Exhibit 1.3
SALES AGENCY FINANCING
AGREEMENT
Sales Agency Financing Agreement
(this “ Agreement ” ), dated as of
November 5, 2010 between AVALONBAY COMMUNITIES, INC., a
Maryland corporation (the “ Company ” ),
and WELLS FARGO SECURITIES, LLC, a registered broker-dealer
organized under the laws of Delaware ( “ Sales Agent
” ).
W I T N E S S E T H:
WHEREAS, the Company has authorized
and proposes to issue and sell in the manner contemplated by this
Agreement Common Shares (as defined herein) with an aggregate Sales
Price of up to $500,000,000 upon the terms and subject to the
conditions contained herein;
WHEREAS, Sales Agent has been
appointed by the Company as its agent to sell the Common Shares and
agrees to use its commercially reasonable efforts to sell the
Common Shares offered by the Company upon the terms and subject to
the conditions contained herein; and
WHEREAS, the Company has also
entered into sales agency financing agreements (each, an
“ Alternative Sales Agency Agreement ” ),
each dated of even date herewith, with each of Morgan
Stanley & Co. Incorporated and J.P. Morgan Securities LLC
(each, an “ Alternative Sales Agent ” ),
for the issuance and sale from time to time through the Alternative
Sales Agents of Common Shares on the terms set forth in the
Alternative Sales Agency Agreements. This Agreement and the
Alternative Sales Agency Agreements are collectively referred to
herein as the “ Sales Agency Agreements.
” The aggregate number of Common Shares to be
issued and sold pursuant to the Sales Agency Agreements shall not
exceed the Maximum Program Amount (as defined herein).
NOW THEREFORE, in consideration of
the premises, representations, warranties, covenants and agreements
contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01
Certain Definitions . For purposes of this Agreement,
capitalized terms used herein and not otherwise defined shall have
the following respective meanings:
“ Accountants ” has the meaning set
forth in Section 3.07.
“ Actual Sold Amount ” means the
number of Issuance Shares that Sales Agent has sold during the
Selling Period.
“ Affiliate ” of a Person means
another Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first- mentioned Person. The term
“ control ” (including the terms
“ controlling, ” “
controlled by ” and “ under common
control with ” ) means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership
of voting securities, by contract or otherwise.
“ Alternative Sales Agency Agreement
” has the meaning set forth in the
Recitals.
“ Alternative Sales Agents ” has the
meaning set forth in the Recitals.
“ Applicable Time ” means the time of
sale of any Common Shares pursuant to this Agreement.
“ CERCLA ” means the Comprehensive
Environment Response, Compensation and Liability Act of
1980.
“ Closing ” has the meaning set forth
in Section 2.02.
“ Closing Date ” means the date on
which the Closing occurs.
“ Code ” means the Internal Revenue
Code of 1986.
“ Comfort Letter Request Date ” has
the meaning set forth in Section 4.08.
“ Commission ” means the United
States Securities and Exchange Commission.
“ Commitment Period ” means the
period commencing on the date of this Agreement and expiring on the
earliest to occur of (x) the date on which Sales Agent and the
Alternative Sales Agents in the aggregate shall have sold the
Maximum Program Amount pursuant to the Sales Agency Agreements,
(y) the date this Agreement is terminated pursuant to
Article VII and (z) the third anniversary of the date of
this Agreement.
“ Common Shares ” shall mean shares
of the Company ’ s Common Stock issued or issuable
pursuant to the Sales Agency Agreements.
“ Common Stock ” shall mean the
Company ’ s Common Stock, $0.01 par value per
share.
“ Communities ” has the meaning set
forth in Section 3.16.
“ Contracts ” has the meaning set
forth in Section 3.17.
“ Controlling Persons ” has the
meaning set forth in Section 6.01.
“ Enforceability Limitations ” has
the meaning set forth in Section 3.17.
“ Environmental Laws ” has the
meaning set forth in Section 3.27.
“ ERISA ” has the meaning set forth
in Section 3.32.
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“ Exchange Act ” means the Securities
Exchange Act of 1934, as amended.
“ FINRA ” means the Financial
Industry Regulatory Authority, Inc.
“ Floor Price ” means the minimum
price per share set by the Company in the Issuance Notice below
which Sales Agent shall not sell Common Shares during the Selling
Period, which may be adjusted by the Company at any time during the
Selling Period and which in no event shall be less than
$1.00.
“ Hazardous Materials ” has the
meaning set forth in Section 3.28.
“ Indemnified Party ” has the meaning
set forth in Section 6.03.
“ Indemnifying Party ” has the
meaning set forth in Section 6.03.
“ Investment Company Act ” means the
Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.
“ Issuance ” means each occasion the
Company elects to exercise its right to deliver an Issuance Notice
requiring Sales Agent to use its commercially reasonable efforts to
sell the Common Shares as specified in such Issuance Notice,
subject to the terms and conditions of this Agreement.
“ Issuance Amount ” means the
aggregate Sales Price of the Issuance Shares to be sold by Sales
Agent with respect to any Issuance, which may not exceed
$150,000,000 without the prior written consent of Sales Agent,
which may be withheld in Sales Agent ’ s sole
discretion.
“ Issuance Date ” means any Trading
Day during the Commitment Period that an Issuance Notice is deemed
delivered pursuant to Section 2.03(b) hereof.
“ Issuance Notice ” means a written
notice to Sales Agent delivered in accordance with this Agreement
in the form attached hereto as Exhibit A.
“ Issuance Price ” means the Sales
Price less the Selling Commission.
“ Issuance Shares ” means all shares
of Common Stock issued or issuable pursuant to an Issuance that has
occurred or may occur in accordance with the terms and conditions
of this Agreement.
“ Issuance Supplement ” has the
meaning set forth in Section 3.01.
“ Material Adverse Effect ” means a
material adverse effect on the business, assets, operations,
properties, prospects or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole, or any
material adverse effect on the Company ’ s ability to
consummate the transactions contemplated by, or to execute, deliver
and perform its obligations under, this Agreement.
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“ Maximum Program Amount ” means
Common Shares with an aggregate Sales Price of $500,000,000 (or, if
less, the aggregate amount of Common Shares registered under the
Registration Statement).
“ Money Laundering Laws ” has the
meaning set forth in Section 3.42.
“ OFAC ” means the Office of Foreign
Assets Control of the U.S. Department of Treasury.
“ Officer ’ s Certificate Request
Date ” has the meaning set forth in
Section 4.09.
“ Opinion Request Date ” has the
meaning set forth in Section 4.07.
“ Original Registration Statement ”
has the meaning set forth in Section 3.01.
“ Partnership ” has the meaning set
forth in Section 3.28.
“ Person ” means an individual or a
corporation, partnership, limited liability company, trust,
incorporated or unincorporated association, joint venture, joint
stock company, governmental authority or other entity of any
kind.
“ Principal Market ” means the New
York Stock Exchange.
“ Prospectus ” has the meaning set
forth in Section 3.01.
“ Prospectus Supplement ” has the
meaning set forth in Section 5.01(k).
“ Registration Statement ” has the
meaning set forth in Section 3.01.
“ Registration Statement Amendment Date
” has the meaning set forth in
Section 4.07.
“ REIT ” has the meaning set forth in
Section 3.31.
“ Request Date ” means each Comfort
Letter Request Date, each Officer ’ s Certificate
Request Date and each Opinion Request Date.
“ Sales Agency Agreements ” has the
meaning set forth in the Recitals.
“ Sales Price ” means the actual sale
execution price of each Common Share sold by Sales Agent on the
Principal Market hereunder in the case of ordinary brokers
’ transactions, or as otherwise agreed by the parties
in other methods of sale.
“ Sarbanes-Oxley Act ” means the
Sarbanes-Oxley Act of 2002.
“ Securities Act ” means the
Securities Act of 1933, as amended.
“ Selling Commission ” means at a
mutually agreed rate, not to exceed 2.0%, of the Sales Price
of Common Shares sold during a Selling Period.
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“ Selling Period ” means the period
of one to ten consecutive Trading Days (as determined by the
Company in the Company ’ s sole discretion and
specified in the applicable Issuance Notice) following the Trading
Day on which an Issuance Notice is delivered or deemed to be
delivered pursuant to Section 2.03(b) hereof.
“ Settlement Date ” means, unless the
Company and Sales Agent shall otherwise agree, the third business
day following each Trading Day during the Selling Period, when the
Company shall deliver to Sales Agent the amount of Common Shares
sold on such Trading Day and Sales Agent shall deliver to the
Company the Issuance Price received on such sales.
“ Significant Subsidiary ” has the
meaning set forth in Section 3.05.
“ Subsidiary ” has the meaning set
forth in Section 3.05.
“ Trading Day ” means any day which
is a trading day on the New York Stock Exchange, other than a day
on which trading is scheduled to close prior to its regular weekday
closing time.
“ Voting Stock ” of any Person as of
any date means the capital stock of such Person that is at the time
entitled to vote in the election of the Board of Directors of such
Person.
ARTICLE II
ISSUANCE AND SALE OF COMMON STOCK
Section 2.01
Issuance .
(a)
Upon the terms and subject to the conditions of this Agreement, the
Company may issue Common Shares through Sales Agent and Sales Agent
shall use its commercially reasonable efforts to sell Common
Shares, with an aggregate Sales Price of up to the Maximum Program
Amount, based on and in accordance with such number of Issuance
Notices as the Company in its sole discretion shall choose to
deliver during the Commitment Period until the aggregate Sales
Price of the Common Shares sold under the Sales Agency Agreements
equals the Maximum Program Amount or this Agreement is otherwise
terminated. Subject to the foregoing and the other terms and
conditions of this Agreement, upon the delivery of an Issuance
Notice, and unless the sale of the Issuance Shares described
therein has been suspended, cancelled or otherwise terminated in
accordance with the terms of this Agreement, Sales Agent will use
its commercially reasonable efforts consistent with its normal
trading and sales practices to sell such Issuance Shares up to the
amount specified into the Principal Market, and otherwise in
accordance with the terms of such Issuance Notice. Sales
Agent will provide written confirmation to the Company no later
than the opening of the Trading Day next following the Trading Day
on which it has made sales of Issuance Shares hereunder setting
forth the portion of the Actual Sold Amount for such Trading Day,
the corresponding Sales Price and the Issuance Price payable to the
Company in respect thereof. Sales Agent may sell Issuance
Shares in the manner described in
Section 2.01(b) herein. The Company acknowledges
and agrees that (i) there can be no assurance that Sales Agent
will be successful in selling Issuance Shares and (ii) Sales
Agent will incur no liability or obligation to the Company or any
other Person if it does not sell Issuance Shares for any reason
other than a failure by Sales Agent to use its commercially
reasonable efforts consistent with its normal trading and sales
practices to sell
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such Issuance Shares as required under this
Section 2.01. In acting hereunder, Sales Agent will be
acting as agent for the Company and not as principal.
(b)
Method of Offer and Sale . The Common Shares may be
offered and sold in (1) privately negotiated transactions (if
and only if the parties hereto have so agreed in writing), or
(2) by any other method or payment permitted by law deemed to
be an “ at the market ” offering as
defined in Rule 415 of the Securities Act, including sales
made directly on the Principal Market or sales made to or through a
market maker or through an electronic communications network.
Nothing in this Agreement shall be deemed to require either party
to agree to the method of offer and sale specified in clause
(1) above, and either party may withhold its consent thereto
in such party ’ s sole discretion.
(c)
Issuances . Upon the terms and subject to the
conditions set forth herein, on any Trading Day as provided in
Section 2.03(b) hereof during the Commitment Period on
which the conditions set forth in Section 5.01 and
Section 5.02 hereof have been satisfied, the Company may
exercise an Issuance by the delivery of an Issuance Notice,
executed by the Chief Executive Officer, the President, the Chief
Financial Officer, the Senior Vice President-Finance or the
Treasurer of the Company, to Sales Agent. The number of
Issuance Shares that Sales Agent shall use its commercially
reasonable efforts to sell pursuant to such Issuance shall have an
aggregate Sales Price equal to the Issuance Amount. Each
Issuance will be settled on the applicable Settlement Date
following the Issuance Date.
Section 2.02
Effectiveness . The effectiveness of this Agreement
(the “ Closing ” ) shall be deemed to
take place concurrently with the execution and delivery of this
Agreement by the parties hereto and the completion of the closing
transactions set forth in the immediately following sentence.
At the Closing, the following closing transactions shall take
place, each of which shall be deemed to occur simultaneously with
the Closing: (i) the Company shall deliver to Sales Agent a
certificate executed by the Secretary of the Company, signing in
such capacity, dated the date of the Closing (A) certifying
that attached thereto are true and complete copies of the
resolutions duly adopted by the Board of Directors of the Company
authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (including,
without limitation, the issuance of the Common Shares
pursuant to this Agreement), which authorization shall be in full
force and effect on and as of the date of such certificate and
(B) certifying and attesting to the office, incumbency, due
authority and specimen signatures of each Person who executed the
Agreement for or on behalf of the Company; (ii) the Company
shall deliver to Sales Agent a certificate executed by the Chief
Executive Officer, the President or any Senior Vice-President of
the Company and by the Chief Financial Officer of the Company,
signing in such capacity, dated the date of the Closing, confirming
that the representations and warranties of the Company contained in
this Agreement are true and correct and that the Company has
performed all of it obligations hereunder to be performed on or
prior to the Closing Date and as to the matters set forth in
Section 5.01(a) hereof; (iii) Goodwin Procter LLP,
counsel to the Company, shall deliver to Sales Agent opinions and a
negative assurance letter, dated the date of the Closing and
addressed to Sales Agent, substantially in the forms of
Exhibit B, Exhibit C and Exhibit D attached hereto;
(iv) O ’ Melveny & Myers, LLP, counsel
to Sales Agent and the Alternative Sales Agents, shall deliver to
Sales Agent and the Alternative Sales Agents an opinion, dated the
date of the Closing and addressed to Sales Agent and the
Alternative Sales Agents, substantially in the form of
Exhibit E attached hereto; (v)
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Ernst & Young LLP shall deliver to
Sales Agent a letter, dated the Closing Date, in form and substance
satisfactory to Sales Agent; and (vi) the Company shall pay
the expenses set forth in Section 9.02(ii),
(iv) and (viii) hereof by wire transfer to the account
designated by Sales Agent in writing prior to the
Closing.
Section 2.03
Mechanics of Issuances .
(a)
Issuance Notice . On any Trading Day during the
Commitment Period, the Company may deliver an Issuance Notice to
Sales Agent, subject to the satisfaction of the conditions set
forth in Sections 5.01 and 5.02; provided, however, that
(1) the Issuance Amount for each Issuance as designated by the
Company in the applicable Issuance Notice shall in no event exceed
$150,000,000 without the prior written consent of Sales Agent,
which may be withheld in Sales Agent ’ s sole
discretion and (2) notwithstanding anything in this Agreement
to the contrary, Sales Agent shall have no further obligations with
respect to any Issuance Notice if and to the extent the aggregate
Sales Price of the Issuance Shares sold pursuant thereto, together
with the aggregate Sales Price of the Common Shares previously sold
under the Sales Agency Agreements, shall exceed the Maximum Program
Amount. The Company shall have the right, in its sole discretion,
to amend at any time and from time to time any Issuance Notice;
provided, however, that the Company may not amend the Issuance
Amount if such amended Issuance Amount is less than the Actual Sold
Amount as of the date of such amendment.
(b)
Delivery of Issuance Notice . An Issuance Notice shall
be deemed delivered on the Trading Day that it is received by
facsimile or otherwise (and the Company confirms such delivery by
e-mail notice or by telephone (including voicemail message)) by
Sales Agent. No Issuance Notice may be delivered other than
on a Trading Day during the Commitment Period.
(c)
Floor Price . Sales Agent shall not sell Common Shares
below the Floor Price during any Selling Period and such Floor
Price may be adjusted by the Company at any time during any Selling
Period upon notice to Sales Agent and confirmation to the
Company.
(d)
Determination of Issuance Shares to be Sold . The
number of Issuance Shares to be sold by Sales Agent with respect to
any Issuance shall be the Actual Sold Amount during the Selling
Period.
(e)
Trading Guidelines . The Company consents to Sales
Agent trading in the Company ’ s Common Stock for
Sales Agent ’ s own account and for the account of its
clients at the same time as sales of Common Shares occur pursuant
to this Agreement, provided, however, that such consent is
expressly limited to trading activity that complies with applicable
federal and state laws, rules and regulations.
Section 2.04
Settlements . Subject to the provisions of
Article V, on or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer
the Issuance Shares being sold by crediting Sales Agent or its
designee ’ s account at the Depository Trust Company
through its Deposit/Withdrawal At Custodian (DWAC) System, or by
such other means of delivery as may be mutually agreed upon by the
parties hereto and, upon receipt of such Issuance Shares, which in
all cases shall be freely tradeable, transferable, registered
shares
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in good deliverable form, Sales Agent will
deliver the related Issuance Price in same day funds delivered to
an account designated by the Company prior to the Settlement
Date. If the Company defaults in its obligation to deliver
Issuance Shares on a Settlement Date, the Company agrees that it
will (i) hold Sales Agent harmless against any loss, claim,
damage or expense (including, without limitation, penalties,
interest and reasonable legal fees and expenses), as incurred,
arising out of or in connection with such default by the Company,
and (ii) pay to Sales Agent any Selling Commission to which it
would otherwise have been entitled absent such default. The
parties acknowledge and agree that, in performing its obligations
under this Agreement, Sales Agent may borrow shares of Common Stock
from stock lenders, and may use the Issuance Shares to settle or
close out such borrowings.
Section 2.05
Use of Free Writing Prospectus . Neither the Company
nor Sales Agent has prepared, used, referred to or distributed, or
will prepare, use, refer to or distribute, without the other party
’ s prior written consent, which consent shall not be
unreasonably withheld, any “ written communication
” which constitutes a “ free writing
prospectus ” as such terms are defined in
Rule 405 under the Securities Act with respect to the offering
of Common Shares contemplated by this Agreement.
Section 2.06
Alternative Sales Agents . The Company agrees that any
offer to sell, any solicitation of an offer to buy, or any sales of
Common Shares or any other equity security of the Company shall
only be effected by or through only one of Sales Agent or the
Alternative Sales Agents on any single given day, but in no event
by more than one, and the Company shall in no event request that
Sales Agent and any other Alternative Sales Agent sell Common
Shares on the same day.
Section 2.07
Exemption from Regulation M . If any party believes
that the exemptive provisions set forth in
Rule 101(c)(1) of Regulation M under the Exchange Act
(applicable to securities with an average daily trading volume of
$1,000,000 that are issued by an issuer whose common equity
securities have a public float value of at least $150,000,000) are
not satisfied with respect to the Company or the Common Shares, it
shall promptly notify the other party and sales of Common Shares
under the Sales Agency Agreements shall be suspended until that or
other exemptive provisions have been satisfied in the reasonable
judgment of all parties.
Section 2.08
Distributions under Regulation M . Notwithstanding any
other provision of this Agreement, in the event the Company engages
Sales Agent for a sale of Common Shares that would constitute a
“ distribution ” within the meaning of
Rule 100 of Regulation M under the Exchange Act, the
Company and Sales Agent will agree to compensation that is
customary for Sales Agent with respect to such
transactions.
Section 2.09
Material Non-Public Information . Notwithstanding any
other provision of this Agreement, the Sales Agent shall not be
obligated to sell any Common Shares hereunder during (a) any
period in which it reasonably believes that the Company is, or
could be deemed to be, in possession of material non-public
information or (b) during the fourteen (14) calendar days
prior to any public announcement or release disclosing the Company
’ s results of operations or financial condition for a
completed quarterly or annual fiscal period.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
The Company represents and warrants
to, and agrees with, Sales Agent that as of the Closing Date, each
Issuance Date, each Settlement Date, each Registration Statement
Amendment Date (as defined in Section 4.07), each Request Date
and each Applicable Time:
Section 3.01
Registration . The Common Stock is registered pursuant
to Section 12(b) of the Exchange Act and is currently
listed and quoted on the Principal Market under the trading symbol
“ AVB, ” and the Common Shares have been
listed on the Principal Market, subject to notice of
issuance. The Company (i) meets the requirements for the
use of Form S-3 under the Securities Act and the
rules and regulations thereunder for the registration of the
transactions contemplated by this Agreement and (ii) has been
subject to the requirements of Section 12 of the Exchange Act
and has timely filed all the material required to be filed pursuant
to Section 13 and 14 of the Exchange Act for a period of more
than 12 calendar months. The Company has filed with the Commission
a registration statement on Form S-3 (File
No. 333-157627; the “ Original Registration
Statement ” ), to be used in connection with, among
other securities, the public offering and sale of Common Stock,
including the Common Shares of the Company. Such registration
statement (and any further registration statements that may be
filed by the Company for the purpose of continuing the offering of
the Common Shares upon expiration of the effectiveness of the
Original Registration Statement after the third anniversary of its
original effective date or for the purpose of registering
additional Common Shares to be sold pursuant to this
Agreement), and the prospectus constituting a part of such
registration statement, together with the Prospectus Supplement (as
defined in Section 5.01(k)) and any pricing supplement
relating to a particular issuance of the Issuance Shares
(each, an “ Issuance Supplement ” ),
including all documents incorporated or deemed to be incorporated
therein by reference pursuant to Item 12 of Form S-3 under the
Securities Act, in each case, as from time to time amended or
supplemented, are referred to herein as the “
Registration Statement ” and the “
Prospectus, ” respectively, except that if any revised
prospectus is provided to Sales Agent by the Company for use in
connection with the offering of the Common Shares that is not
required to be filed by the Company pursuant to
Rule 424(b) promulgated by the Commission under the
Securities Act, the term “ Prospectus ”
shall refer to such revised prospectus from and after the time it
is first provided to Sales Agent for such use. Promptly after
the execution and delivery of this Agreement, the Company will
prepare and file the Prospectus Supplement relating to the Issuance
Shares pursuant to Rule 424(b) promulgated by the
Commission under the Securities Act, as contemplated by
Section 5.01(k) of this Agreement. As used in this
Agreement, the terms “ amendment ” or
“ supplement ” when applied to the
Registration Statement or the Prospectus shall be deemed to include
the filing by the Company with the Commission of any document under
the Exchange Act after the date hereof that is or is deemed to be
incorporated therein by reference.
Section 3.02
Registration Statement and Prospectus . The
Registration Statement is an “ automatic effective
registration statement ” as defined under
Rule 405 of the Securities Act that has been filed with the
Commission not earlier than three years prior to the date hereof;
and no notice of objection of the Commission to the use of the
Registration Statement or any post-effective amendment thereto
pursuant to Rule 401(g)(2) under the Securities Act has
been received by the Company. No order suspending the
effectiveness of the Registration Statement
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has been issued by the Commission and no
proceeding for that purpose or pursuant to Section 8A of the
Securities Act against the Company or related to the offering has
been initiated or threatened by the Commission; as of the
applicable effective date of the Registration Statement and any
amendment thereto, the Registration Statement complied and will
comply in all material respects with the Securities Act, and did
not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading;
and as of the date of the Prospectus (and any amendment or
supplement thereto) and the applicable Issuer Free Writing
Prospectus(es), if any, issued at or prior to the Applicable Time,
taken together (collectively, and, with respect to any Common
Shares, together with the public offering price of such Common
Shares, the “ General Disclosure Package
” ) as of each Applicable Time and the Closing Date,
as the case may be, will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided that the Company makes no
representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information
relating to Sales Agent furnished to the Company in writing by
Sales Agent expressly for use in the Registration Statement, the
Prospectus and the General Disclosure Package and any amendment or
supplement thereto.
Section 3.03
Incorporated Documents . The documents incorporated by
reference in the Registration Statement, the Prospectus or the
General Disclosure Package, when they became effective or were
filed with the Commission, as the case may be, conformed in all
material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and none of such documents contained
any untrue statement of a material fact or, taken together, omitted
to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and any further
documents so filed and incorporated by reference in the
Registration Statement, the Prospectus or the General Disclosure
Package, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material
respects to the requirements of the Securities Act or the Exchange
Act, as applicable, and will not contain any 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, in the
light of the circumstances under which they were made, not
misleading.
Section 3.04
Organization, Power and Authority of Company .
The Company has been duly organized and is 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 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 taken as a
whole.
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Section 3.05
Organization, Power and Authority and Capitalization of
Subsidiaries . As of the date of this Agreement,
the Company does not have any “ significant
subsidiaries ” (as defined in Rule 12b-2 under
the Exchange Act, individually a “ Significant
Subsidiary ” and collectively “
Significant Subsidiaries ” ).
Section 3.06
Capitalization . The Company has an authorized
capitalization as set forth in the Registration Statement and the
Prospectus under the heading “ Capitalization
” ; all the outstanding shares of capital stock of the
Company have been duly and validly authorized and issued and are
fully paid and non-assessable and are not subject to any
pre-emptive or similar rights; except as described in or expressly
contemplated by the Prospectus and the General Disclosure Package
and 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 2009 Stock Option and Incentive
Plan or 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, there are no outstanding
rights (including, without limitation, pre-emptive rights),
warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity
interest in the Company or any of its subsidiaries, or any
contract, commitment, agreement, understanding or arrangement of
any kind relating to the issuance of any capital stock of the
Company or any such subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options;
the capital stock of the Company conforms in all material respects
to the description thereof contained in the Registration Statement,
the Prospectus and the General Disclosure Package.
Section 3.07
Financial Statements . Except as otherwise
stated therein and except, in the case of interim periods, for the
notes thereto and normal year-end adjustment, (i) the
financial statements and the related notes thereto of the Company
and its consolidated subsidiaries included or incorporated by
reference in the Registration Statement, the Prospectus and the
General Disclosure Package comply in all material respects with the
applicable requirements of the Securities Act and the Exchange Act,
as applicable, and present fairly the financial position of the
Company and its subsidiaries as of the dates indicated and the
results of their operations and the changes in their cash flows for
the periods specified; (ii) such financial statements have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods
covered thereby, and the supporting schedules included or
incorporated by reference in the Registration Statement present
fairly the information required to be stated therein; and
(iii) the other financial information included or incorporated
by reference in the Registration Statement, the Prospectus and the
General Disclosure Package has been derived from the accounting
records of the Company and its subsidiaries and presents fairly the
information shown thereby. No other financial statements (or
schedules) of the Company or any predecessor of the Company are
required by the Securities Act to be included in the Registration
Statement, the Prospectus or the General Disclosure Package.
Ernst & Young LLP (together with any other nationally
recognized accounting firm that the Company may from time to time
engage, the “ Accountants ” ), who have
reported on the financial statements and schedules which are
audited, are independent registered public accountants with respect
to the Company and its subsidiaries within the applicable
rules and regulations adopted by the
11
Commission and the Public Company Accounting
Oversight Board (United States) and as required by the Securities
Act. The statements included in the Registration Statement
with respect to the Accountants pursuant to Rule 509 of
Regulation S-K of the Securities Act are true and correct in
all material respects.
Section 3.08
Disclosure Controls . The Company and its subsidiaries
maintain an effective system of “ disclosure controls
and procedures ” (as defined in
Rule 13a-15(e) of the Exchange Act) that complies with
the requirements of the Exchange Act and is designed to ensure that
information required to be disclosed by the Company in reports that
it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
Commission ’ s rules and forms, including, but
not limited to, controls and procedures designed to ensure that
such information is accumulated and communicated to the Company
’ s management as appropriate to allow timely
decisions regarding required disclosure. The Company and its
subsidiaries have carried out evaluations of the effectiveness of
their disclosure controls and procedures as required by
Rule 13a-15 of the Exchange Act.
Section 3.09
Accounting Controls . The Company and its
subsidiaries maintain systems of “ internal control
over financial reporting ” (as defined in
Rule 13a-15(f) of the Exchange Act) that comply with the
requirements of the Exchange Act. Except as disclosed in the
Registration Statement, the Prospectus or the General Disclosure
Package, since the end of the Company ’ s most recent
fiscal year, there has been no change in the Company ’
s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company
’ s internal control over financial reporting.
Except as disclosed in the Registration Statement, the Prospectus
and the General Disclosure Package, the Company is not aware of any
material weaknesses in the Company ’ s internal
controls.
Section 3.10
Common Shares . The Common Shares have been
duly authorized and, when issued and delivered in accordance with
the terms of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Common Shares will not be
subject to any preemptive rights under the Charter or Bylaws or the
Maryland General Corporation Law. Upon issuance, the Common
Shares will conform in all material respects to the statements
relating thereto contained in the Prospectus and the General
Disclosure Package. Upon payment of the purchase price and
delivery of the Common Shares in accordance with this Agreement,
each of the purchasers thereof will receive good, valid and
marketable title to such Common Shares, free and clear of all
liens, charges and encumbrances.
Section 3.11
Sale of Common Shares . Immediately after any sale of
Common Shares by the Company hereunder, the aggregate amount of
Common Stock that has been issued and sold by the Company hereunder
will not exceed the aggregate amount of Common Stock
registered under the Registration Statement (in this regard,
the Company acknowledges and agrees that Sales Agent shall have no
responsibility for maintaining records with respect to the
aggregate amount of Common Shares sold, or of otherwise monitoring
the availability of Common Stock for sale, under the Registration
Statement).
Section 3.12
This Agreement . The Company has the corporate
power and authority to enter into this Agreement and to issue the
Common Shares; and all action required to be taken for the due and
proper authorization, execution and delivery by the Company of this
Agreement
12
and the consummation by it of the transactions
contemplated hereby has been duly and validly taken. This
Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its
terms. Neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions
contemplated hereby constitutes a breach or violation of, or a
default under, or conflict with, or give any other party a right to
terminate any of its obligations under, or result in the
acceleration of any obligation under, or result in the creation or
imposition of any lien, charge or encumbrance upon the Communities
(as defined below) or any of the other assets of the Company or any
of its subsidiaries pursuant to the terms or provisions of, the
Charter or Bylaws of the Company, the articles or certificate of
incorporation or bylaws or partnership agreement or operating
agreement of any of the Company ’ s subsidiaries or
any material contract, lease or other instrument to which the
Company or any of its subsidiaries is a party or by which any of
their property may be bound or any judgment, ruling, decree, order,
law, statute, rule or regulation of any court or other
governmental agency or body applicable to the Communities or the
business or properties of the Company or any of its subsidiaries,
except as disclosed in the Prospectus or except for such instances
as, individually or in the aggregate, would not have a Material
Adverse Effect.
Section 3.13
No Material Adverse Change . Since the date of the
most recent financial statements of the Company included or
incorporated by reference in the Registration Statement, the
Prospectus and the General Disclosure Package, (i) there has
not been any material change in the capital stock or long-term debt
of the Company or its subsidiaries taken as a whole, or (except for
regular quarterly dividends on the Company ’ s Common
Shares and except as disclosed in the Registration Statement, the
Prospectus and the General Disclosure Package) any dividend or
distribution of any kind declared, set aside for payment, paid or
made by the Company on any class of capital stock, or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the business, properties, business
prospects, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries taken as a whole;
(ii) neither the Company nor any of its subsidiaries has
entered into any transaction or agreement that is material to the
Company and its subsidiaries taken as a whole or incurred any
liability or obligation, direct or contingent, that is material to
the Company and its subsidiaries taken as a whole; and
(iii) neither the Company nor any of its subsidiaries has
sustained any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor disturbance or dispute or any action,
order or decree of any court or arbitrator or governmental or
regulatory authority, except in each case as otherwise disclosed in
the Registration Statement, the Prospectus and the General
Disclosure Package.
Section 3.14
Company Not an Investment Company . The Company is not
and, after giving effect to the offering and sale of the Common
Shares and the application of the proceeds thereof as described in
the Registration Statement and the Prospectus, will not be required
to register as an “ investment company ”
or an entity “ controlled ” by an
“ investment company ” within the meaning
of the Investment Company Act.
Section 3.15
Use of Proceeds . The Company will use the net
proceeds from the offering of Common Shares in the manner specified
in the Prospectus under “ Use of Proceeds.
”
13
Section 3.16
No Material Actions or Proceedings . Except as
set forth in the Registration Statement, the Prospectus and the
General Disclosure Package, there is no pending or, to the
knowledge of the Company, threatened investigation, 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 or materially and
adversely affect the ability of the Company to perform its
obligations under this Agreement; and there are no statutes or
regulations or current or pending legal, governmental or regulatory
actions, suits or proceedings that are required under the
Securities Act to be described in the Registration Statement that
are not so described in the Registration Statement, the Prospectus
and the General Disclosure Package.
Section 3.17
Filing and Enforceability of Contracts . There
are no contracts or documents of a character required under the
Securities Act to be described in the Registration Statement or to
be filed as exhibits to the Registration Statement that are not so
described in the Registration Statement, the Prospectus and the
General Disclosure Package or filed as exhibits to the Registration
Statement (the “ Contracts ” ). All
Contracts executed and delivered on or before the date hereof to
which the Company or any subsidiary of the Company is a party have
been duly authorized, executed and delivered by the Company or such
subsidiary and, assuming due authorization, execution and delivery
thereof by the other parties thereto, constitute valid and binding
agreements of the other parties thereto, enforceable against such
parties in accordance with the terms thereof, subject, as to
enforcement, to (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,
(iv) requirements that a claim payable in a foreign or
composite currency (or a foreign or composite currency judgment in
respect of such claim) be converted into U.S. dollars at a rate of
exchange prevailing on a date determined pursuant to applicable law
and (v) governmental authority to limit, delay or prohibit the
making of payments outside the United States (collectively, the
“ Enforceability Limitations ”
).
Section 3.18
Compliance With Law . 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;
neither the Company nor any of its subsidiaries is, and upon
consummation of the sale of the Common Shares none of them will be,
in default under any contract to which the Company or any of its
subsidiaries is a party the violation of which would, individually
or in the aggregate, have a Material Adverse Effect, and no other
party under any such contract 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
Registration Statement, the Prospectus and the General Disclosure
Package, the Company and each of its subsidiaries have, or upon the
Closing Date will have, all governmental licenses (including,
without limitation, a California general contractor ’
s license, if applicable), permits, consents, orders, approvals and
other authorizations, and have made all declarations and
filings
14
with the appropriate federal, state, local or
foreign governmental or regulatory authorities that are, necessary
for the ownership or lease of their respective properties or
required to carry on their respective business as contemplated in
the Registration Statement, the Prospectus and the General
Disclosure Package, 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 or has any reason to believe that any such
governmental license, permit, consent, order, approval or other
authorization will not be renewed in the ordinary course which,
individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse
Effect.
Section 3.19
No Further Consents Required . No consent, approval,
authorization or order of, or filing with, any court or arbitrator
or governmental agency or body is required for the consummation of
the transactions contemplated by this Agreement in connection with
the issuance or sale of the Common Shares by the Company, except
such as may be required by the federal securities laws or the
securities or Blue Sky laws of the various states in connection
with the offer and sale of the Common Shares or for such as have
been obtained and delivered to the Representatives and counsel for
Sales Agent as of the date of this Agreement.
Section 3.20
Title to Properties . 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, (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.
Section 3.21
Mortgages; Community Matters . Except as disclosed in
the Registration Statement or the Prospectus, 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 and except as disclosed in the Registration
Statement or the Prospectus, (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, and (ii) there is no pending or, to
the
15
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.
Section 3.22
Title Insurance . Title insurance in favor of
the mortgagee, the Company or its subsidiaries is maintained with
respect to each of the Communities, in an amount at least equal to
the greater of (i) the cost of acquisition of such property
and (ii) the cost of construction by the Company and its
subsidiaries of the improvements located on such property (measured
at the time of such construction), except, in each case, where the
failure to maintain such title insurance would not have a Material
Adverse Effect.
Section 3.23
Accuracy of Company ’ s Statements .
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 Sales Agent
was or will be, when made, inaccurate, untrue or
incorrect.
Section 3.24
No Price Stabilization or Manipulation .
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 Common Shares to facilitate the
sale or resale of the Common Shares.
Section 3.25
No Labor Disputes . 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
contemplated or threatened, which, in either case, would have a
Material Adverse Effect.
Section 3.26
No Unlawful Contributions . Neither the
Company nor any of its subsidiaries nor, to the Company
’ s knowledge, any director, officer, agent, employee
or other person associated with or acting on behalf of the Company
or any of its subsidiaries has (i) 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; (ii) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense
relating to political activity; (iii) made any direct or
indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (iv) violated or is
in violation of any provision of the Foreign Corrupt Practices Act
of 1977; or (v) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
Section 3.27
Compliance With Environmental Laws . As of the
Closing Date and any Additional Closing Date, as the case may be,
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,
16
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.
Section 3.28
Hazardous Materials .
(i)
None of the Company or any partnership or other subsidiary 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 referred to in the Prospectus or such as would not,
individually or in the aggregate, have a Material Adverse Effect.
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,
generatin
