EXHIBIT 10.20
4,500,000 Shares
Cornerstone Realty Income Trust, Inc.
Common Shares
(No Par Value)
UNDERWRITING AGREEMENT
April 18, 1997
Alex. ▇▇▇▇▇ & Sons Incorporated
Branch, ▇▇▇▇▇▇ & Co., Inc.
Freidman, Billings, ▇▇▇▇▇▇ & Co., Inc.
Interstate/▇▇▇▇▇▇▇ Lane Corporation
c/o Alex. ▇▇▇▇▇ & Sons Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Cornerstone Realty Income Trust, Inc., a Virginia corporation (the
"Company"), subject to the terms and conditions stated herein, proposes to sell
to the several underwriters (the "Underwriters") named in Appendix I hereto an
aggregate of 4,500,000 shares of the Company's Common Shares, no par value (the
"Firm Shares"). The respective amounts of the Firm Shares to be so purchased by
the several Underwriters are set forth opposite their names in Appendix I
hereto. The Company also proposes to sell at the Underwriters' option an
aggregate of up to 675,000 additional shares of the Company's Common Shares (the
"Optional Shares") as set forth below.
You have advised the Company (a) that you are authorized to enter into
this Agreement and (b) that the several Underwriters are acting severally and
not jointly, to purchase the number of Firm Shares set forth opposite their
respective names in Appendix I, plus their pro rata portion of the Optional
Shares if you elect to exercise the over-allotment option in whole or in part
for the accounts of the several Underwriters. The Firm Shares and the Optional
Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to, and agrees with, the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-23693)
with respect to the Shares 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. The
Company has complied with the conditions for the use of Form S-3.
Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the
Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to you. Such registration
statement, together with any registration statement filed by the
Company pursuant to Rule 462 (b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all
information omitted therefrom in reliance upon Rule 430A and contained
in the Prospectus referred to below, has become effective under the Act
and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. "Prospectus" means (a) the form
of prospectus first filed with the Commission pursuant to Rule 424(b)
or (b) the last preliminary prospectus included in the Registration
Statement filed prior to the time it becomes effective or filed
pursuant to Rule 424(a) under the Act that is delivered by the Company
to the Underwriters for delivery to purchasers of the Shares, together
with the term sheet or abbreviated term sheet filed with the Commission
pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus." Any
reference herein to the Registration Statement, any Preliminary
Prospectus or to the Prospectus shall be deemed to refer to and include
any documents incorporated by reference therein, and, in the case of
any reference herein to any Prospectus, also shall be deemed to include
any documents incorporated by reference therein, and any supplements or
amendments thereto, filed with the Commission after the date of filing
of the Prospectus under Rules 424(b) or 430A, and prior to the
termination of the offering of the Shares by the Underwriters.
(b) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Virginia, with corporate power and authority to own its
properties and conduct its business as described in the Registration
Statement. Each of the subsidiaries of the Company as
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listed in Schedule II hereto (collectively, the "Subsidiaries") has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. The
Subsidiaries are the only subsidiaries, direct or indirect, of the
Company. The Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of their
business requires such qualification except where the failure to be so
qualified would have a material adverse effect on the financial
position, results of operations or business of the Company and its
subsidiaries taken as a whole ("Material Adverse Effect"). The
outstanding shares of capital stock of each of the Subsidiaries have
been duly authorized and validly issued, are fully paid and
non-assessable and, all Preferred Shares of the Subsidiaries are owned
by the Company and all Common Shares of the Subsidiaries are owned by
the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, free and clear of all liens,
encumbrances and equities and claims; and except as described in the
Registration Statement, no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to
convert any obligations into shares of capital stock or ownership
interests in the Subsidiaries are outstanding. The Company's Preferred
Shares of the Subsidiaries represents 95% of the equity interests in
each Subsidiary and except as required by law have no voting rights.
(c) The Company is organized in conformity with the
requirements for qualification as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code"), and the
Company's method of operation will enable it to meet the requirements
for taxation as a real estate investment trust under the Code.
(d) The outstanding Common Shares of the Company have been
duly authorized and validly issued and are fully paid and
non-assessable; the Shares to be issued and sold by the Company have
been duly authorized and when issued and paid for as contemplated
herein will be validly issued, fully paid and non-assessable; and no
preemptive rights of stockholders exist with respect to any of the
Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, other than
those which have been waived or satisfied, for or relating to the
registration of any Common Shares.
(e) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the
Shares conform to the description thereof contained in the Registration
Statement. The form of certificates for the Shares conforms to the
corporate law of the jurisdiction of the Company's incorporation.
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(f) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering
of the Shares nor instituted proceedings for that purpose. The
Registration Statement contains, and the Prospectus and any amendments
or supplements thereto will contain, all statements which are required
to be stated therein by, and will conform to, the requirements of the
Act and the Rules and Regulations. The documents incorporated by
reference in the Prospectus, at the time filed with the Commission
conformed, in all material respects, to the requirements of the
Securities Exchange Act of 1934 or the Act, as applicable, and the
Rules and Regulations. The Registration Statement and any amendment
thereto do not contain, and will not contain, any untrue statement of a
material fact and do not omit, and will not omit, to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to
state any 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; provided, however, that the
Company makes no representations or warranties as to information
contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and
in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representatives, specifically
for use in the preparation thereof.
(g) The consolidated financial statements of the Company,
together with related notes and schedules as set forth or incorporated
by reference in the Registration Statement, present fairly the
financial position and the results of operations and cash flows of the
Company at the indicated dates and for the indicated periods. Such
financial statements and related schedules have been prepared in
accordance with generally accepted accounting principles, consistently
applied throughout the periods involved, except as disclosed therein,
and all adjustments necessary for a fair presentation of results for
such periods have been made. The summary financial and statistical data
included or incorporated by reference in the Registration Statement
presents fairly the information shown therein and such data has been
compiled on a basis consistent with the financial statements presented
therein and the books and records of the Company. The pro forma
financial statements and other pro forma financial information included
in the Registration Statement and the Prospectus present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma bases
described therein, and, in the opinion of the Company, the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions or
circumstances referred to therein.
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(h) Ernst & Young LLP, KPMG Peat Marwick LLP, ▇.▇. ▇▇▇▇▇▇ &
Company, P.C. and ▇▇▇▇▇, ▇▇▇▇ & Co., L.L.P., who have certified certain
of the financial statements filed with the Commission as part of, or
incorporated by reference in, the Registration Statement, are
independent public accountants with respect to the Company as required
by the Act and the Rules and Regulations.
(i) There is no proceeding, action, suit, claim, inquiry or
investigation pending or, to the knowledge of the Company, threatened
against the Company or any of the Subsidiaries before any court or
administrative agency or otherwise which if determined adversely to the
Company or any of its Subsidiaries would result in a Material Adverse
Effect or to prevent the consummation of the transactions contemplated
hereby, except as set forth in the Registration Statement.
(j) The Company will have, at the Closing Date, as hereinafter
defined, good and marketable title in fee simple to all of the
properties described in the Prospectus (the "Properties") free and
clear of all liens, encumbrances, claims, security interests,
restrictions and defects except such as (i) are described in the
Prospectus or (ii) would not have a Material Adverse Effect. All liens,
encumbrances, claims, security interests, restrictions and defects
affecting the Properties which are required to be disclosed in the
Prospectus are disclosed therein. The Company does not own or lease any
material real property, except as described in the Prospectus. No
person has an option or right of first refusal to purchase all or part
of any property or any interest therein. Each of theProperties complies
with all applicable codes, laws and regulations (including, without
limitation, building and zoning codes, laws and regulations and laws
relating to access to the properties), except if and to the extent
disclosed in the Prospectus and except for such failures to comply that
would not individually or in the aggregate have a Material Adverse
Effect. The Company has no knowledge of any pending or threatened
condemnation proceedings, zoning change, or other proceeding or action
that will in any manner affect the size of, use of, improvements on,
construction on or access to any of its property, except such
proceedings or actions that would not have a Material Adverse Effect.
The Company has obtained an owner's title insurance policy or
commitment from a title insurance company to issue such a policy on
each of its Properties with coverage in an amount at least equal to the
cost of acquisition of such property, including the principal amount of
any indebtedness assumed with respect to the property.
(k) The Company and the Subsidiaries have filed all Federal,
State, local and foreign income tax returns which have been required to
be filed and have paid all taxes indicated by said returns and all
assessments received by them or any of them to the extent that such
taxes have become due. All material tax liabilities have been
adequately provided for in the financial statements of the Company.
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(l) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or
supplemented, there has not been any material adverse change or any
development involving a prospective material adverse change in or
affecting the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise), or prospects of
the Company and its Subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business.
(m) Neither the Company nor any of the Subsidiaries is or with
the giving of notice or lapse of time or both, will be, in violation of
or in default under its Articles of Incorporation or By-Laws or under
any agreement, lease, contract, indenture or other instrument or
obligation to which it is a party or by which it, or any of its
properties, is bound and which violation or default is of material
significance in respect of the business, management, properties,
assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries taken as a whole. The
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms
hereof will not conflict with or result in a breach of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust or other agreement or instrument to which the
Company or any Subsidiary is a party, or of the Articles of
Incorporation or By-laws of the Company or any order, rule or
regulation applicable to the Company or any Subsidiary of any court or
of any regulatory body or administrative agency or other governmental
body having jurisdiction and which conflict, breach or default would
have a Material Affect.
(n) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated (except such additional steps as may
be required by the Commission, the National Association of Securities
Dealers, Inc. (the "NASD") or as may be necessary to qualify the Shares
for public offering by the Underwriters under state securities or Blue
Sky laws) has been obtained or made and is in full force and effect.
(o) The Company and each of the Subsidiaries holds all
material licenses, certificates and permits from governmental
authorities which are necessary to the conduct of their businesses; and
neither the Company nor any of the Subsidiaries has infringed any
patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company and the
Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names,
trademarks or copyrights owned by or licensed to the Company.
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(p) Neither the Company, nor to the Company's best knowledge,
any of its officers, directors or other affiliates has taken or may
take, directly or indirectly, any action designed to cause or result
in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the
Common Shares to facilitate the sale or resale of the Shares.
(q) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission thereunder.
(r) 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 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.
(s) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks that the
Company believes is adequate for the conduct of their respective
businesses and the value of their respective properties and as is
customary for companies engaged in similar industries. Except as
otherwise disclosed in the Prospectus, neither the Company, nor, to its
knowledge, any former owner of any of the Properties has authorized or
conducted or has knowledge of the generation, transportation, storage,
presence, use, treatment, disposal, release, or other handling of any
hazardous substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant, asbestos, radon,
polychlorinated biphenyls ("PCBs"), petroleum product or waste
(including crude oil or any fraction thereof), natural gas, liquefied
gas, synthetic gas or other material defined, regulated, controlled or
potentially subject to any remediation requirement under any
environmental law (collectively, "Hazardous Materials"), on, in, under
or affecting the Properties except in material compliance with
applicable laws; to the knowledge of the Company, the Properties and
the Company's operations with respect to the Properties are in
substantial compliance with all federal, state and local laws,
ordinances, rules, regulations and other governmental requirements
relating to pollution, control of chemicals, management of waste,
discharges of materials into the environment, health, safety, natural
resources, and the environment (collectively, "Environmental Laws"),
and the Company has been, and is, in substantial compliance with all
licenses, permits, registrations and government authorizations
necessary to operate under all applicable Environmental Laws. Except as
otherwise disclosed in the Prospectus, neither the Company nor to
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the knowledge of the Company, any former owner of any of the Properties
has received any written or oral notice from any governmental entity or
any other person and there is no pending or threatened claim,
litigation or anyadministrative agency proceeding that: alleges a
violation of any Environmental Laws by the Company; alleges that the
Company is a liable party or a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ss. 9601, et seq., or any state superfund law; has resulted
in or could result in the attachment of an environmental lien on any of
the Properties; or alleges that the Company is liable for any
contamination of the environment, contamination of the Properties,
damage to natural resources, property damage, or personal injury based
on their activities or the activities of their predecessors or third
parties (whether at the Real Property or elsewhere) involving Hazardous
Materials, whether arising under the Environmental Laws, common law
principles, or other legal standards.
None of the entities which prepared appraisals of the
Company's properties, nor the entities which prepared Phase I
environmental assessment reports with respect to such properties, was
employed for such purpose on a contingent basis or has any substantial
interest in the Company, and none of their directors, officers or
employees is connected with the Company as a promoter, selling agent,
voting trustee, officer, director or employee.
(t) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such
qualification. To the best of the Company's knowledge, no general labor
problem exists or is imminent with the employees of the Company.
(u) The Company has not incurred any liability for a fee,
commission or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement other than as contemplated hereby.
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(v) To the knowledge of the executive officers of the Company,
other than the Subsidiaries, except as disclosed in the Prospectus, no
corporation, partnership, limited liability company or any other entity
of which the Company or any of such officers owns a material interest
is providing any services to Apple.
Any certificate signed by any officer of the Company on behalf
of the Company and delivered to you or to counsel for the Underwriters
in connection with the consummation of the offering shall be deemed a
representation and warranty by such entity to each Underwriter as to
the matters covered thereby.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
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(a) On the basis of the representations, warranties, covenants
and agreements herein contained, and subject to the terms and
conditions herein set forth, the Company agrees to sell to the
Underwriters and each Underwriter agrees, severally and not jointly, to
purchase, at a price of $9.765 per share, the number of Firm Shares set
forth opposite the name of each Underwriter in Appendix I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be
made in New York Clearing House funds by wire transfer to the order of
the Company against delivery of certificates therefor to the
Underwriters for the several accounts of the Underwriters. Such payment
and delivery are to be made at the offices of Alex. ▇▇▇▇▇ & Sons
Incorporated, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at 10:00 a.m.,
Baltimore time, (i) on the third business day after the date of this
Agreement if this Agreement is executed and delivered on or before 4:00
p.m., Eastern Standard time, (ii) on the fourth business day after the
date of this Agreement if this Agreement is executed and delivered on
or after 4:01 p.m. Eastern Standard time or (iii) at such other time
and date not later than five business days thereafter as you and the
Company shall agree upon, such time and date being herein referred to
as the "Closing Date." (As used herein, "business day" means a day on
which the New York Stock Exchange is open for trading and on which
banks in New York are open for business and are not permitted by law or
executive order to be closed.) The certificates for the Firm Shares
will be delivered in such denominations and in such registrations as
the Underwriters request in writing not later than the second full
business day prior to the Closing Date, and will be made available for
inspection by the Underwriters at least one business day prior to the
Closing Date.
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions
herein set forth, the Company hereby grants an option to the several
Underwriters to purchase the Optional Shares at the price per share as
set forth in the first paragraph of this Section 2. The option granted
hereby may be exercised in whole or in part by giving written notice
(i) at
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any time before the Closing Date and (ii) only once thereafter within
30 days after the date of this Agreement, by you, to the Company
setting forth the number of Optional Shares as to which the several
Underwriters are exercising the option, the names and denominations in
which the Optional Shares are to be registered and the time and date at
which such certificates are to be delivered. The time and date at which
certificates for Optional Shares are to be delivered shall be
determined by the Underwriters but shall not be earlier than three nor
later than 10 full business days after the exercise of such option, nor
in any event prior to the Closing Date (such time and date being herein
referred to as the "Option Closing Date"). If the date of exercise of
the option is three or more days before the Closing Date, the notice of
exercise shall set the Closing Date as the Option Closing Date. The
number of Optional Shares to be purchased by each Underwriter shall be
in the same proportion to the total number of Optional Shares being
purchased as the number of Firm Shares being purchased by such
Underwriter bears to the total number of Firm Shares, adjusted by you
in such manner as to avoid fractional shares. The option with respect
to the Optional Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters. The
Underwriters may cancel such option at any time prior to its expiration
by giving written notice of such cancellation to the Company. To the
extent, if any, that the option is exercised, payment for the Optional
Shares shall be made on the Option Closing Date in New York Clearing
House funds by wire transfer to the order of the Company against
delivery of certificates therefor at the offices of Alex. ▇▇▇▇▇ & Sons
Incorporated, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
3. OFFERING BY THE UNDERWRITERS.
----------------------------
It is understood that the several Underwriters are to make a
public offering of the Firm Shares as soon as they deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the
initial public offering price set forth in the Prospectus. The
Underwriters may from time to time thereafter change the public
offering price and other selling terms. To the extent, if at all, that
any Optional Shares are purchased pursuant to Section 2 hereof, the
Underwriters will offer them to the public on the foregoing terms.
It is further understood that you will act as the Underwriters
in the offering and sale of the Shares in accordance with an Agreement
Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY.
------------------------
The Company covenants and agrees with the several Underwriters
that:
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(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely
file with the Commission under Rule 424(b) of the Rules and Regulations
a Prospectus in a form approved by the Underwriters containing
information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and
Regulations, (ii) not file any amendment to the Registration Statement
or supplement to the Prospectus or any document incorporated by
reference therein of which the Underwriters shall not previously have
been advised and furnished with a copy or to which the Underwriters
shall have reasonably objected in writing or which is not in compliance
with the Rules and Regulations and (iii) file on a timely basis all
reports and any definitive proxy or information statements required to
be filed by the Company with the Commission subsequent to the date of
the Prospectus and prior to the termination of the offering of the
Shares by the Underwriters.
(b) The Company will advise the Underwriters promptly (i) when
the Registration Statement or any post-effective amendment thereto
shall have become effective, (ii) of receipt of any comments from the
Commission, (iii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending
the use of the Prospectus and to obtain as soon as possible the lifting
thereof, if issued.
(c) The Company will cooperate with the Underwriters in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Underwriters may reasonably have designated
in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that
purpose, provided the Company shall not be required to qualify as a
foreign corporation, to file a general consent to service of process or
to subject itself to taxation in any jurisdiction where it is not now
so qualified, required to file such a consent or so subject to
taxation. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to
continue such qualifications in effect for so long a period as the
Underwriters may reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Underwriters, from time to time, as many copies of any Preliminary
Prospectus as the Underwriters may reasonably request. The Company will
deliver to, or upon the order of, the Underwriters during the period
when delivery of a Prospectus is required under the Act, as many copies
of the Prospectus in final form, or as thereafter amended or
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supplemented, as the Underwriters may reasonably request. The Company
will deliver to the Underwriters at or before the Closing Date, four
signed copies of the Registration Statement and all amendments thereto
including all exhibits filed therewith, and will deliver to the
Underwriters such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that
may reasonably be requested), including documents incorporated by
reference therein, and of all amendments thereto, as the Underwriters
may reasonably request.
(e) The Company will comply in all material respects with the
Act and the Rules and Regulations, and the Securities Exchange Act of
1934 (the "Exchange Act"), and the rules and regulations of the
Commission thereunder, so as to permit the completion of the
distribution of the Shares as contemplated in this Agreement and the
Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur
as a result of which, in the judgment of the Company or in the
reasonable written opinion of the Underwriters, it becomes necessary to
amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is
necessary at any time to amend or supplement the Prospectus to comply
with any law, the Company promptly will either (i) prepare and file
with the Commission an appropriate amendment to the Registration
Statement or supplement to the Prospectus or (ii) prepare and file with
the Commission an appropriate filing under the Securities Exchange Act
of 1934 which shall be incorporated by reference in the Prospectus so
that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or
so that the Prospectus will comply with the law.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration
Statement, an earnings statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement, which
earning statement shall satisfy the requirements of Section 11(a) of
the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the
Closing Date, deliver to the Underwriters copies of annual reports and
copies of all other documents, reports and information furnished by the
Company to its stockholders or filed with any securities exchange
pursuant to the requirements of such exchange or with the Commission
pursuant to the Act or the Securities Exchange Act of 1934, as amended.
The Company will deliver to the Underwriters similar reports with
respect
12
to significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial
statements.
(h) No offering, sale, short sale or other disposition of any
Common Shares of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Shares or derivative
of Common Shares (or agreement for such), except for issuances by the
Company pursuant to the Company's Stock Incentive Plan, Directors' Plan
and Dividend Reinvestment Plan and Stock Purchase and the issuance by
the Company of Common Shares not registered under the Act and not to be
registered under the Act until the first anniversary of the date of
this Agreement that have been issued as consideration for the Company's
acquisition of additional properties, will be made for a period of 12
months after the date of this Agreement, directly or indirectly, by the
Company otherwise than hereunder or with the prior written consent of
Alex. ▇▇▇▇▇ & Sons Incorporated, which consent shall not unreasonably
be withheld.
(i) The Company has caused each officer and director of the
Company to furnish to you, on or prior to the date of this agreement, a
letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to
offer, sell, sell short or otherwise dispose of any Common Shares of
the Company or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for Common Shares
or derivative of Common Shares owned by such person or request the
registration for the offer or sale of any of the foregoing (or as to
which such person has the right to direct the disposition of) for a
period of 12 months after the date of this Agreement, directly or
indirectly, except with the prior written consent of Alex. ▇▇▇▇▇ & Sons
Incorporated ("Lockup Agreements").
(j) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the New York Stock Exchange.
(k) The Company shall apply the net proceeds of its sale of
the Shares as set forth in the Prospectus.
(l) The Company will use its best efforts to meet the
requirements to qualify as a real estate investment trust under the
Code.
(m) The Company shall not invest, or otherwise use, the
proceeds received by the Company from its sale of the Shares in such a
manner as would require the Company or any of the Subsidiaries to
register as an investment company under the Investment Company Act of
1940, as amended (the "1940 Act").
13
(n) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a
registrar for the Common Shares.
(o) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the same class or convertible into or
exchangeable for Common Shares.
(p) The Company on or before the Closing Date, shall purchase
the number of common shares of Apple equal to approximately 9.5% of the
issued and outstanding common shares of Apple as of the date of the
initial filing of the Registration Statement and (ii) at each of the
Company's quarterly meetings of its Board of Directors, the Board shall
consider an additional purchase of Apple common shares and the Company
shall purchase the number of Apple common shares necessary to increase
the Company's aggregate holdings of Apple common shares to
approximately 9.5% of the issued and outstanding Apple common shares as
of the date of such Board meeting unless the Board determines that such
purchase is not in the best interest of the Company. Notwithstanding
any other provisions of this paragraph, no purchase of Apple common
shares by the Company shall be required (a) if a majority of the
Company's Board of Directors, including a majority of the Company's
Independent Directors (as defined in the Company's Bylaws) resolves
that the purchase of common shares of Apple is not in the best interest
of the Company.
(q) Between October 1, 1997 and December 31, 1997, the Company
shall (i) call a special meeting of the Board of Directors for the
purpose of the Board considering, or (ii) at any other meeting of the
Board of Directors (provided proper notice of the subject has been
given), cause the Board of Directors to consider, the merits of the
Company proposing to purchase or acquire Apple or its assets.
5. COSTS AND EXPENSES.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement,
including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements
of counsel for the Company; the cost of printing and delivering to, or
as requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the
Underwriters' Selling Memorandum, the Underwriters' Invitation Letter,
the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the
Shares; the Listing Fee of the New York Stock Exchange; and the
14
expenses, including the reasonable fees and disbursements of counsel
for the Underwriters, incurred in connection with the qualification of
the Shares under State securities or Blue Sky laws. The Company shall
not, however, be required to pay for any of the Underwriters' expenses
(other than those related to reviews under NASD regulation and
qualifications under State securities or Blue Sky laws) except that, if
this Agreement shall not be consummated because the conditions in
Section 6 hereof are not satisfied, or because this Agreement is
terminated by the Representatives pursuant to Section 11 hereof, or by
reason of any failure, refusal or inability on the part of the Company
to perform any undertaking or satisfy any condition of this Agreement
or to comply with any of the terms hereof on its part to be performed,
unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the
Company shall reimburse the several Underwriters for reasonable
out-of-pocket expenses, including reasonable fees and disbursements of
counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of
performing their obligations hereunder; but the Company shall not in
any event be liable to any of the several Underwriters for damages on
account of loss of anticipated profits from the sale by them of the
Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
---------------------------------------------
The several obligations of the Underwriters to purchase the
Firm Shares on the Closing Date and the Optional Shares, if any, on the
Option Closing Date are subject to the accuracy in all material
respects, as of the Closing Date or the Option Closing Date, as the
case may be, of the representations and warranties of the Company
contained herein, and to the performance by the Company in all material
respects of its covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations shall
have been made, and any request of the Commission for additional
information (to be included in the Registration Statement or otherwise)
shall have been disclosed to the Underwriters and complied with to
their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to
time, shall have been issued and no proceedings for that purpose shall
have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission and no injunction, restraining order, or
order of any nature by a Federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance of the Shares.
(b) The Underwriters shall have received on the Closing Date
or the Option Closing Date, as the case may be, the opinion of McGuire,
Woods, Battle &
15
▇▇▇▇▇▇, L.L.P., counsel for the Company, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters
to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the
laws of the Commonwealth of Virginia, with corporate power and
authority to own, lease and operate its properties and conduct
its business as described in the Registration Statement; each
of the Subsidiaries has been duly organized and is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with corporate power
and authority to own or lease its properties and conduct its
business as described in the Registration Statement; the
Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of
their business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon
the business of the Company and the Subsidiaries taken as a
whole; and the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable and are owned of record
by the Company or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇; the preferred shares of
each Subsidiary held by the Company represents 95% of the
equity interests in each Company and, except as required by
law, are not entitled to vote on matters before the
shareholders of the Subsidiaries and, to of such counsel's
knowledge, the outstanding shares of capital stock of each of
the Subsidiaries is owned free and clear of all liens,
encumbrances and equities and claims, and no options, warrants
or other rights to purchase, agreements or other obligations
to issue or other rights to convert any obligations into any
shares of capital stock or of ownership interests in the
Subsidiaries are outstanding.
(ii) The Company has authorized capital stock as set
forth under the caption "Capitalization" in the Prospectus;
the Company's outstanding Common Shares have been duly
authorized and validly issued and are fully paid and
non-assessable; the Shares conform to the description thereof
contained in the Prospectus;the certificates for the Shares,
assuming they are in the form filed with the Commission, are
in due and proper form; the Common Shares, including the
Optional Shares, if any, to be sold by the Company pursuant to
this Agreement have been duly authorized and will be validly
issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement; and no preemptive rights of
shareholders exist with respect to any of the Shares or the
issue or sale thereof.
(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no
outstanding securities of the Company convertible or
exchangeable into or evidencing the right to purchase or
subscribe for any shares of the Company and there are no
outstanding or
16
authorized options, warrants or rights of any character
obligating the Company to issue any shares or any securities
convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares; and except as described
in the Prospectus, to the knowledge of such counsel, no holder
of any securities of the Company or any other person has the
right, contractual or otherwise, which has not been satisfied
or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the
sale of, any of the Shares or the right to have any Common
Shares or other securities of the Company included in the
Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under
the Act of Common Shares or other securities of the Company.
(iv) The Registration Statement has become effective
under the Act and, to the knowledge of such counsel, no stop
order proceedings with respect thereto have been instituted or
are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus and
each amendment or supplement thereto and document incorporated
by reference therein comply as to form in all material
respects with the requirements of the Act or the Securities
Exchange Act of 1934, as applicable, and the applicable rules
and regulations thereunder (except that such counsel need
express no opinion as to the financial statements, financial
schedules and statistical information, including those
incorporated by reference therein). To the knowledge of such
counsel, the conditions for the Company's use of Form S-3 for
the Offering, set forth in the General Instructions thereto,
have been satisfied.
(vi) The statements under the captions "Certain
Transactions," "Federal Income Tax Considerations," and "ERISA
Consideration," in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or
matters of law, fairly summarize in all material respects the
information called for with respect to such documents and
matters of law.
(vii) Such counsel does not know of any contracts or
documents required to be filed as exhibits to or incorporated
by reference in the Registration Statement or described in the
Registration Statement or the Prospectus that are not so
filed, incorporated by reference or described as required, and
such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized
in all material respects.
(viii) Such counsel knows of no material legal or
governmental proceedings, actions, suits, inquiries or
investigations pending or threatened
17
against the Company, or any of its properties, or any of the
Subsidiaries except as set forth in the Prospectus.
(ix) The Company has corporate power and authority to
enter into, deliver and perform this Agreement.
(x) The Company's execution and delivery of this
Agreement and the consummation of the transactions herein
contemplated do not and will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a
default under, the Articles of Incorporation or By-laws of the
Company, or any material agreement or instrument known to such
counsel to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries may
be bound except for conflicts or breaches which would not have
a Material Adverse Effect.
(xi) To the knowledge of such counsel, neither the
Company nor any of its Subsidiaries is in violation of its
respective Articles of Incorporation or By-laws, as the case
may be, and no material default exists and no event has
occurred which, with notice or after the lapse of time to cure
or both, would constitute a material default in the due
performance and observance of any agreement or instrument
known to such counsel. To the knowledge of such counsel,
neither the Company nor any of its Subsidiaries is in
violation of, or in default with respect to, any statute,
rule, regulation, order, judgment or decree, except as may be
properly described in the Prospectus or such as in the
aggregate do not now have and will not in the future have a
material adverse effect on the financial position, results of
operations or business of the Company.
(xii) This Agreement has been duly authorized,
executed and delivered by the Company.
(xiii) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body is necessary in
connection with the execution and delivery of this Agreement
and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by
State securities and Blue Sky laws as to which such counsel
need express no opinion) except such as have been obtained or
made.
(xiv) The Company is organized in conformity with the
requirements for qualification as a real estate investment
trust pursuant to Sections 856 through 860 of the Code, and
the Company's proposed method of operation
18
will enable it to meet the requirements for qualification and
taxation as a real estate investment trust under the Code.
(xv) The Company is not, and will not be, as a result
of the consummation of the transactions contemplated by this
Agreement and application of the net proceeds therefrom as
described in the Prospectus, required to register as an
investment company under the 1940 Act.
In rendering such opinion, McGuire, Woods, Battle & ▇▇▇▇▇▇,
L.L.P. may rely as to matters governed by the laws of states other than
Virginia or Federal laws on local counsel in such jurisdictions,
provided that in each case McGuire, Woods, Battle & Booth, L.L.P. shall
state that they believe that they and the Underwriters are justified in
relying on such other counsel. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to
believe that (i) the Registration Statement, at the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act)and as of the
Closing Date or the Option Closing Date, as the case may be, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations
and as of the Closing Date or the Option Closing Date, as the case may
be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the
light of the circumstances under which they are made, not misleading
(except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With
respect to such statement, McGuire, Woods, Battle & Booth, L.L.P. may
state that their belief is based upon the procedures set forth therein,
but is without independent check and verification.
(c) The Underwriters shall have received from Hunton &
▇▇▇▇▇▇▇▇, counsel for the Underwriters, an opinion dated the Closing
Date or the Option Closing Date, as the case may be, substantially to
the effect specified in subparagraphs (ii), (iii), (iv) and (x) of
Paragraph (b) of this Section 6, and that the Company is a duly
organized and validly existing corporation under the laws of the
Commonwealth of Virginia. In rendering such opinion, Hunton & ▇▇▇▇▇▇▇▇
may rely as to all matters governed other than by the laws of the State
of Virginia or Federal laws on the opinion of counsel referred to in
Paragraph (b) of this Section 6. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to
believe that (i) the Registration Statement, or any amendment thereto,
as of the time it became effective under the Act (but after giving
effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or
19
the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations
and as of the Closing Date or the Option Closing Date, as the case may
be, contained an untrue statement of a material fact or omitted to
state a material fact, necessary in order to make the statements, in
the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein).
With respect to such statement, Hunton & ▇▇▇▇▇▇▇▇ may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(d) The Underwriters shall have received, on each of the dates
hereof, the Closing Date and the Option Closing Date, as the case may
be, signed letters dated the date hereof, the Closing Date or the
Option Closing Date, as the case may be, in form and substance
satisfactory to you, of Ernst & Young LLP, KPMG Peat Marwick LLP, ▇.▇.
▇▇▇▇▇▇ & Company, P.C. and ▇▇▇▇▇, ▇▇▇▇ & Co., L.L.P., confirming that
they are independent public accountants within the meaning of the Act
and the applicable published Rules and Regulations thereunder and
stating that in their opinion the financial statements and schedules
prepared and examined by them and included in the Registration
Statement comply in form in all material respects with the applicable
accounting requirements of the Act and the related published Rules and
Regulations; and, with regards to the letter from Ernst & Young, LLP,
containing such other statements and information as is ordinarily
included in accountants' "comfort letters" to Underwriters with respect
to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(e) The Underwriters shall have received on the Closing Date
or the Option Closing Date, as the case may be, a certificate or
certificates of the Chief Executive Officer and the Chief Financial
Officer of the Company to the effect that, as of the Closing Date or
the Option Closing Date, as the case may be:
(i) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness
of the Registration Statement has been issued, and no
proceedings for such purpose have been taken or are, to his
knowledge, contemplated by the Commission;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct as
of the Closing Date or the Option Closing Date, as the case
may be;
(iii) All filings required to have been made pursuant
to Rules 424 or 430A under the Act have been made;
20
(iv) He or she has carefully examined the
Registration Statement and the Prospectus and, in his or her
opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration
Statement were true and correct in all material respects, and
such Registration Statement and Prospectus did not omit to
state a material fact required to be stated therein or
necessary in order to make the statements therein not
misleading, and since the effective date of the Registration
Statement, no event has occurred which should have been set
forth in a supplement to or an amendment of the Prospectus
which has not been so set forth in such supplement or
amendment; and
(v) Since the respective dates as of which
information is given in the Registration Statement and
Prospectus, there has not been any material adverse change or
any development that is reasonably likely to result in a
material adverse change in or affecting the condition,
financial or otherwise, of the Company and its Subsidiaries
taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial
or otherwise) or prospects of the Company and the Subsidiaries
taken as a whole, whether or not arising in the ordinary
course of business.
(f) The Company shall have furnished to the Underwriters such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related
matters as the Underwriters may reasonably have requested.
(g) The Shares have been approved for listing, upon official
notice of issuance, on the New York Stock Exchange.
(h) The Lockup Agreements described in Section 4 are in full
force and effect.
The opinions and certificates mentioned in this Agreement
shall be deemed to be in compliance with the provisions hereof only if
they are in all material respects reasonably satisfactory to the
Underwriters and to Hunton & ▇▇▇▇▇▇▇▇, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this
Section 6 shall not have been fulfilled when and as required by this
Agreement to be fulfilled, the obligations of the Underwriters
hereunder may be terminated by the Underwriters by notifying the
Company of such termination in writing or by telegram at or prior to
the Closing Date or the Option Closing Date, as the case may be.
21
In such event, the Company and the Underwriters shall not be
under any obligation to each other (except to the extent provided in
Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
---------------------------------------------
The obligations of the Company to sell and deliver the portion
of the Shares required to be delivered as and when specified in this
Agreement are subject to the conditions that at the Closing Date or the
Option Closing Date, as the case may be, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
in effect or proceedings therefor initiated or threatened.
8. INDEMNIFICATION.
---------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities to which such Underwriter or any such controlling person
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained or incorporated
by reference in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto, or (ii) the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter and each such
controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss, claim, damage
or liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or
not such Underwriter or controlling person is a party to any action or
proceeding; provided, however, that the Company will not be liable in
any such case to the extent that (i) any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement, or omission or alleged omission made or incorporated
by reference in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or
through the Underwriters specifically for use in the preparation
thereof; (ii) such statement or omission was contained or made in any
Preliminary Prospectus and corrected in the Prospectus and (a) any such
loss, claim,damage or liability suffered or incurred by any Underwriter
(or any person who controls any Underwriter) resulting from an action,
claim or suit by any person who purchased Shares which are the subject
thereof from such Underwriter in the offering of the shares and (b)
such Underwriter failed to deliver or provide a copy of the Prospectus
to such person at or prior to the confirmation of the sale of such
Shares in any case where such delivery is required by the Act. This
22
indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify
and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if
any, who controls the Company within the meaning of the Act, against
any losses, claims, damages or liabilities to which the Company or any
such director, officer, or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement
of any material fact contained or incorporated by reference in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made; and will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or such amendment
or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Underwriters
specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to this Section 8, such person
(the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available
to any party who shall fail to give notice as provided in this Section
8(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially
prejudiced by the failure to give such notice, but the failure to give
such notice shall not relieve the indemnifying party or parties from
any liability which it or they may have to the indemnified party for
contribution or otherwise than on account of the provisions of Section
8(a) or (b). In case any such proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel selected by the indemnifying party and reasonably
satisfactory to such
23
indemnified party and shall pay as incurred the fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its
own expense. Notwithstanding the foregoing, the indemnifying party
shall pay as incurred the fees and expenses of the counsel retained by
the indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing
interests between them or (iii) the indemnifying party shall have
failed to assume the defense and employ counsel reasonably acceptable
to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all
such indemnified parties. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written
consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party from and against any loss or liability by reason
of such settlement or judgment. In addition, the indemnifying party
will not, without the prior written consent of the indemnified party,
settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability
arising out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give
notice required under Section 8(c) above, then each indemnifying party
shall contribute to such amount paid or payable by such indemnified
party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages
or liabilities, (or actions or proceedings in respect thereof), as well
as any other relevant equitable considerations.
24
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. The relative fault shall
be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this Section 8(d) were
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 account of the equitable considerations
referred toabove in this Section 8(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
above in this Section 8(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in
this Section 8(d) to contribute are several in proportion to their
respective underwriting obligations and not joint.
(e) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or
contribution under this Section 8 shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 8 and the representations and
warranties of the Company set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or
any persons controlling the Company, (ii) acceptance of any Shares and
payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
25
9. DEFAULT BY UNDERWRITERS.
-----------------------
If on the Closing Date or the Option Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion
of the Shares which such Underwriter has agreed to purchase and pay for
on such date (otherwise than by reason of any default on the part of
the Company), you shall use your reasonable efforts to procure within
36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon
and upon the terms set forth herein, the Firm Shares or Optional
Shares, as the case may be, which thedefaulting Underwriter or
Underwriters failed to purchase. If during such 36 hours you shall not
have procured such other Underwriters, or any others, to purchase the
Firm Shares or Optional Shares, as the case may be, agreed to be
purchased by the defaulting Underwriter or Underwriters, then (a) if
the aggregate number of shares with respect to which such default shall
occur does not exceed 10% of the Firm Shares or Optional Shares, as the
case may be, covered hereby, the other Underwriters shall be obligated,
severally, in proportion to the respective numbers of Firm Shares or
Optional Shares, as the case may be, which they are obligated to
purchase hereunder, to purchase the Firm Shares or Optional Shares, as
the case may be, which such defaulting Underwriter or Underwriters
failed to purchase, or (b) if the aggregate number of shares of Firm
Shares or Optional Shares, as the case may be, with respect to which
such default shall occur exceeds 10% of the Firm Shares or Optional
Shares, as the case may be, covered hereby, the Company or you will
have the right, by written notice given within the next 36-hour period
to the parties to this Agreement, to terminate this Agreement without
liability on the part of the non-defaulting Underwriters or of the
Company except to the extent provided in Section 8 hereof. In the event
of a default by any Underwriter or Underwriters, as set forth in this
Section 9, the Closing Date or Option Closing Date, as the case may be,
may be postponed for such period, not exceeding seven days, as you may
determine in order that the required changes in the Registration
Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under
this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this
Agreement.
10. NOTICES.
-------
All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered or telegraphed
and confirmed as follows:
26
If to the Underwriters:
Alex. ▇▇▇▇▇ & Sons Incorporated
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Alex. ▇▇▇▇▇ & Sons Incorporated
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
If to the Company:
Cornerstone Realty Income Trust, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
McGuire, Woods, Battle & Booth, L.L.P.
One ▇▇▇▇▇ Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
11. TERMINATION.
-----------
This Agreement may be terminated by you by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the
Shares are released by you for sale by notice to the Underwriters, or
(ii) 11:30 a.m. on the first business day following the date of this
Agreement;
(b) at any time prior to the Closing Date if any of the
following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a
27
whole or the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency
or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the
financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Shares or to enforce
contracts for the sale of the Shares, or (iii) suspension of trading in
securities generally on the New York Stock Exchange or American Stock
Exchange or limitation on prices (other than limitations on hours or
numbers of days of trading) for securities on either such Exchange,
(iv) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court or other governmental
authority which in your reasonable opinion materially and adversely
affects or that is reasonably likely to materially and adversely affect
the business or operations of the Company, (v) declaration of a banking
moratorium by United States or New York State authorities, (vi) the
suspension of trading of the Common Shares by the Commission on the New
York Stock Exchange or (vii) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal
affairs which in your reasonable opinion has a material adverse effect
on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
----------
This Agreement has been and is made solely for the benefit of
the Underwriters and the Company and their respective successors,
executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. No purchaser of any
of the Shares from any Underwriter shall be deemed a successor or
assign merely because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
------------------------------------
The Company and the Underwriters acknowledge and agree that
the only information furnished or to be furnished by any Underwriter to
the Company for inclusion in any Prospectus or the Registration
Statement consists of the information set forth in the last paragraph
on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(d) of Regulation S-K under
the Act and the information under the caption "Underwriting" in the
Prospectus.
28
14. MISCELLANEOUS.
-------------
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any
investigation made by
or on behalf of any Underwriter or controlling person thereof, or by or
on behalf of the Company or its directors or officers and (c) delivery
of and payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
29
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Its: Chairman
------------------------------
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
ALEX. ▇▇▇▇▇ & SONS INCORPORATED
BRANCH, ▇▇▇▇▇▇ & CO., INC.
FREIDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
INTERSTATE/▇▇▇▇▇▇▇ LANE CORPORATION
By: ALEX. ▇▇▇▇▇ & SONS INCORPORATED
By: /s/ Illegible
---------------------------
Its: Managing Director
--------------------------
30
APPENDIX I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
Alex. ▇▇▇▇▇ & Sons Incorporated 750,000
Freidman, Billings, ▇▇▇▇▇▇ & Co., Inc. 750,000
Interstate ▇▇▇▇▇▇▇▇ ▇▇▇▇ Corporation 750,000
Branch Cabell & Company, Inc. 750,000
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. 90,000
▇▇▇▇▇▇▇▇▇, Lurkin & ▇▇▇▇▇▇▇▇ Securities Corporation 90,000
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. 90,000
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. 90,000
▇▇▇▇▇▇ Brothers, Inc. 90,000
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated 90,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated 90,000
PaineWebber Incorporated 90,000
Prudential Securities Incorporated 90,000
▇▇▇▇▇ ▇▇▇▇▇▇ Inc. 90,000
EVEREN Securities, Inc. 60,000
▇▇▇▇▇▇▇▇▇ & Company 60,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Co., Inc. 60,000
▇▇▇▇▇ Capital Markets, Inc. 60,000
Pennsylvania Merchant Group Ltd. 60,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc. 60,000
Sands Brothers & Co., Ltd. 60,000
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc. 60,000
The ▇▇▇▇▇▇▇ Companies Incorporated 60,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Incorporated 60,000
---------
Total 4,500,000
31
APPENDIX II
SCHEDULE OF SUBSIDIARIES
1. Apple Residential Advisors, Inc.
2. Apple Residential Management Group, Inc.
32
