORPORATE SUBSIDIARIES Ownership Interests or Foreign
Interest Formation State Qualification
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bay Asset Group, Inc......................... 100% 3/17/94 MD CA
Bay Waterford, Inc........................... 100% 3/17/94 MD CA
Bay Development Partners, Inc................ 100% 3/17/94 MD CA
Bay GP, Inc.................................. 100% 3/17/94 MD CA
Avalon Town Green II, Inc.................... 100% 8/24/93 MD NY
Avalon Chase Ridge, Inc...................... 100% 10/27/93 MD
Avalon Chase Glen, Inc....................... 100% 10/27/93 MD
Avalon Chase Grove, Inc...................... 100% 3/18/94 MD
Avalon Chase Hampton II, Inc................. 100% 10/27/93 MD VA
Avalon Chase Heritage, Inc................... 100% 10/27/93 MD VA
Avalon Chase Lea, Inc........................ 100% 10/27/93 MD
Avalon Town Meadows, Inc..................... 100% 5/27/94 MD MA
Lexington Ridge-Avalon, Inc.................. 100% 10/27/93 MD MA
Avalon Town View, Inc........................ 100% 10/27/93 MD NY
Avalon Development Services, Inc............. 100% 11/24/97 MD WA,OR
Avalon 4100 Mass. Avenue, Inc................ 100% 6/15/94 MD DOC
Town Cove Jersey City Urban Renewal, Inc..... 100% 2/2/94 NJ
Town Cove II Jersey City Urban Renewal, Inc.. 100% 4/16/96 NJ
Avalon Transactions, Inc..................... 100% 12/27/94 CT
Avalon Decoverly, Inc........................ 100% 3/8/95 MD
Avalon Collateral, Inc....................... 100% 3/1/96 MD VA,NJ
Avalon Lake Arbor, Inc....................... 100% 7/14/95 MD
Avalon Fairway II, Inc....................... 100% 6/27/97 MD
Avalon Commons, Inc.......................... 100% 2/1/96 MD NY
Avalon Ballston II, Inc...................... 100% 11/1/96 MD VA
Avalon DownREIT V, Inc....................... 100% 11/7/97 MD IL,IN,MN,
MO,OH
Avalon Oaks, Inc............................. 100% 9/4/97 MD MA
Avalon BFG, Inc.............................. 100% 5/14/98 MD MA
</TABLE>
<PAGE> 1
EXHIBIT 4.2
------------------------------------------------------------------------
AVALON BAY COMMUNITIES, INC.
ISSUER
to
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
-------------------------
Second Supplemental Indenture
Dated as of July 7, 1998
-------------------------
$100,000,000
of
6.50% Senior Notes due 2003
$150,000,000
of
6.80% Senior Notes due 2006
------------------------------------------------------------------------
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE, dated as of July 7, 1998 (the
"Supplemental Indenture"), between AVALON BAY COMMUNITIES, INC., a corporation
duly organized and existing under the laws of the State of Maryland (formerly
known as Bay Apartment Communities, Inc. and hereinafter called the "Company"),
and STATE STREET BANK AND TRUST COMPANY, a trust company organized and existing
under the laws of The Commonwealth of Massachusetts, as Trustee (herein called
the "Trustee").
RECITALS OF THE COMPANY
The Company has heretofore delivered to the Trustee an Indenture dated
as of January 16, 1998 (the "Senior Indenture"), and a First Supplemental
Indenture dated as of January 20, 1998, copies of which have been filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
as exhibits to the Company's Registration Statement on Form S-3, as amended
(File No. 333-41511), providing for the issuance from time to time of Senior
Debt Securities of the Company (the "Securities").
Section 301 of the Senior Indenture provides for various matters with
respect to any series of Securities issued under the Senior Indenture to be
established in an indenture supplemental to the Senior Indenture.
Section 901(7) of the Senior Indenture provides for the Company and the
Trustee to enter into an indenture supplemental to the Senior Indenture to
establish the form or terms of Securities of any series as provided by Sections
201 and 301 of the Senior Indenture.
The Board of Directors of the Company has duly adopted resolutions
authorizing the Company to execute and deliver this Supplemental Indenture.
All the conditions and requirements necessary to make this Supplemental
Indenture, when duly executed and delivered, a valid and binding agreement in
accordance with its terms and for the purposes herein expressed, have been
performed and fulfilled.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of each of
the series of Securities provided for herein by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Notes (as herein defined) or for either thereof, as follows:
<PAGE> 3
ARTICLE ONE - RELATION TO SENIOR INDENTURE; DEFINITIONS.
SECTION 1.1. RELATION TO SENIOR INDENTURE. This Supplemental
Indenture constitutes an integral part of the Senior Indenture.
SECTION 1.2. DEFINITIONS. For all purposes of this Supplemental
Indenture, except as otherwise expressly provided for or unless the context
otherwise requires:
(1) Capitalized terms used but not defined herein shall have
the respective meanings assigned to them in the Senior Indenture;
(2) All references herein to Articles and Sections, unless
otherwise specified, refer to the corresponding Articles and Sections of this
Supplemental Indenture; and
(3) In the event that any of the following definitions differs
from its respective definition set forth in the Senior Indenture, the definition
set forth herein shall control.
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person becomes a Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary or such acquisition. Acquired Indebtedness shall be
deemed to be incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Subsidiary.
"Annual Service Charge" for any period means the maximum
amount which is payable during such period for interest on, and original issue
discount of, Indebtedness of the Company and its Subsidiaries and the amount of
dividends which are payable during such period in respect of any Disqualified
Stock.
"Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions in the
City of New York or in the City of Chicago are authorized or required by law,
regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any capital
stock (including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
<PAGE> 4
"Consolidated Income Available for Debt Service" for any
period means Earnings from Operations of the Company and its Subsidiaries, plus
amounts which have been deducted, and minus amounts which have been added, for
the following (without duplication): (i) interest on Indebtedness of the Company
and its Subsidiaries, (ii) provision for taxes of the Company and its
Subsidiaries based on income, (iii) amortization of debt discount and other
deferred financing costs, (iv) provisions for gains and losses on properties and
property depreciation and amortization, (v) the effect of any noncash charge
resulting from a change in accounting principles in determining Earnings from
Operations for such period and (vi) amortization of deferred charges.
"Corporate Trust Office" means the office of the Trustee at
which, at any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Two International
Place, Boston, Massachusetts 02110 and, for purposes of the Place of Payment
provisions of Sections 305 and 1002 of the Senior Indenture, is located at the
office of State Street Bank and Trust Company, N.A., 61 Broadway, New York, New
York 10005.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock of such Person which by the terms of such Capital Stock (or by the
terms of any security into which it is convertible or for which it is
exchangeable or exercisable), upon the happening of any event or otherwise (i)
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise (other than Capital Stock which is redeemable solely in exchange for
common stock), (ii) is convertible into or exchangeable or exercisable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part (other than Capital Stock which is
redeemable solely in exchange for Capital Stock which is not Disqualified
Stock), in each case on or prior to the Stated Maturity of the Notes.
"Earnings from Operations" for any period means net earnings
excluding gains and losses on sales of investments, extraordinary items, and
property valuation losses, net as reflected in the financial statements of the
Company and its Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or
security interest of any kind.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder by the Commission.
"GAAP" means generally accepted accounting principles as used
in the United States applied on a consistent basis as in effect from time to
time; provided that solely for purposes of any calculation required by the
financial covenants contained
<PAGE> 5
herein, "GAAP" shall mean generally accepted accounting principles as used in
the United States on the date hereof, applied on a consistent basis.
"Indebtedness" of the Company or any Subsidiary means, without
duplication, any indebtedness of the Company or any Subsidiary, whether or not
contingent, in respect of (i) borrowed money or evidenced by bonds, notes,
debentures or similar instruments, (ii) indebtedness for borrowed money secured
by any Encumbrance existing on property owned by the Company or any Subsidiary,
(iii) the reimbursement obligations, contingent or otherwise, in connection with
any letters of credit actually issued (other than letters of credit issued to
provide credit enhancement or support with respect to other indebtedness of the
Company or any Subsidiary otherwise reflected as Indebtedness hereunder) or
amounts representing the balance deferred and unpaid of the purchase price of
any property or services, except any such balance that constitutes an accrued
expense or trade payable, or all conditional sale obligations or obligations
under any title retention agreement, (iv) the principal amount of all
obligations of the Company or any Subsidiary with respect to redemption,
repayment or other repurchase of any Disqualified Stock, (v) any lease of
property by the Company or any Subsidiary as lessee which is reflected on the
Company's consolidated balance sheet as a capitalized lease in accordance with
GAAP, or (vi) interest rate swaps, caps or similar agreements and foreign
exchange contracts, currency swaps or similar agreements, to the extent, in the
case of items of indebtedness under (i) through (iii) above, that any such items
(other than letters of credit) would appear as a liability on the Company's
consolidated balance sheet in accordance with GAAP, and also includes, to the
extent not otherwise included, any obligation by the Company or any Subsidiary
to be liable for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), Indebtedness of
another Person (other than the Company or any Subsidiary) (it being understood
that Indebtedness shall be deemed to be incurred by the Company or any
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any 2003 Note or 2006 Note, the excess, if
any, of (i) the aggregate present value as of the date of such redemption or
accelerated payment of each dollar of principal being redeemed or paid and the
amount of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of such dollar if
such redemption or accelerated payment had not been made, determined by
discounting, on a semi-annual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date such
notice of Redemption is given or declaration of acceleration is made) from the
respective dates on which such principal and interest would have been payable if
such redemption or accelerated payment had not been made, over (ii) the
aggregate principal amount of the Notes being redeemed or paid.
<PAGE> 6
"Notes" has the meaning specified in Section 2.1 hereof.
"Reinvestment Rate" means .25% (twenty-five one hundredths of
one percent) plus the arithmetic mean of the yields under the respective
headings "This Week" and "Last Week" published in the Statistical Release under
the caption "Treasury Constant Maturities" for the maturity (rounded to the
nearest month) corresponding to the remaining life to maturity, as of the
payment date of the principal being redeemed or paid. If no maturity exactly
corresponds to such maturity, yields for the two published maturities most
closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For such purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination of the
Make-Whole Amount, then such other reasonably comparable index which shall be
designated by the Company.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership or other entity of which a
majority of (i) the voting power of the voting equity securities or (ii) the
outstanding equity interests are owned, directly or indirectly, by such Person.
For the purposes of this definition, "voting equity securities" means equity
securities having voting power for the election of directors, whether at all
times or only so long as no senior class of security has such voting power by
reason of any contingency.
"Total Assets" as of any date means the sum of (i) the
Undepreciated Real Estate Assets and (ii) all other assets of the Company and
its Subsidiaries determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Total Unencumbered Assets" means the sum of (i) those
Undepreciated Real Estate Assets not subject to an Encumbrance for borrowed
money and (ii) all other assets of the Company and its Subsidiaries not subject
to an Encumbrance for borrowed money, determined in accordance with GAAP (but
excluding accounts receivable and intangibles).
"2003 Notes" has the meaning specified in Section 2.1 hereof.
<PAGE> 7
"2006 Notes" has the meaning specified in Section 2.1 hereof.
"Undepreciated Real Estate Assets" as of any date means the
cost (original cost plus capital improvements) of real estate assets of the
Company and its Subsidiaries on such date, before depreciation and amortization,
determined on a consolidated basis in accordance with GAAP.
"Unsecured Indebtedness" means Indebtedness which is not
secured by any Encumbrance upon any of the properties of the Company or any
Subsidiary.
ARTICLE TWO - THE SERIES OF NOTES.
The following provisions of this Article Two are made pursuant to
Section 301 of the Senior Indenture in order to establish and set forth the
terms of the series of Securities described in Section 2.1.
SECTION 2.1. TITLE OF THE SECURITIES. There shall be a series of
Securities designated the "6.50% Senior Notes due 2003" (the "2003 Notes") and a
series of Securities designated the 6.80% Senior Notes due 2006" (the "2006
Notes" and, together with the 2003 Notes, the "Notes").
SECTION 2.2. LIMITATION ON AGGREGATE PRINCIPAL AMOUNT.
(1) The aggregate principal amount of the 2003 Notes shall be
limited to $100,000,000, and, except as provided in this Section and in Section
306 of the Senior Indenture, the Company shall not execute and the Trustee shall
not authenticate or deliver 2003 Notes in excess of such aggregate principal
amount.
(2) The aggregate principal amount of the 2006 Notes shall be
limited to $150,000,000, and, except as provided in this Section and in Section
306 of the Senior Indenture, the Company shall not execute and the Trustee shall
not authenticate or deliver 2006 Notes in excess of such aggregate principal
amount.
Nothing contained in this Section 2.2 or elsewhere in this Supplemental
Indenture, or in the Notes, is intended to or shall limit execution by the
Company or authentication or delivery by the Trustee of Notes under the
circumstances contemplated by Sections 303, 304, 305, 306, 906, 1107 and 1305 of
the Senior Indenture.
SECTION 2.3. INTEREST AND INTEREST RATES; MATURITY DATE OF NOTES.
The 2003 Notes will bear interest at a rate of 6.50% per annum and the 2006
Notes will bear interest at a rate of 6.80% per annum, in each case from July 7,
1998 or from the
<PAGE> 8
immediately preceding Interest Payment Date to which interest has been paid or
duly provided for, payable semi-annually in arrears on January 15 and July 15 of
each year, commencing January 15, 1999 (each, an "Interest Payment Date"), to
the Person in whose name such Note is registered at the close of business on
December 31 or June 30 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date (each, a "Regular Record Date"). Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. The interest so payable on any Note which is not punctually paid or duly
provided for on any Interest Payment Date shall forthwith cease to be payable to
the Person in whose name such Note is registered on the relevant Regular Record
Date, and such defaulted interest shall instead be payable to the Person in
whose name such Note is registered on the Special Record Date or other specified
date determined in accordance with the Senior Indenture.
If any Interest Payment Date or Maturity falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as if
it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or Maturity, as the case may be.
The 2003 Notes will mature on July 15, 2003 and the 2006 Notes will
mature on July 15, 2006.
SECTION 2.4. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS.
(1) The Company will not, and will not permit any Subsidiary
to, incur any Indebtedness if, immediately after giving effect to the incurrence
of such additional Indebtedness and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Indebtedness of the Company and
its Subsidiaries on a consolidated basis determined in accordance with GAAP is
greater than 60% of the sum of (without duplication) (i) the Total Assets of the
Company and its Subsidiaries as of the end of the calendar quarter covered in
the Company's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to the incurrence
of such additional Indebtedness and (ii) the purchase price of any real estate
assets or mortgages receivable acquired, and the amount of any securities
offering proceeds received (to the extent that such proceeds were not used to
acquire real estate assets or mortgages receivable or used to reduce
Indebtedness), by the Company or any Subsidiary since the end of such calendar
quarter, including those proceeds obtained in connection with the incurrence of
such additional Indebtedness.
(2) In addition to the limitation set forth in subsection (1)
of this Section 2.4, the Company will not, and will not permit any Subsidiary
to, incur any
<PAGE> 9
Indebtedness if the ratio of Consolidated Income Available for Debt Service to
the Annual Service Charge for the four consecutive fiscal quarters most recently
ended prior to the date on which such additional Indebtedness is to be incurred
shall have been less than 1.5:1, on a pro forma basis after giving effect
thereto and to the application of the proceeds therefrom, and calculated on the
assumption that (i) such Indebtedness and any other Indebtedness incurred by the
Company and its Subsidiaries since the first day of such four-quarter period and
the application of the proceeds therefrom, including to refinance other
Indebtedness, had occurred at the beginning of such period; (ii) the repayment
or retirement of any other Indebtedness by the Company and its Subsidiaries
since the first day of such four-quarter period had been repaid or retired at
the beginning of such period (except that, in making such computation, the
amount of Indebtedness under any revolving credit facility shall be computed
based upon the average daily balance of such Indebtedness during such period);
(iii) in the case of Acquired Indebtedness or Indebtedness incurred in
connection with any acquisition since the first day of such four-quarter period,
the related acquisition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation; and (iv) in the case of any acquisition or disposition by
the Company or its Subsidiaries of any asset or group of assets since the first
day of such four-quarter period, whether by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related repayment
of Indebtedness had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition or disposition being
included in such pro forma calculation.
(3) In addition to the limitations set forth in subsections
(1) and (2) of this Section 2.4, the Company will not, and will not permit any
Subsidiary to, incur any Indebtedness secured by any Encumbrance upon any of the
property of the Company or any Subsidiary if, immediately after giving effect to
the incurrence of such additional Indebtedness and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Indebtedness
of the Company and its Subsidiaries on a consolidated basis which is secured by
any Encumbrance on property of the Company or any Subsidiary is greater than 40%
of the sum of (without duplication) (i) the Total Assets of the Company and its
Subsidiaries as of the end of the calendar quarter covered in the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
most recently filed with the Commission (or, if such filing is not permitted
under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Indebtedness and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Indebtedness), by
the Company or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such additional
Indebtedness.
<PAGE> 10
(4) The Company and its Subsidiaries may not at any time own
Total Unencumbered Assets equal to less than 150% of the aggregate outstanding
principal amount of the Unsecured Indebtedness of the Company and its
Subsidiaries on a consolidated basis.
(5) For purposes of this Section 2.4, Indebtedness shall be
deemed to be "incurred" by the Company or a Subsidiary whenever the Company or
such Subsidiary shall create, assume, guarantee or otherwise become liable in
respect thereof.
SECTION 2.5. REDEMPTION. The Notes may be redeemed at any time at
the option of the Company, in whole or in part, at a redemption price equal to
the sum of (i) the principal amount of the Notes being redeemed plus accrued
interest thereon to the Redemption Date and (ii) the Make-Whole Amount, if any,
with respect to such Notes (the "Redemption Price").
SECTION 2.6. PLACES OF PAYMENT. The Places of Payment where the
Notes may be presented or surrendered for payment, where the Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to and upon the Company in respect of the Notes and the Senior Indenture
may be served shall be in (i) the Borough of Manhattan, The City of New York,
New York, and the office or agency for such purpose shall initially be located
at the office of State Street Bank and Trust Company, 61 Broadway, New York, New
York 10005, and (ii) the City of Boston, Massachusetts and the office or agency
for such purpose shall initially be located at the Corporate Trust Office.
SECTION 2.7. METHOD OF PAYMENT. Payment of the principal of and
interest on the Notes will be made at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York
(which shall initially be an office or agency of the Trustee), in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company, payments of principal and interest on the Notes (other
than payments of principal and interest due at Maturity) may be made (i) by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register or (ii) by wire transfer to an account
maintained by the Person entitled thereto located within the United States.
SECTION 2.8. CURRENCY. Principal and interest on the Notes shall
be payable in U.S. dollars.
SECTION 2.9. REGISTERED SECURITIES; GLOBAL FORM. The Notes shall
be issuable and transferable in fully registered form as Registered Securities,
without coupons. The 2003 Notes and the 2006 Notes shall be issued in the form
of one or
<PAGE> 11
more permanent Global Securities. The depository for the Notes shall be The
Depository Trust Company ("DTC"). The Notes shall not be issuable in definitive
form except as provided in Section 305 of the Senior Indenture.
SECTION 2.10. FORM OF NOTES. The 2003 Notes shall be substantially
in the form attached hereto as EXHIBIT A. The 2006 Notes shall be substantially
in the form attached hereto as EXHIBIT B.
SECTION 2.11. REGISTRAR AND PAYING AGENT. The Trustee shall
initially serve as Registrar and Paying Agent for the Notes.
SECTION 2.12. DEFEASANCE. The provisions of Sections 1402 and 1403
of the Senior Indenture, together with the other provisions of Article Fourteen
of the Senior Indenture, shall be applicable to the Notes. The provisions of
Section 1403 of the Senior Indenture shall apply to the covenants set forth in
Sections 2.4 and 2.15 of this Supplemental Indenture and to those covenants
specified in Section 1403 of the Senior Indenture.
SECTION 2.13. EVENTS OF DEFAULT. The provisions of clause (5) of
Section 501 of the Senior Indenture as applicable with respect to the Notes
shall be deemed to be amended and restated in their entirety to read as follows:
(5) default under any bond, debenture, note, mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company (or by
any Subsidiary, the repayment of which the Company has guaranteed or for which
the Company is directly responsible or liable as obligor or guarantor), having
an aggregate principal amount outstanding of at least $10,000,000, whether such
indebtedness now exists or shall hereafter be created, which default shall have
resulted in such indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable, without
such indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days after there shall have been
given written notice, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 10% in
principal amount of the Outstanding Securities of that series a written notice
specifying such default and requiring the Company to cause such indebtedness to
be discharged or cause such acceleration to be rescinded or annulled and stating
that such notice is a "Notice of Default" hereunder; provided, however, that
such a default on indebtedness which constitutes tax-exempt financing having an
aggregate principal amount outstanding not exceeding $25,000,000 that results
solely from a failure of an entity providing credit support for such
indebtedness to honor a demand for payment on a letter of credit shall not
constitute an Event of Default.
<PAGE> 12
SECTION 2.14. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
The provisions of the first paragraph of Section 502 of the Senior Indenture as
applicable with respect to the notes shall be deemed to be amended and restated
in their entirety to read as follows:
If an Event of Default with respect to Securities of any
series at the time Outstanding occurs and is continuing, then in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
Securities of that series are Original Issue Discount Securities or Indexed
Securities, such portion of the principal as may be specified in the terms
thereof) of, and the Make-Whole Amount, if any, on, all the Securities of that
series to be due and payable immediately, by a notice in writing to the Company
(and to the Trustee if given by the Holders), and upon any such declaration such
principal or specified portion thereof shall become immediately due and payable.
If an Event of Default with respect to the Securities of any series set forth in
Section 501(6) of the Senior Indenture occurs and is continuing, then in every
such case all the Securities of that series shall become immediately due and
payable, without notice to the Company, at the principal amount thereof (or, if
any Securities are Original Issue Discount Securities or Indexed Securities,
such portion of the principal as may be specified in the terms thereof) plus
accrued interest to the date the Securities of that series are paid, plus the
Make-Whole Amount, if any, on the Securities of that series.
SECTION 2.15. PROVISION OF FINANCIAL INFORMATION. Whether or not
the Company is subject to Section 13 or 15(d) of the Exchange Act, the Company
will, to the extent permitted under the Exchange Act, file with the Commission
the annual reports, quarterly reports and other documents which the Company
would have been required to file with the Commission pursuant to such Section 13
or 15(d) if the Company were so subject, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates") by
which the Company would have been required so to file such documents if the
Company were so subject.
The Company will also in any event (x) within 15 days of each Required
Filing Date (i) if the Company is not then subject to Section 13 or 15(d) of the
Exchange Act, transmit by mail to all Holders, as their names and addresses
appear in the Security Register, without cost to such Holders, copies of the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act if the Company were subject to such Sections and (ii) file
with the Trustee copies of annual reports, quarterly reports and other documents
which the Company is required to file with the Commission or would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Company were subject to such Sections and (y) supply,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, copies of such documents to any prospective Holder.
<PAGE> 13
The Trustee shall not be required to examine any of the reports and
other documents filed therewith pursuant to the provisions of this Section 2.15
or Section 7.03 of the Senior Indenture in order to determine whether the
Company is in compliance with the provisions of Section 2.4 of this Supplemental
Indenture.
SECTION 2.16. WAIVER OF CERTAIN COVENANTS. Notwithstanding the
provisions of Section 1009 of the Senior Indenture, the Company may omit in any
particular instance to comply with any term, provision or condition set forth in
Sections 1004 to 1008, inclusive, of the Senior Indenture, with Sections 2.4 and
2.15 of this Supplemental Indenture and with any other term, provision or
condition with respect to the Notes (except any such term, provision or
condition which could not be amended without the consent of all Holders of the
Notes or such series thereof, as applicable), if before or after the time for
such compliance the Holders of at least a majority in principal amount of all
outstanding Notes, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such covenant or condition. Except
to the extent so expressly waived, and until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force and effect.
ARTICLE THREE - MISCELLANEOUS PROVISIONS.
SECTION 3.1. RATIFICATION OF SENIOR INDENTURE. Except as expressly
modified or amended hereby, the Senior Indenture continues in full force and
effect and is in all respects confirmed and preserved.
SECTION 3.2. GOVERNING LAW. This Supplemental Indenture and the
Notes shall be governed by and construed in accordance with the laws of the
State of New York. This Supplemental Indenture is subject to the provisions of
the Trust Indenture Act of 1939, as amended, and shall, to the extent
applicable, be governed by such provisions.
SECTION 3.3. COUNTERPARTS. This Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
[Remainder of Page Intentionally Left Blank.]
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed by their respective officers hereunto duly
authorized, all as of the day and year first written above.
AVALON BAY COMMUNITIES, INC.
By: /s/ Richard L. Michaux
----------------------------------------
Name: Richard L. Michaux
Title: Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert J. Dunn
----------------------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 15
EXHIBIT A TO SUPPLEMENTAL INDENTURE
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 55 WATER STREET, NEW
YORK, NEW YORK, TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING SET FORTH IN THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF DTC OR A NOMINEE OF
DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A
NOMINEE OF DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ITS NOMINEE TO A SUCCESSOR
DEPOSITORY OR ITS NOMINEE.
AVALON BAY COMMUNITIES, INC.
6.50% SENIOR NOTE DUE 2003
Registered No. 1 CUSIP No.: 053373 AA 4
PRINCIPAL AMOUNT $100,000,000
AVALON BAY COMMUNITIES, INC., a corporation duly organized and existing
under the laws of the State of Maryland (herein referred to as the "Company"
which term shall include any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of $100,000,000
on July 15, 2003 and to pay interest on the outstanding principal amount thereon
from July 7, 1998, or from the immediately preceding Interest Payment Date to
which interest has been paid or duly provided for, semi-annually in arrears on
January 15 and July 15 in each year, commencing January 15, 1999, at the rate of
6.50% per annum, until the entire principal hereof is paid or made
<PAGE> 16
available for payment. The interest so payable and punctually paid or duly
provided for on any Interest Payment Date will, as provided in the Indenture, be
paid to the Holder in whose name this Security is registered at the close of
business on the Regular Record Date for such interest which shall be December 31
or June 30 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and may either be paid to the Holder in whose name this Security is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to the Holder of this Security not more than 15 days and not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which this Security may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture. Payment of the
principal of and interest on this Security will be made at the office or agency
maintained for that purpose in the City of New York, New York, or elsewhere as
provided in the Indenture, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; PROVIDED, HOWEVER, that at the option of the Company payments of
principal and interest on the Notes (other than payments of principal and
interest due at Maturity) may be made (i) by check mailed to the address of the
Holder entitled thereto as such address shall appear in the Security Register or
(ii) by wire transfer to an account of the Holder entitled thereto located
within the United States.
Securities of this series are one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of January 16, 1998,
as supplemented by the First Supplemental Indenture, dated as of January 20,
1998, and the Second Supplemental Indenture, dated as of July 7, 1998 (as so
supplemented, herein called the "Indenture"), between the Company and State
Street Bank and Trust Company (herein called the "Trustee," which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are authenticated and delivered. This Security is one of
the series designated in the first page hereof, limited in aggregate principal
amount to $100,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, upon notice of not more than 60 nor less than
30 days prior to the Redemption Date, at a redemption price equal to the sum of
(i) the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
<PAGE> 17
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to the Securities shall occur and be
continuing, the principal of the Securities may be declared due and payable in
the manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
written notice to the Trustee of a continuing Event of Default with respect to
the Securities, the Holders of not less than 25% in principal amount of the
Securities of this series at the time outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
the Securities of this series at the time outstanding a direction inconsistent
with such request, and shall have failed to institute any such proceeding, for
60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of all
outstanding Securities. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of each
series at the time outstanding, on behalf of the Holders of all Securities of
such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and
<PAGE> 18
unconditional, to pay the principal of (and Make-Whole Amount, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of
(and Make-Whole Amount, if any) and interest on this Security are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced hereby or thereby, shall be had against any promoter, as such, or
against any past, present or future shareholder, officer or director, as such,
of the Company or of any successor, either directly or through the Company or
any successor, under any rule of law, statute or constitutional provision or by
the enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of this Security by the Holder thereof and as part of the
consideration for the issue of the Securities of this series.
All capitalized terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
<PAGE> 19
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 20
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
<PAGE> 21
IN WITNESS WHEREOF, AVALON BAY COMMUNITIES, INC. has caused this
instrument to be duly executed under its corporate seal.
Dated:
AVALON BAY COMMUNITIES, INC.
By:
----------------------------------------
Name: Richard L. Michaux
Title: Chief Executive Officer
[Corporate Seal]
Attest:
- ---------------------------------------
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
----------------------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 22
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
- -------------------------------
- ------------------------------- ...............................................
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Security of Avalon Bay Communities, Inc. and hereby does irrevocably
constitute and appoint
....................................................................... Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: ................... ...................................................
...................................................
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
================================================================================
<PAGE> 23
EXHIBIT B TO SUPPLEMENTAL INDENTURE
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 55 WATER STREET, NEW
YORK, NEW YORK, TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING SET FORTH IN THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF DTC OR A NOMINEE OF
DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A
NOMINEE OF DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ITS NOMINEE TO A SUCCESSOR
DEPOSITORY OR ITS NOMINEE.
AVALON BAY COMMUNITIES, INC.
6.80% SENIOR NOTE DUE 2006
Registered No. 1 CUSIP No.: 053373 AB 2
PRINCIPAL AMOUNT $150,000,000
AVALON BAY COMMUNITIES, INC., a corporation duly organized and existing
under the laws of the State of Maryland (herein referred to as the "Company"
which term shall include any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of $150,000,000
on July 15, 2006 and to pay interest on the outstanding principal amount thereon
from July 7, 1998, or from the immediately preceding Interest Payment Date to
which interest has been paid or duly provided for,
<PAGE> 24
semi-annually in arrears on January 15 and July 15 in each year, commencing
January 15, 1999, at the rate of 6.80% per annum, until the entire principal
hereof is paid or made available for payment. The interest so payable and
punctually paid or duly provided for on any Interest Payment Date will, as
provided in the Indenture, be paid to the Holder in whose name this Security is
registered at the close of business on the Regular Record Date for such interest
which shall be December 31 or June 30 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may either be paid to the Holder in
whose name this Security is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of this Security not more
than 15 days and not less than 10 days prior to such Special Record Date, or may
be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which this Security may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payment of the principal of and interest on this
Security will be made at the office or agency maintained for that purpose in the
City of New York, New York, or elsewhere as provided in the Indenture, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at
the option of the Company payments of principal and interest on the Notes (other
than payments of principal and interest due at Maturity) may be made (i) by
check mailed to the address of the Holder entitled thereto as such address shall
appear in the Security Register or (ii) by wire transfer to an account of the
Holder entitled thereto located within the United States.
Securities of this series are one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of January 16, 1998,
as supplemented by the First Supplemental Indenture, dated as of January 20,
1998, and the Second Supplemental Indenture, dated as of July 7, 1998 (as so
supplemented, herein called the "Indenture"), between the Company and State
Street Bank and Trust Company (herein called the "Trustee," which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are authenticated and delivered. This Security is one of
the series designated in the first page hereof, limited in aggregate principal
amount to $150,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, upon notice of not more than 60 nor less than
30 days prior to the Redemption Date, at a redemption price equal to the sum of
(i) the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
<PAGE> 25
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to the Securities shall occur and
be continuing, the principal of the Securities may be declared due and payable
in the manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
written notice to the Trustee of a continuing Event of Default with respect to
the Securities, the Holders of not less than 25% in principal amount of the
Securities of this series at the time outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
the Securities of this series at the time outstanding a direction inconsistent
with such request, and shall have failed to institute any such proceeding, for
60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of all
outstanding Securities. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of each
series at the time outstanding, on behalf of the Holders of all Securities of
such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and Make-Whole Amount,
if any) and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
<PAGE> 26
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of
(and Make-Whole Amount, if any) and interest on this Security are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced hereby or thereby, shall be had against any promoter, as such, or
against any past, present or future shareholder, officer or director, as such,
of the Company or of any successor, either directly or through the Company or
any successor, under any rule of law, statute or constitutional provision or by
the enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of this Security by the Holder thereof and as part of the
consideration for the issue of the Securities of this series.
All capitalized terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 27
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
<PAGE> 28
IN WITNESS WHEREOF, AVALON BAY COMMUNITIES, INC. has caused
this instrument to be duly executed under its corporate seal.
Dated:
AVALON BAY COMMUNITIES, INC.
By:
----------------------------------------
Name: Richard L. Michaux
Title: Chief Executive Officer
[Corporate Seal]
Attest:
- -------------------------------------
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
----------------------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 29
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
- -------------------------------
- ------------------------------- ...............................................
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Security of Avalon Bay Communities, Inc. and hereby does irrevocably
constitute and appoint
....................................................................... Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: ................... ...................................................
...................................................
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
================================================================================
<PAGE> 1
EXHIBIT 4.3
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 55 WATER STREET, NEW
YORK, NEW YORK, TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING SET FORTH IN THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF DTC OR A NOMINEE OF
DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A
NOMINEE OF DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ITS NOMINEE TO A SUCCESSOR
DEPOSITORY OR ITS NOMINEE.
AVALON BAY COMMUNITIES, INC.
6.50% SENIOR NOTE DUE 2003
Registered No. 1 CUSIP No.: 053373 AA 4
PRINCIPAL AMOUNT $100,000,000
AVALON BAY COMMUNITIES, INC., a corporation duly organized and existing
under the laws of the State of Maryland (herein referred to as the "Company"
which term shall include any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of $100,000,000
on July 15, 2003 and to pay interest on the outstanding principal amount thereon
from July 7, 1998, or from the immediately preceding Interest Payment Date to
which interest has been paid or duly provided for, semi-annually in arrears on
January 15 and July 15 in each year, commencing January 15, 1999, at the rate of
6.50% per annum, until the entire principal hereof is paid or made
<PAGE> 2
available for payment. The interest so payable and punctually paid or duly
provided for on any Interest Payment Date will, as provided in the Indenture, be
paid to the Holder in whose name this Security is registered at the close of
business on the Regular Record Date for such interest which shall be December 31
or June 30 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and may either be paid to the Holder in whose name this Security is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to the Holder of this Security not more than 15 days and not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which this Security may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture. Payment of the
principal of and interest on this Security will be made at the office or agency
maintained for that purpose in the City of New York, New York, or elsewhere as
provided in the Indenture, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; PROVIDED, HOWEVER, that at the option of the Company payments of
principal and interest on the Notes (other than payments of principal and
interest due at Maturity) may be made (i) by check mailed to the address of the
Holder entitled thereto as such address shall appear in the Security Register or
(ii) by wire transfer to an account of the Holder entitled thereto located
within the United States.
Securities of this series are one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of January 16, 1998,
as supplemented by the First Supplemental Indenture, dated as of January 20,
1998, and the Second Supplemental Indenture, dated as of July 7, 1998 (as so
supplemented, herein called the "Indenture"), between the Company and State
Street Bank and Trust Company (herein called the "Trustee," which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are authenticated and delivered. This Security is one of
the series designated in the first page hereof, limited in aggregate principal
amount to $100,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, upon notice of not more than 60 nor less than
30 days prior to the Redemption Date, at a redemption price equal to the sum of
(i) the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
<PAGE> 3
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to the Securities shall occur and be
continuing, the principal of the Securities may be declared due and payable in
the manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
written notice to the Trustee of a continuing Event of Default with respect to
the Securities, the Holders of not less than 25% in principal amount of the
Securities of this series at the time outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
the Securities of this series at the time outstanding a direction inconsistent
with such request, and shall have failed to institute any such proceeding, for
60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of all
outstanding Securities. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of each
series at the time outstanding, on behalf of the Holders of all Securities of
such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and
<PAGE> 4
unconditional, to pay the principal of (and Make-Whole Amount, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of
(and Make-Whole Amount, if any) and interest on this Security are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced hereby or thereby, shall be had against any promoter, as such, or
against any past, present or future shareholder, officer or director, as such,
of the Company or of any successor, either directly or through the Company or
any successor, under any rule of law, statute or constitutional provision or by
the enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of this Security by the Holder thereof and as part of the
consideration for the issue of the Securities of this series.
All capitalized terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
<PAGE> 5
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 6
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
<PAGE> 7
IN WITNESS WHEREOF, AVALON BAY COMMUNITIES, INC. has caused this
instrument to be duly executed under its corporate seal.
Dated:
AVALON BAY COMMUNITIES, INC.
By: /s/ Richard L. Michaux
----------------------------------------
Name: Richard L. Michaux
Title: Chief Executive Officer
[Corporate Seal]
Attest:
/s/ Mary M. Stafford
- ---------------------------------------
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert J. Dunn
----------------------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 8
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
- -------------------------------
- ------------------------------- ...............................................
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Security of Avalon Bay Communities, Inc. and hereby does irrevocably
constitute and appoint
....................................................................... Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: ................... ...................................................
...................................................
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
================================================================================
<PAGE> 1
EXHIBIT 4.4
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 55 WATER STREET, NEW
YORK, NEW YORK, TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING SET FORTH IN THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF DTC OR A NOMINEE OF
DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A
NOMINEE OF DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ITS NOMINEE TO A SUCCESSOR
DEPOSITORY OR ITS NOMINEE.
AVALON BAY COMMUNITIES, INC.
6.80% SENIOR NOTE DUE 2006
Registered No. 1 CUSIP No.: 053373 AB 2
PRINCIPAL AMOUNT $150,000,000
AVALON BAY COMMUNITIES, INC., a corporation duly organized and existing
under the laws of the State of Maryland (herein referred to as the "Company"
which term shall include any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of $150,000,000
on July 15, 2006 and to pay interest on the outstanding principal amount thereon
from July 7, 1998, or from the immediately preceding Interest Payment Date to
which interest has been paid or duly provided for,
<PAGE> 2
semi-annually in arrears on January 15 and July 15 in each year, commencing
January 15, 1999, at the rate of 6.80% per annum, until the entire principal
hereof is paid or made available for payment. The interest so payable and
punctually paid or duly provided for on any Interest Payment Date will, as
provided in the Indenture, be paid to the Holder in whose name this Security is
registered at the close of business on the Regular Record Date for such interest
which shall be December 31 or June 30 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may either be paid to the Holder in
whose name this Security is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of this Security not more
than 15 days and not less than 10 days prior to such Special Record Date, or may
be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which this Security may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payment of the principal of and interest on this
Security will be made at the office or agency maintained for that purpose in the
City of New York, New York, or elsewhere as provided in the Indenture, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at
the option of the Company payments of principal and interest on the Notes (other
than payments of principal and interest due at Maturity) may be made (i) by
check mailed to the address of the Holder entitled thereto as such address shall
appear in the Security Register or (ii) by wire transfer to an account of the
Holder entitled thereto located within the United States.
Securities of this series are one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of January 16, 1998,
as supplemented by the First Supplemental Indenture, dated as of January 20,
1998, and the Second Supplemental Indenture, dated as of July 7, 1998 (as so
supplemented, herein called the "Indenture"), between the Company and State
Street Bank and Trust Company (herein called the "Trustee," which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are authenticated and delivered. This Security is one of
the series designated in the first page hereof, limited in aggregate principal
amount to $150,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, upon notice of not more than 60 nor less than
30 days prior to the Redemption Date, at a redemption price equal to the sum of
(i) the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
<PAGE> 3
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to the Securities shall occur and
be continuing, the principal of the Securities may be declared due and payable
in the manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
written notice to the Trustee of a continuing Event of Default with respect to
the Securities, the Holders of not less than 25% in principal amount of the
Securities of this series at the time outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
the Securities of this series at the time outstanding a direction inconsistent
with such request, and shall have failed to institute any such proceeding, for
60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of all
outstanding Securities. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of each
series at the time outstanding, on behalf of the Holders of all Securities of
such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and Make-Whole Amount,
if any) and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
<PAGE> 4
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of
(and Make-Whole Amount, if any) and interest on this Security are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced hereby or thereby, shall be had against any promoter, as such, or
against any past, present or future shareholder, officer or director, as such,
of the Company or of any successor, either directly or through the Company or
any successor, under any rule of law, statute or constitutional provision or by
the enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of this Security by the Holder thereof and as part of the
consideration for the issue of the Securities of this series.
All capitalized terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 5
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
<PAGE> 6
IN WITNESS WHEREOF, AVALON BAY COMMUNITIES, INC. has caused
this instrument to be duly executed under its corporate seal.
Dated:
AVALON BAY COMMUNITIES, INC.
By: /s/ Richard L. Michaux
----------------------------------------
Name: Richard L. Michaux
Title: Chief Executive Officer
[Corporate Seal]
Attest:
/s/ Mary M. Stafford
- -------------------------------------
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert J. Dunn
----------------------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 7
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
- -------------------------------
- ------------------------------- ...............................................
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Security of Avalon Bay Communities, Inc. and hereby does irrevocably
constitute and appoint
....................................................................... Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: ................... ...................................................
...................................................
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
================================================================================
