Exhibit 1.2
CORNERSTONE REALTY INCOME TRUST, INC.
(a Virginia corporation)
Common Shares and Preferred Shares
UNDERWRITING AGREEMENT
______________, 199__
[Name[s] of Representative[s]]
Dear Sirs:
Cornerstone Realty Income Trust, Inc., a Virginia corporation (the
"Company"), proposes to issue and sell its common shares, no par value (the
"Common Shares"), and its preferred shares, no par value (the "Preferred
Shares") from time to time, in one or more offerings on terms to be determined
at the time of sale. Each series of Preferred Shares may vary as to the specific
number of shares, title, stated value, liquidation preference, issuance price,
ranking, dividend rate or rates (or method of calculation), dividend payment
dates, any redemption or sinking fund requirements, any conversion provisions
and any other variable terms as set forth in the applicable Articles of
Amendment to the Company's Articles of Incorporation (each, the "Articles of
Amendment") relating to such series of Preferred Shares. As used herein,
"Securities" shall mean the Common Shares and the Preferred Shares. As used
herein, "you" and "your", unless the context otherwise requires, shall mean the
parties to whom this Agreement is addressed together with the other parties, if
any, identified in the applicable Terms Agreement (as hereinafter defined) as
additional co-managers with respect to Underwritten Securities (as hereinafter
defined) purchased pursuant thereto.
Whenever the Company determines to make an offering of Securities
through you or through an underwriting syndicate managed by you, the Company
will enter into an agreement (the "Terms Agreement") providing for the sale of
such Securities (the "Underwritten Securities") to, and the purchase and
offering thereof by, you and such other underwriters, if any, selected by you as
have authorized you to enter into such Terms Agreement on
their behalf (the "Underwriters", which term shall include you whether acting
alone in the sale of the Underwritten Securities or as a member of an
underwriting syndicate and any Underwriter substituted pursuant to Section 10
hereof). The Terms Agreement relating to the offering of Underwritten Securities
shall specify the number of Underwritten Securities of each class or series to
be initially issued (the "Initial Underwritten Securities"), the names of the
Underwriters participating in such offering (subject to substitution as provided
in Section 10 hereof), the number of Initial Underwritten Securities which each
such Underwriter severally agrees to purchase, the names of such of you or such
other Underwriters acting as co-managers, if any, in connection with such
offering, the price at which the Initial Underwritten Securities are to be
purchased by the Underwriters from the Company, the initial public offering
price, the time, date and place of delivery and payment, any delayed delivery
arrangements and any other variable terms of the Initial Underwritten Securities
(including, but not limited to, any current ratings (in the case of Preferred
Shares only), designations, liquidation preferences, conversion provisions,
redemption provisions and sinking fund requirements). In addition, each Terms
Agreement shall specify whether the Company has agreed to grant to the
Underwriters an option to purchase additional Underwritten Securities to cover
over-allotments, if any, and the number of Underwritten Securities subject to
such option (the "Option Securities"). As used herein, the term "Underwritten
Securities" shall include the Initial Underwritten Securities and all or any
portion of the Option Securities agreed to be purchased by the Underwriters as
provided herein, if any. The Terms Agreement, which shall be substantially in
the form of Exhibit A hereto, may take the form of an exchange of any standard
form of written telecommunication between you and the Company. Each offering of
Underwritten Securities through you or through an underwriting syndicate managed
by you will be governed by this Agreement, as supplemented by the applicable
Terms Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-_______) for the
registration of the Securities (including the Underwritten Securities) and
certain of the Company's debt securities under the Securities Act of 1933, as
amended (the "1933 Act"), and the offering thereof from time to time in
accordance with Rule 415 of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations"), and the Company has filed such
amendments thereto as may have been required prior to the execution of the
applicable Terms Agreement. Such registration statement (as amended, if
applicable) has been declared effective by the Commission. Such
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registration statement (as amended, if applicable), on the one hand, and the
prospectus constituting a part thereof and each prospectus supplement relating
to the offering of Underwritten Securities provided to the Underwriters for use
(whether or not such prospectus supplement is required to be filed by the
Company pursuant to Rule 424(b) of the 1933 Act Regulations) (the "Prospectus
Supplement"), on the other hand, including in each case all documents
incorporated therein by reference and the information, if any, deemed to be a
part thereof pursuant to Rule 430A(b) or Rule 434 of the 1933 Act Regulations,
as from time to time amended or supplemented pursuant to the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or otherwise, are
referred to herein as the "Registration Statement" and the "Prospectus",
respectively; provided, however, that a Prospectus Supplement shall be deemed to
have supplemented the Prospectus only with respect to the offering of
Underwritten Securities to which it relates. All references in this Agreement to
financial statements and schedules and other information which is "contained,"
"included" or "stated" in the Registration Statement or the Prospectus (and all
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement or the Prospectus,
as the case may be; and all references in this Agreement to amendments or
supplements to the Registration Statement or the Prospectus shall be deemed to
mean and include, without limitation, any document filed under the 1934 Act
which is or is deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be. If the Company elects to rely
on Rule 434 under the 1933 Act Regulations, all references to the Prospectus
shall be deemed to include, without limitation, the form of prospectus and the
abbreviated term sheet, taken together, provided to the Underwriters by the
Company in reliance on Rule 434 under the 1933 Act (the "Rule 434 Prospectus").
If the Company files a registration statement to register a portion of the
Securities and relies on Rule 462(b) for such registration statement to become
effective upon filing with the Commission (the "Rule 462 Registration
Statement"), then any reference to "Registration Statement" herein shall be
deemed to be to both the registration statement referred to above (No.
333-_____) and the Rule 462 Registration Statement, as each such registration
statement may be amended pursuant to the 1933 Act.
Section 1. Representations and Warranties.
(a) The Company represents and warrants to you, as of the date hereof,
and to you and each other Underwriter named in the
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applicable Terms Agreement, as of the date thereof (such latter date being
referred to herein as a "Representation Date"), as follows:
(i) The Registration Statement and the Prospectus, at the time
the Registration Statement became effective, complied, and as of the
applicable Representation Date will comply, in all material respects
with the requirements of the 1933 Act and 1933 Act Regulations; the
Registration Statement, at the time the Registration Statement became
effective, did not and as of the applicable Representation Date will
not, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; the Prospectus, as of the date
hereof does not, and as of the applicable Representation Date and at
Closing Time (as hereinafter defined) will not, include an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by any Underwriter
through you expressly for use in the Registration Statement or the
Prospectus.
(ii) The documents incorporated or deemed to be incorporated
by reference in the Prospectus pursuant to Item 12 of Form S-3 under
the 1933 Act, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission under the 1934 Act (the "1934 Act Regulations"), and, when
read together with the other information in the Prospectus, at the time
the Registration Statement became effective and as of the applicable
Representation Date or Closing Time or during the period specified in
Section 3(f), did not and will not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(iii) The accountants who certified the financial statements
and supporting schedules included in, or incorporated by reference
into, the Registration Statement and the Prospectus are independent
public accountants as required by the 1933 Act and the 1933 Act
Regulations.
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(iv) The financial statements and supporting schedules
included in, or incorporated by reference into, the Registration
Statement and the Prospectus present fairly in all material respects
the financial position of the Company and its subsidiaries as of the
dates indicated and the results of their operations for the periods
specified; except as otherwise stated in the Registration Statement and
the Prospectus, said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis; and the supporting schedules included or incorporated
by reference in the Registration Statement and the Prospectus present
fairly in all material respects the information required to be stated
therein.
(v) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, (A) there has been no material adverse change
or development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not occurring in
the ordinary course of business, (B) there have been no transactions or
acquisitions entered into by the Company or any of its subsidiaries
other than those arising in the ordinary course of business, and (C)
except for regular quarterly dividends on the Company's common shares,
or dividends declared, paid or made in accordance with the terms of any
series of the Company's preferred shares, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
series of its common shares or preferred shares.
(vi) 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 full power and authority to own, lease
and operate its properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to transact business in
all jurisdictions in which the conduct of its business requires such
qualification except where the failure so to qualify would not have a
material adverse effect on the condition, financial or otherwise, or
the earnings, business affairs or business prospects of the Company.
(vii) Each subsidiary of the Company (as defined on Exhibit C)
has been duly organized and is validly existing as a corporation,
limited liability company, limited partnership or real estate
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investment trust in good standing under the laws of the jurisdiction of
its incorporation or organization, with power and authority to own,
lease and operate its properties and conduct its business as described
in the Prospectus except where the failure so to be in good standing
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of
the Company and its subsidiaries, considered as one enterprise; each
such subsidiary is duly qualified to transact business in all
jurisdictions in which the conduct of its business requires such
qualification, or in which the failure to qualify would have a
materially adverse effect upon the business of such subsidiary; all of
the issued and outstanding shares or other beneficial interests owned
by the Company in any such subsidiary have been duly authorized and
validly issued, are fully paid and non-assessable and are owned by the
Company free and clear of any security interest, mortgage, pledge,
lien, encumbrance, or other claim.
(viii) The authorized, issued and outstanding common and
preferred shares of the Company are as set forth in the Prospectus
under "Capitalization" (except for subsequent issuances, if any,
pursuant to reservations, agreements or the conversion of convertible
securities referred to in the Registration Statement including, without
limitation, the exercise or grant of stock options pursuant to the
Company's stock option plan or the issuance of shares pursuant to the
Company's dividend reinvestment plan, stock purchase and loan plan or
employees' stock purchase plan); and such common shares and preferred
shares of the Company have been duly authorized and validly issued and
are fully paid and non-assessable and are not subject to preemptive or
other similar rights.
(ix) The applicable Underwritten Securities have been duly
authorized by the Company for issuance and sale pursuant to this
Agreement and, when issued and delivered pursuant to this Agreement
against payment of the consideration therefor specified in the
applicable Terms Agreement or any Delayed Delivery Contract (as
hereinafter defined), such Underwritten Securities will be duly and
validly issued, fully paid and non-assessable; the Preferred Shares, if
applicable, conforms to the provisions of the Articles of Amendment;
such Underwritten Securities conform in all material respects to all
statements relating thereto contained in the Prospectus; and the
issuance of such Underwritten Securities is not subject to preemptive
or
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other similar rights.
(x) If applicable, the Common Shares issuable upon conversion
of any of the Preferred Shares will have been duly and validly
authorized and reserved for issuance upon such conversion or exercise
by all necessary corporate action and such shares, when issued upon
such conversion or exercise, will be duly and validly issued, fully
paid and non-assessable, and the issuance of such shares upon such
conversion or exercise will not be subject to preemptive or other
similar rights; the Common Shares so issuable conform in all material
respects to all statements relating thereto contained in the
Prospectus.
(xi) Neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or Bylaws or in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease (other than as disclosed in the Prospectus) or
other instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any of its subsidiaries is
subject and which default is of material significance in respect of the
business or financial condition of the Company and its subsidiaries
considered as one enterprise; and the execution, delivery and
performance of this Agreement and the applicable Terms Agreement and
the consummation of the transactions contemplated herein and therein
and compliance by the Company with its obligations hereunder and
thereunder have been duly authorized by all necessary corporate action
on the part of the Company, and will not conflict with or constitute a
breach of, or default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the
Company or any of its subsidiaries is a party or by which it or any of
them may be bound, or to which any property or assets of the Company or
any of its subsidiaries is subject, or result in any violation of the
Articles of Incorporation or By-Laws of the Company or any law,
administrative regulation or administrative or court decree.
(xii) With respect to all tax periods regarding which the
Internal Revenue Service is or will be entitled to assert any claim,
the Company has met the requirements for
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qualification as a real estate investment trust under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Company's present and contemplated operations, assets
and income continue to meet such requirements.
(xiii) The Company is not and, after giving effect to the
offering and sale of the Underwritten Securities, will not be an
"investment company" or an entity "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").
(xiv) The conditions for use of registration statements on
Form S-3 set forth in the General Instructions on Form S-3 have been
satisfied and the Company is entitled to use such form for the
transaction contemplated herein and in any applicable Terms Agreement.
(xv) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries which is required to be disclosed in the
Prospectus (other than as disclosed therein) or which might result in
any material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, or which
might materially and adversely affect the properties or assets thereof
or which might materially and adversely affect the consummation of this
Agreement or the applicable Terms Agreement or the transactions
contemplated herein and therein; all pending legal or governmental
proceedings to which the Company or any of its subsidiaries is a party
or of which any of their respective property is the subject which are
not described in the Prospectus, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not
material; and there are no contracts or documents of the Company or any
of its subsidiaries which would be required to be filed as exhibits to
the Registration Statement by the 1933 Act or by the 1933 Act
Regulations which have not been filed as exhibits to the Registration
Statement.
(xvi) No authorization, approval or consent of any
governmental authority or agency is necessary in connection with the
consummation by the Company of the transactions contemplated by this
Agreement or the applicable Terms
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Agreement, except such as may be required under the 1933 Act or the
1933 Act Regulations or state securities or Blue Sky laws.
(xvii) The Company has full right, power and authority to
enter into this Agreement, the applicable Terms Agreement and the
Delayed Delivery Contracts, if any, and this Agreement has been, and as
of the applicable Representation Date, the applicable Terms Agreement
and the Delayed Delivery Contracts, if any, will have been, duly
authorized, executed and delivered by the Company.
(xviii) The Company and its subsidiaries have good and
marketable title to, or valid and enforceable leasehold estates in, all
items of real and personal property referred to in the Prospectus as
owned or leased by them, in each case free and clear of all liens,
encumbrances, claims, security interests and defects, other than those
referred to in the Prospectus or which are not material in amount.
(xix) The Company has filed all Federal, state, local and
foreign income tax returns which have been required to be filed and has
paid all taxes indicated by said returns and all assessments received
by it to the extent that such taxes have become due and are not being
contested in good faith.
(xx) The Company and each of its subsidiaries hold all
material licenses, certificates and permits from governmental
authorities which are necessary to the conduct of their respective
businesses; and neither the Company nor any of its subsidiaries has
infringed any patents, patent rights, trade names, trademarks or
copyrights, which infringement is material to the business of the
Company or any of its subsidiaries.
(xxi) The Company has no knowledge of (a) the unlawful
presence of any hazardous substances, hazardous materials, toxic
substances or waste materials (collectively, "Hazardous Materials") on
any of the properties owned by it or any of its subsidiaries, or of (b)
any unlawful spills, releases, discharges or disposal of Hazardous
Materials that have occurred or are presently occurring off such
properties as a result of any construction on or operation and use of
such properties which presence or occurrence would materially adversely
affect the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company or any of its
subsidiaries. In
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connection with the construction on or operation and use of the
properties owned by the Company or any of its subsidiaries, the Company
represents that it has no knowledge of any material failure to comply
with all applicable local, state and federal environmental laws,
regulations, ordinances and administrative and judicial orders relating
to the generation, recycling, reuse, sale, storage, handling, transport
and disposal of any Hazardous Materials.
(b) Any certificate signed by any officer of the Company and delivered
to you or to counsel for the Underwriters in connection with the offering of the
Underwritten Securities shall be deemed a representation and warranty by the
Company to each Underwriter participating in such offering as to the matters
covered thereby on the date of such certificate and, unless subsequently amended
or supplemented, at the applicable Representation Date subsequent thereto.
Section 2. Purchase and Sale.
(a) The several commitments of the Underwriters to purchase the
Underwritten Securities pursuant to the applicable Terms Agreement shall be
deemed to have been made on the basis of the representations and warranties
herein contained and shall be subject to the terms and conditions herein set
forth.
(b) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company may grant, if so provided in the applicable Terms Agreement relating to
the Initial Underwritten Securities, an option to the Underwriters named in such
Terms Agreement, severally and not jointly, to purchase up to the number of
Option Securities set forth therein at the same price per Option Security as is
applicable to the Initial Underwritten Securities less an amount equal to any
dividend paid by the Company and payable on the Initial Underwritten Securities
and not payable on such Option Securities. Such option, if granted, will expire
30 days (or such lesser number of days as may be specified in the applicable
Terms Agreement) after the Representation Date relating to the Initial
Underwritten Securities, and may be exercised in whole or in part from time to
time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial Underwritten
Securities upon notice by you to the Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and
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delivery for such Option Securities. Any such time, date and place of delivery
(a "Date of Delivery") shall be determined by you, but shall not be later than
seven full business days nor earlier than two full business days after the
exercise of said option, nor in any event prior to Closing Time, unless
otherwise agreed upon by you and the Company. If the option is exercised as to
all or any portion of the Option Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
Option Securities then being purchased which the number of Initial Underwritten
Securities each such Underwriter has severally agreed to purchase as set forth
in the applicable Terms Agreement bears to the total number of Initial
Underwritten Securities (except as otherwise provided in the applicable Terms
Agreement), subject to such adjustments as you in your discretion shall make to
eliminate any sales or purchases of fractional Underwritten Securities.
(c) Payment of the purchase price for, and delivery of, the
Underwritten Securities to be purchased by the Underwriters shall be made at the
office of ____________________________________________, or at such other place
as shall be agreed upon by you and the Company, at 10:00 A.M., New York City
time, on the third business day (unless postponed in accordance with the
provisions of Section 10 herein) following the date of the applicable Terms
Agreement or, if pricing takes place after 4:30 P.M., New York City time, on the
date of the applicable Terms Agreement, on the fourth business day (unless
postponed in accordance with the provisions of Section 10) following the date of
the applicable Terms Agreement or at such other time as shall be agreed upon by
you and the Company (each such time and date of payment and delivery being
referred to herein as the "Closing Time"). In addition, in the event that any or
all of the Option Securities are purchased by the Underwriters, payment of the
purchase price for, and delivery of certificates representing, such Option
Securities, shall be made at the above-mentioned offices of
_______________________________, or at such other place as shall be agreed upon
by you and the Company on each Date of Delivery as specified in the notice from
you to the Company. Unless otherwise specified in the applicable Terms
Agreement, payment shall be made to the Company by certified or official bank
check or checks in New York Clearing House funds payable to the order of the
Company against delivery to you for the respective accounts of the Underwriters
of the certificates for the Underwritten Securities to be purchased by them. The
Underwritten Securities shall be in such authorized denominations and registered
in such names as you may request in writing at least one business day prior to
the Closing Time or Date of Delivery, as the case may
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be. The Underwritten Securities, which may be in temporary form, will be made
available for examination and packaging by you on or before 3:00 P.M. on the
first business day prior to the Closing Time or the Date of Delivery, as the
case may be.
If authorized by the applicable Terms Agreement, the Underwriters named
therein may solicit offers to purchase Underwritten Securities from the Company
pursuant to delayed delivery contracts ("Delayed Delivery Contracts")
substantially in the form of Exhibit B hereto with such changes therein as the
Company may approve. As compensation for arranging Delayed Delivery Contracts,
the Company will pay to you at Closing Time, for the respective accounts of the
Underwriters, a fee specified in the applicable Terms Agreement for each of the
Underwritten Securities for which Delayed Delivery Contracts are made at the
Closing Time as is specified in the applicable Terms Agreement. Any Delayed
Delivery Contracts are to be with institutional investors of the types described
in the Prospectus. At the Closing Time, the Company will enter into Delayed
Delivery Contracts (for not less than the minimum number of Underwritten
Securities per Delayed Delivery Contract specified in the applicable Terms
Agreement) with all purchasers proposed by the Underwriters and previously
approved by the Company as provided below, but not for an aggregate number of
Underwritten Securities in excess of that specified in the applicable Terms
Agreement. The Underwriters will not have any responsibility for the validity or
performance of Delayed Delivery Contracts.
You shall submit to the Company, at least two business days prior to
the Closing Time, the names of any institutional investors with which it is
proposed that the Company will enter into Delayed Delivery Contracts and the
number of Underwritten Securities to be purchased by each of them, and the
Company will advise you, at least one business day prior to the Closing Time, of
the names of the institutions with which the making of Delayed Delivery
Contracts is approved by the Company and the number of Underwritten Securities
to be covered by each such Delayed Delivery Contract.
The number of Underwritten Securities agreed to be purchased by the
several Underwriters pursuant to the applicable Terms Agreement shall be reduced
by the number of Underwritten Securities covered by Delayed Delivery Contracts,
as to each Underwriter as set forth in a written notice delivered by you to the
Company; provided, however, that the total number of Underwritten Securities to
be purchased by all Underwriters shall be the total number of Underwritten
Securities covered by the applicable Terms Agreement, less the number of
Underwritten
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Securities covered by Delayed Delivery Contracts.
SECTION 3. Covenants of the Company. The Company covenants with you,
and with each Underwriter participating in the offering of Underwritten
Securities, as follows:
(a) If the Company does not elect to rely on Rule 434 under the 1933
Act Regulations, immediately following the execution of the applicable Terms
Agreement, the Company will prepare a Prospectus Supplement setting forth the
number of Underwritten Securities covered thereby and their terms not otherwise
specified in the Prospectus pursuant to which the Underwritten Securities are
being issued, the names of the Underwriters participating in the offering and
the number of Underwritten Securities which each severally has agreed to
purchase, the names of the Underwriters acting as co-managers in connection with
the offering, the price at which the Underwritten Securities are to be purchased
by the Underwriters from the Company, the initial public offering price, if any,
the selling concession and reallowance, if any, any delayed delivery
arrangements, and such other information as you and the Company deem appropriate
in connection with the offering of the Underwritten Securities; and the Company
will promptly transmit copies of the Prospectus Supplement to the Commission for
filing pursuant to Rule 424(b) of the 1933 Act Regulations and will furnish to
the Underwriters named therein as many copies of the Prospectus (including such
Prospectus Supplement) as you shall reasonably request. If the Company elects to
rely on Rule 434 under the 1933 Act Regulations, immediately following the
execution of the applicable Terms Agreement, the Company will prepare an
abbreviated term sheet that complies with the requirements of Rule 434 under the
1933 Act Regulations and will provide the Underwriters with copies of the form
of Rule 434 Prospectus, in such number as you shall reasonably request, and, if
necessary, promptly file or transmit for filing with the Commission the form of
Prospectus complying with Rule 434(c)(2) of the 1933 Act Regulations in
accordance with Rule 424(b) of the 1933 Act Regulations.
(b) The Company will notify you immediately, and confirm such notice in
writing, of (i) the effectiveness of any amendment to the Registration
Statement, (ii) the transmittal to the Commission for filing of any Prospectus
Supplement or other supplement or amendment to the Prospectus to be filed
pursuant to the 1934 Act, (iii) the receipt of any comments from the Commission,
(iv) any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for additional
information, and (v) the
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issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
and the Company will make every reasonable effort to prevent the issuance of any
such stop order and, if any stop order is issued, to obtain the lifting thereof
at the earliest possible moment.
(c) At any time when the Prospectus is required to be delivered under
the 1933 Act or the 1934 Act in connection with sales of the Underwritten
Securities, the Company will give you notice of its intention to file or prepare
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus, whether pursuant to the 1933 Act, 1934 Act or otherwise
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with an offering of Underwritten Securities which
differs from the Prospectus on file at the Commission at the time the
Registration Statement first becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act
Regulations, or any abbreviated term sheet prepared in reliance on Rule 434 of
the 1933 Act Regulations), and will furnish you with copies of any such
amendment or supplement or other documents proposed to be used or filed a
reasonable amount of time prior to such proposed filing and, unless required by
law, will not file or use any such amendment or supplement or other documents in
a form to which you or counsel for the Underwriters shall reasonably object.
(d) The Company will deliver to each Underwriter a signed copy of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith and documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the ▇▇▇▇ ▇▇▇) as you reasonably
request and will also deliver to each Underwriter a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(including documents incorporated by reference but without exhibits).
(e) The Company will furnish to each Underwriter, from time to time
during the period when the Prospectus is required to be delivered under the 1933
Act or the 1934 Act in connection with sales of the Underwritten Securities,
such number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request for the purposes contemplated by the 1933
Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act Regulations.
(f) If at any time when the Prospectus is required to be
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delivered under the 1933 Act or the 1934 Act in connection with sales of the
Underwritten Securities any event shall occur or condition exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters, to amend
or supplement the Prospectus in order that the Prospectus will not include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend or
supplement the Registration Statement or the Prospectus in order to comply with
the requirements of the 1933 Act or the 1933 Act Regulations, then the Company
will promptly prepare and file with the Commission such amendment or supplement,
whether by filing documents pursuant to the 1933 Act, the 1934 Act or otherwise,
as may be necessary to correct such untrue statement or omission or to make the
Registration Statement and Prospectus comply with such requirements.
(g) If applicable, the Company will endeavor, in cooperation with the
Underwriters, to qualify the Underwritten Securities and the Common Shares
issuable upon conversion of the Preferred Shares, if any, for offering and sale
under the applicable securities laws and real estate syndication laws of such
states and other jurisdictions of the United States as you may designate; and in
each jurisdiction in which the Underwritten Securities and the Common Shares
issuable upon conversion of the Preferred Shares, if any, have been so
qualified, the Company will file such statements and reports as may be required
by the laws of such jurisdiction to continue such qualification in effect for so
long as may be required for the distribution of the Underwritten Securities and
the Common Shares issuable upon conversion of the Preferred Shares, if any;
provided, however, that the Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction where it is not so qualified.
(h) With respect to each sale of Underwritten Securities, the Company
will make generally available to its security holders as soon as practicable,
but not later than 90 days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158 of the
1933 Act Regulations) covering a twelve month period beginning not later than
the first day of the Company's fiscal quarter next following the "effective
date" (as defined in such Rule 158) of the Registration Statement.
(i) The Company will continue to elect to qualify as a "real estate
investment trust" under the Code and will use its best
15
efforts to continue to meet the requirements to qualify as a "real estate
investment trust."
(j) The Company, during the period when the Prospectus is required to
be delivered under the 1933 Act or the 1934 Act in connection with sales of the
Underwritten Securities, will file promptly all documents required to be filed
with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act within the
time periods prescribed by the 1934 Act and the 1934 Act Regulations.
(k) The Company will not, during a period of 90 days from the date of
the applicable Terms Agreement, with respect to the Underwritten Securities
covered thereby, without your prior written consent, offer or sell, grant any
option for the sale of, or enter into any agreement to sell, any securities of
the same class or series or ranking on a parity with such Underwritten
Securities (other than the Underwritten Securities which are to be sold pursuant
to such Terms Agreement), or if such Terms Agreement relates to Preferred Shares
that are convertible into Common Shares, any Common Shares or any security
convertible into Common Shares (except for Common Shares issued pursuant to
reservations, agreements, employee benefit plans, dividend reinvestment plans,
or employee and director stock option plans), except as may otherwise be
provided in the applicable Terms Agreement.
(l) If the applicable Terms Agreement relates to Common Shares, the
Company will cause each officer of the Company who owns Common Shares to agree
not to offer for sale, sell or otherwise dispose of any shares of Common Shares
during the 90 days following the date of such Terms Agreement without your prior
written consent.
(m) If the Preferred Shares are convertible into Common Shares, the
Company will reserve and keep available at all times, free of preemptive rights
or other similar rights, a sufficient number of Common Shares for the purpose of
enabling the Company to satisfy any obligations to issue such shares upon
conversion of the Preferred Shares.
(n) If the Preferred Shares are convertible into Common Shares, the
Company will use its best efforts to list the Common Shares issuable upon
conversion of the Preferred Stock on the New York Stock Exchange or such other
national exchange on which the Company's Common Shares are then listed.
(o) The Company will use its best efforts to list the Underwritten
Securities on the New York Stock Exchange.
16
(p) The Company will use the net proceeds received by it from the sale
of the Underwritten Securities in the manner specified in the Prospectus under
the caption "Use of Proceeds."
Section 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement or the
applicable Terms Agreement, including (i) the printing and filing of the
Registration Statement as originally filed and of each amendment thereto, (ii)
the cost of printing, filing and distributing to the Underwriters copies of this
Agreement and the applicable Terms Agreement, (iii) the preparation, issuance
and delivery of the Underwritten Securities to the Underwriters, (iv) the fees
and disbursements of the Company's counsel and accountants, (v) if applicable,
the qualification of the Underwritten Securities and the Common Shares issuable
upon conversion of the Preferred Shares, if any, under securities laws and real
estate syndication laws in accordance with the provisions of Section 3(g),
including filing fees but not including the fees and disbursements of counsel
for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey, (vi) the printing and delivery to the
Underwriters of copies of the Registration Statement as originally filed and of
each amendment thereto, and of the Prospectus and any amendments or supplements
thereto, including each abbreviated term sheet delivered by the Company pursuant
to Rule 434 of the 1933 Act Regulations, (vii) the cost of reproducing and
distributing to the Underwriters copies of the Blue Sky Survey, (viii) any fees
charged by nationally recognized statistical rating organizations for the rating
of the Underwritten Securities, (ix) the fees and expenses, if any, incurred
with respect to the listing of the Underwritten Securities or the Common Shares
issuable upon conversion of the Preferred Shares, if any, on any national
securities exchange, and (x) the fees and expenses, if any, incurred with
respect to any filing with the National Association of Securities Dealers, Inc.
If the applicable Terms Agreement is canceled or terminated by you in
accordance with the provisions of Section 5 or Section 9(b)(i), the Company
shall reimburse the Underwriters named in such Terms Agreement for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
Section 5. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase Underwritten Securities pursuant to
the applicable Terms Agreement are subject to the accuracy of the
representations and warranties of the
17
Company herein contained, to the accuracy of the statements of the Company's
officers made in any certificate pursuant to the provisions hereof, to the
performance by the Company of all of its covenants and other obligations
hereunder, and to the following further conditions:
(a) At Closing Time, (i) no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission and (ii) if
Preferred Stock is being offered, the rating assigned by any nationally
recognized statistical rating organization to any preferred stock of the Company
as of the date of the applicable Terms Agreement shall not have been lowered
since such date nor shall any such rating organization have publicly announced
that it has placed the Company on what is commonly termed a "watch list" for
possible downgrading.
(b) At Closing Time, you shall have received:
(1) The favorable opinion, dated as of Closing Time,
of McGuire, Woods, Battle & ▇▇▇▇▇▇, L.L.P., counsel for the
Company, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The Company has been duly organized and
is validly existing as a corporation and 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 Prospectus as amended or supplemented.
(ii) The Company is duly qualified to
transact business in all jurisdictions in which the
conduct of its business requires such qualification,
or in which the failure to qualify would have a
materially adverse effect upon the business of the
Company.
(iii) Each subsidiary of the Company has
been duly organized and is validly existing as a
corporation, limited liability company, limited
partnership or real estate investment trust in good
standing under the laws of the jurisdiction of its
incorporation or organization, with power and
authority to own its properties and conduct
18
its business as described in the Prospectus as
amended or supplemented except where the failure to
so be in good standing would not have a material
adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or
business prospects of the Company and its
subsidiaries, considered as one enterprise; each such
subsidiary is duly qualified to transact business in
all jurisdictions in which the conduct of its
business requires such qualification, or in which the
failure to qualify would have a materially adverse
effect upon the business of such subsidiary; all of
the issued and outstanding shares or other beneficial
interests owned by the Company in any such subsidiary
have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the
Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, or other claim.
(iv) The Company has authorized and
outstanding capital stock as set forth in the
Prospectus under "Capitalization" (except for
subsequent issuances, if any, pursuant to
reservations, agreements or the conversion of
convertible securities referred to in the
Registration Statement including, without limitation,
the exercise or grant of stock options pursuant to
the Company's stock option plan or the issuance of
shares pursuant to the Company's dividend
reinvestment plan, stock purchase and loan plan or
employees' stock purchase plan); the authorized
capital stock of the Company has been duly
authorized; and the outstanding shares of capital
stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable
and are not subject to preemptive or other similar
rights arising by operation of law or, to the best of
such counsel's knowledge, otherwise.
(v) The applicable Underwritten Securities
have been duly and validly authorized by all
necessary corporate action and, when issued and
delivered pursuant to this Agreement against payment
of the consideration therefor specified in the
applicable Terms Agreement or the Delayed Delivery
Contracts, the applicable Underwritten
19
Securities will be validly issued, fully paid and
non-assessable; the Underwritten Securities are not
subject to preemptive or other similar rights arising
by operation of law or, to the best of such counsel's
knowledge, otherwise; and the Preferred Shares, if
applicable, conform to the provisions of the Articles
of Amendment.
(vi) If applicable, the Common Shares
issuable upon conversion of any of the Preferred
Shares have been duly and validly authorized and
reserved for issuance upon such conversion or
exercise by all necessary corporate action and such
shares, when issued upon such conversion or exercise,
will be duly and validly issued and will be fully
paid and non-assessable, and the issuance of such
shares upon such conversion or exercise will not be
subject to preemptive or other similar rights arising
by operation of law or, to the best of such counsel's
knowledge, otherwise.
(vii) Each of this Agreement, the applicable
Terms Agreement and the Delayed Delivery Contracts,
if any, has been duly authorized, executed and
delivered by the Company.
(viii) The Registration Statement is
effective under the 1933 Act and, to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been
issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission.
(ix) The Registration Statement and the
Prospectus, excluding the documents incorporated by
reference therein, as of their respective effective
or issue dates, comply as to form in all material
respects with the requirements of the 1933 Act and
the 1933 Act Regulations; it being understood,
however, that no opinion need be rendered with
respect to the financial statements, schedules and
other financial and statistical data included or
incorporated by reference in the Registration
Statement or the Prospectus or excluded therefrom. If
applicable, the Rule 434 Prospectus conforms in all
material aspects to the requirements of Rule 434
under the 1933 Act
20
Regulations.
(x) Each document filed pursuant to the 1934
Act (other than the financial statements, schedules
and other financial and statistical data included
therein or excluded therefrom, as to which no opinion
need be rendered) and incorporated or deemed to be
incorporated by reference in the Prospectus complied
when so filed (or as when amended prior to the
Representation Date) as to form in all material
respects with the 1934 Act and the 1934 Act
Regulations.
(xi) If applicable, the relative rights,
preferences, interests and powers of the Preferred
Shares are as set forth in the Articles of Amendment
relating thereto, and all such provisions are valid
under applicable Virginia law; and the form of
certificate used to evidence the Preferred Shares is
in due and proper form under applicable Virginia law,
and complies in all material respects with all
applicable statutory requirements.
(xii) The Underwritten Securities and, if
applicable, the Common Shares issuable upon
conversion of the Preferred Shares conform in all
material respects to the statements relating thereto
contained in the Prospectus.
(xiii) To the best of such counsel's
knowledge and information, there are no legal or
governmental proceedings pending or threatened which
are required to be disclosed in the Prospectus, other
than those disclosed therein, and all pending legal
or governmental proceedings to which the Company or
any of its subsidiaries is a party or of which any of
the property of the Company or its subsidiaries is
the subject which are not described in the
Prospectus, including ordinary routine litigation
incidental to the business, are, considered in the
aggregate, not material to the business of the
Company and its subsidiaries considered as one
enterprise.
(xiv) To the best of such counsel's
knowledge and information, there are no contracts,
indentures, mortgages, loan agreements, notes,
21
leases or other instruments required to be described
or referred to in the Registration Statement or the
Prospectus or to be filed as exhibits to the
Registration Statement other than those described or
referred to therein or filed as exhibits thereto, the
descriptions thereof or references thereto are
correct, and, to the best of such counsel's knowledge
and information, no default exists in the due
performance or observance of any obligation,
agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note,
lease or other instrument so described, referred to
or filed which would have a material adverse effect
on the condition, financial or otherwise, or on the
earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one
enterprise.
(xv) No authorization, approval or consent
of any court or governmental authority or agency is
required that has not been obtained in connection
with the consummation by the Company of the
transactions contemplated by this Agreement and the
applicable Terms Agreement, except such as may be
required under the 1933 Act, the 1934 Act and state
securities laws or real estate syndication laws.
(xvi) To the best of such counsel's
knowledge and information, the execution and delivery
of this Agreement and the applicable Terms Agreement
and the consummation of the transactions contemplated
herein and therein and compliance by the Company with
its obligations hereunder and thereunder will not
conflict with or constitute a breach of, or default
under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries
pursuant to any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which
the Company or any of its subsidiaries is a party or
by which they may be bound or to which any of the
property or assets of the Company or any of its
subsidiaries is subject, nor will such action result
in violation of the provisions of the Articles of
Incorporation or By-Laws of the
22
Company or any law, administrative regulation or
court decree.
(xvii) The Company is not required to be
registered under the ▇▇▇▇ ▇▇▇.
(xviii) The statements under the caption
"Description of Capital Shares" in the Prospectus,
insofar as such statements constitute a summary of
documents referred to therein or matters of law, are
accurate summaries and fairly and correctly present
the information called for with respect to such
documents and matters.
(2) The favorable opinion, dated as of Closing Time, of
McGuire, Woods, Battle & ▇▇▇▇▇▇, L.L.P., counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters, to the
effect that the Company has qualified to be taxed as a real estate
investment trust pursuant to Sections 856 through 860 of the Code for
its most recently ended fiscal year and for the four fiscal years
immediately preceding such year, and the Company's organization and
contemplated method of operation are such as to enable it to continue
to so qualify for its current fiscal year.
(3) The favorable opinion, dated as of the Closing
Time, of _____________________, counsel for the Underwriters,
with respect to the due organization of the Company and the
matters set forth in (v) to (ix), inclusive, and (xii), (xv)
and (xviii) of subsection (b)(1) of this Section. In rendering
their opinion, ____________________ may rely as to matters of
Virginia law upon the opinion of Hunton & ▇▇▇▇▇▇▇▇.
(4) In giving their opinions required by subsections
(b)(1) and (b)(3), respectively, of this Section, McGuire,
Woods, Battle & ▇▇▇▇▇▇, L.L.P. and _______________________
shall each additionally state that nothing has come to their
attention that would lead them to believe that the
Registration Statement or any amendment thereto (excluding the
financial statements and financial schedules included or
incorporated by reference therein, or excluded therefrom, as
to which such counsel need express no belief), at the time it
became effective or at the time an Annual Report on Form 10-K
was filed by the Company with the Commission (whichever is
later), or at the
23
Representation Date, 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 or that the Prospectus or any amendment or
supplement thereto (excluding the financial statements and
financial schedules included or incorporated by reference
therein, or excluded therefrom, as to which such counsel need
express no belief), at the Representation Date or at Closing
Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) At Closing Time, there shall not have been, since the date of the
applicable Terms Agreement or since the respective dates as of which information
is given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business; and you shall have
received a certificate of the President and Chief Executive Officer and the
Chief Financial Officer of the Company, dated as of such Closing Time, to the
effect that (i) there has been no such material adverse change and (ii) the
representations and warranties in Section 1 are true and correct with the same
force and effect as though such Closing Time were a Representation Date. As used
in this Section 5(c), the term "Prospectus" means the Prospectus in the form
first used to confirm sales of the Underwritten Securities.
(d) At the time of execution of the applicable Terms Agreement, you
shall have received from Ernst & Young LLP a letter dated such date, in form and
substance satisfactory to you, to the effect that (i) they are independent
accountants with respect to the Company and its subsidiaries within the meaning
of the 1933 Act and the 1934 Act and the applicable published rules and
regulations thereunder; (ii) it is their opinion that the consolidated financial
statements and supporting schedules of the Company and its subsidiaries included
or incorporated by reference in the Registration Statement and the Prospectus
and covered by their opinions therein comply in form in all material respects
with the applicable accounting requirements of the 1933 Act and the 1934 Act and
the related published rules and regulations thereunder; (iii) based upon limited
procedures set forth in detail in such letter (which shall include, without
limitation, the procedures specified by the American Institute of
24
Certified Public Accountants for a review of interim financial information as
described in SAS No. 71, Interim Financial Information, with respect to the
unaudited condensed consolidated financial statements of the Company and its
subsidiaries included or incorporated by reference in the Registration
Statement), nothing came to their attention that caused them to believe that (A)
any material modifications should be made to the unaudited financial statements
and financial statement schedules of the Company and its subsidiaries included
or incorporated by reference in the Registration Statement and the Prospectus
for them to be in conformity with generally accepted accounting principles, (B)
the unaudited financial statements and financial statement schedules of the
Company included or incorporated by reference in the Registration Statement and
the Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the 1934 Act and the related published
rules and regulations thereunder, or (C) at a specified date not more than three
days prior to the date of the applicable Terms Agreement, there has been any
change in the capital stock of the Company or in the notes payable or mortgage
notes payable of the Company or any decrease in the total assets of the Company,
as compared with the amounts shown in the most recent consolidated balance sheet
included or incorporated by reference in the Registration Statement and the
Prospectus or, during the period from the date of the most recent consolidated
statement of operations included or incorporated by reference in the
Registration Statement and the Prospectus to a specified date not more than
three days prior to the date of the applicable Terms Agreement, there were any
decreases, as compared with the corresponding period in the preceding year, in
rental income or in the total or per share amounts of net income or income
before gains (losses) on investments and extraordinary items of the Company,
except in all instances for changes, increases or decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur;
(iv) they have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to their attention as a
result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301, 402 and 503(d) of Regulation S-K; and (v) in addition
to the audit referred to in their opinions and the limited procedures referred
to in clause (iii) above, they have carried out certain specified procedures,
not constituting an audit, with respect to certain amounts, percentages and
financial information which are included or incorporated by reference in the
Registration Statement and the Prospectus and which are specified by you, and
25
have found such amounts, percentages and financial information to be in
agreement with the relevant accounting, financial and other records of the
Company and its subsidiaries identified in such letter.
(e) At Closing Time, you shall have received from Ernst & Young LLP a
letter dated as of such Closing Time to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (d) of this
Section, except that the "specified date" referred to shall be a date not more
than three days prior to such Closing Time.
(f) At Closing Time, counsel for the Underwriters shall have been
furnished with such documents and opinions as they may reasonably require for
the purpose of enabling them to pass upon the issuance and sale of the
Underwritten Securities as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the
Underwritten Securities as herein contemplated shall be satisfactory in form and
substance to you and counsel for the Underwriters.
(g) In the event the Underwriters exercise their option provided in a
Terms Agreement as set forth in Section 2(b) hereof to purchase all or any
portion of the Option Securities, the representations and warranties of the
Company contained herein and the statements in any certificates furnished by the
Company hereunder shall be true and correct as of each Date of Delivery, and you
shall have received:
(1) A certificate, dated such Date of Delivery, of the
President and Chief Executive Officer and the Chief Financial Officer
of the Company, in their capacities as such, confirming that the
certificate delivered at Closing Time pursuant to Section 5(c) hereof
remains true and correct as of such Date of Delivery.
(2) The favorable opinions of McGuire, Woods, Battle & ▇▇▇▇▇▇,
L.L.P., counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, dated such Date of Delivery, relating to
the Option Securities and otherwise substantially to the same effect as
the opinions required by Sections 5(b)(1) and 5(b)(2) hereof.
(3) The favorable opinion of _____________________,
26
counsel for the Underwriters, dated such Date of Delivery, relating to
the Option Securities and otherwise to the same effect as the opinion
required by Section 5(b)(3) hereof.
(4) A letter from Ernst & Young LLP, in form and substance
satisfactory to you and dated such Date of Delivery, substantially the
same in scope and substance as the letter furnished to you pursuant to
Section 5(e) hereof, except that the "specified date" in the letter
furnished pursuant to this Section 5(g)(4) shall be a date not more
than three days prior to such Date of Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, the applicable Terms Agreement
may be terminated by you by notice to the Company at any time at or prior to the
Closing Time, and such termination shall be without liability of any party to
any other party except as provided in Section 4 hereof.
Section 6. 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 Section 15 of the 1933 Act as follows:
(1) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be a part of the Registration Statement pursuant
to Rule 430A(b) or Rule 434 of the 1933 Act Regulations, if applicable,
or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact included in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto)
or the omission, or alleged omission therefrom, of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(2) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission
referred to
27
in subsection (1) above, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(3) against any and all expense whatsoever, as incurred
(including, the fees and disbursements of counsel chosen by you),
reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceedings by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (1) or (2) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through you expressly for use in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act, against any and all loss, liability, claim,
damage and expense arising from breach of this Agreement or any Terms Agreement
or described in the indemnity contained in subsection (a) of this Section, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto) or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through you expressly for use in
the Registration Statement (or any amendment thereto) or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. In no event shall the indemnifying
28
parties be liable for fees and expenses of more than one counsel (in addition to
any local counsel) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances.
Section 7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and the
Underwriters with respect to the offering of the Underwritten Securities shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
one or more of the Underwriters in respect of such offering, as incurred, in
such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the applicable Prospectus Supplement in respect of such offering
bears to the initial public offering price appearing thereon and the Company is
responsible for the balance; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇
▇▇▇) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Notwithstanding the provisions of this
Section 7, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Underwritten Securities
purchased by it pursuant to the applicable Terms Agreement and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay in respect of such losses,
liabilities, claims, damages and expenses. For purposes of this Section 7, each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.
Section 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or the applicable Terms Agreement, or contained in certificates of
officers of the Company submitted pursuant hereto, shall remain operative and in
full force and effect, regardless of any termination of this Agreement, or
29
investigation made by or on behalf of any Underwriter or any controlling person,
or by or on behalf of the Company and shall survive delivery of and payment for
the Underwritten Securities to the Underwriters.
Section 9. Termination of Agreement. (a) This Agreement (excluding the
applicable Terms Agreement) may be terminated for any reason at any time by the
Company or by you upon the giving of 30 days' written notice of such termination
to the other party hereto; provided that this Agreement may not be terminated
prior to the Closing Time set forth in any applicable Terms Agreement.
(b) You may also terminate the applicable Terms Agreement, by notice to
the Company, at any time at or prior to the Closing Time (i) if there has been,
since the date of such Terms Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or any outbreak of hostilities or other calamity or crisis or
escalation of any existing hostilities, the effect of which is such as to make
it, in your reasonable judgment, impracticable to market the Underwritten
Securities or enforce contracts for the sale of the Underwritten Securities, or
(iii) if trading in any of the securities of the Company has been suspended by
the Commission or the New York Stock Exchange, or if trading generally on either
the New York Stock Exchange or the American Stock Exchange has been suspended,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said exchanges or by
order of the Commission or any other governmental authority, or if a banking
moratorium has been declared by Federal, New York or Virginia authorities, or
(iv) if Preferred Shares are being offered and the rating assigned by any
nationally recognized statistical rating organization to any preferred stock or
debt of the Company as of the date of the applicable Terms Agreement shall have
been lowered since such date or if any such rating organization shall have
publicly announced that it has placed any preferred stock or debt of the Company
on what is commonly termed a "watch list" for possible downgrading. As used in
this Section 9(b), the term "Prospectus" means the Prospectus in the form first
used to confirm sales of the Underwritten Securities.
(c) In the event of any such termination, (x) the covenants set forth
in Section 3 with respect to any offering of
30
Underwritten Securities shall remain in effect so long as any Underwriter owns
any such Underwritten Securities purchased from the Company pursuant to the
applicable Terms Agreement and (y) the covenant set forth in Section 3(h)
hereof, the provisions of Section 4 hereof, the indemnity and contribution
agreements set forth in Sections 6 and 7 hereof, and the provisions of Sections
8 and 13 hereof shall remain in effect.
Section 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time to purchase the Underwritten
Securities which it or they are obligated to purchase under the applicable Terms
Agreement (the "Defaulted Securities"), then you shall have the right, within 48
hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, you shall not have completed such
arrangements within such 48-hour period, then:
(a) if the total number of Defaulted Securities does not exceed 10% of
the total number of Underwritten Securities to be purchased pursuant to such
Terms Agreement, the non-defaulting Underwriters named in such Terms Agreement
shall be obligated to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the total number of Defaulted Securities exceeds 10% of the
total number of Underwritten Securities to be purchased pursuant to such Terms
Agreement, the applicable Terms Agreement shall terminate without liability on
the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default under this Agreement and
the applicable Terms Agreement.
In the event of any such default which does not result in a termination
of the applicable Terms Agreement, either you or the Company shall have the
right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or the
Prospectus or in any other documents or arrangements.
Section 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of
31
telecommunication. Notices to the Underwriters shall be directed c/o [name and
address of Representative], attention of ______________________________; and
notices to the Company shall be directed to it at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and Chief
Executive Officer.
Section 12. Parties. This Agreement and the applicable Terms Agreement
shall inure to the benefit of and be binding upon you and the Company and any
Underwriter who becomes a party to such Terms Agreement, and their respective
successors. Nothing expressed or mentioned in this Agreement or the applicable
Terms Agreement is intended or shall be construed to give any person, firm or
corporation, other than those referred to in Sections 6 and 7 and their heirs
and legal representatives, any legal or equitable right, remedy or claim under
or in respect of this Agreement or such Terms Agreement or any provision herein
or therein contained. This Agreement and the applicable Terms Agreement and all
conditions and provisions hereof and thereof are intended to be for the sole and
exclusive benefit of the parties hereto and thereto and their respective
successors and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Underwritten Securities from any Underwriter shall
be deemed to be a successor by reason merely of such purchase.
Section 13. Governing Law and Time. This Agreement and the applicable
Terms Agreement shall be governed by and construed in accordance with the laws
of the Commonwealth of Virginia applicable to agreements made and to be
performed in said State. Specified times of day refer to Richmond, Virginia
time.
Section 14. Counterparts. This Agreement and the applicable Terms
Agreement may be executed in one or more counterparts, and if executed in more
than one counterpart the executed counterparts shall constitute a single
instrument.
32
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between you and the Company in accordance with its terms.
Very truly yours,
CORNERSTONE REALTY INCOME TRUST, INC.
By:__________________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first
above written:
[Names[s] of Representative[s]]
By:________________________________
33
Exhibit A
_______ Shares
CORNERSTONE REALTY INCOME TRUST, INC.
(a Virginia corporation)
[Title of Securities]
TERMS AGREEMENT
Dated: _____________, 199__
To: Cornerstone Realty Income Trust, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
Dear Sirs:
We (the "Representative[s]") understand that Cornerstone Realty Income
Trust, Inc., a Virginia corporation (the "Company"), proposes to issue and sell
the number of its [common shares (the "Common Shares")] [preferred shares (the
"Preferred Shares")] (such [Common Shares]) [Preferred Shares] being
collectively hereinafter [also] referred to as the "Underwritten Securities").
Subject to the terms and conditions set forth or incorporated by reference
herein, the underwriters named below (the "Underwriters") offer to purchase,
severally and not jointly, the respective numbers of [Initial Underwritten
Securities (as defined in the Underwriting Agreement referred to below)] set
forth below opposite their respective names, and a proportionate share of Option
Securities (as defined in the Underwriting Agreement referred to below) to the
extent any are purchased, at the purchase price set forth below.
(1029)V:\CORNER\STOCK.AGT
34
Number of Shares
of Initial Underwriter
Underwritten Securities
------------------------
Total $
=======================
A-1
The Underwritten Securities shall have the following terms:
[Common Shares] [Preferred Shares]
Title of Securities:
Number of Shares:
[Current Ratings:]
[Dividend Rate: [$ ] [ %], Payable:]
[Stated Value:]
[Liquidation Preference:]
[Ranking:]
Public Offering Price Per Share: $ [, plus accumulated
dividends, if any, from , 19 .]
Purchase Price Per Share: $ [, plus accumulated dividends,
if any, from , 19 .]
[Conversion Provisions:]
[Redemption Provisions:]
[Sinking Fund Requirements:]
Number of Option Securities, if any, that may be purchased by the
Underwriters:
Delayed Delivery Contracts: [authorized] [not authorized] [Date
of Delivery:
Minimum Contract:
Maximum Number of Shares:
Fee:] Additional co-managers, if any:
Other terms:
Closing time, date and location:
All the provisions contained in the document attached as Annex A hereto
entitled "Cornerstone Realty Income Trust, Inc.- Common Shares and Preferred
Shares-Underwriting Agreement" are hereby incorporated by reference in their
entirety herein and shall be deemed to be a part of this Terms Agreement to the
same extent as if such provisions had been set forth in full herein. Terms
defined in such document are used herein as therein defined.
Please accept this offer no later than ____ o'clock P.M. (Richmond,
Virginia time) on by signing a copy of this Terms
A-2
Agreement in the space set forth below and returning the signed copy to us.
Very truly yours,
[NAME[S] OF REPRESENTATIVE[S]
By:_________________________
Acting on behalf of
[itself] [themselves] and
the other named
Underwriters.
Accepted:
CORNERSTONE REALTY INCOME TRUST, INC.
By:_________________________
Name:
Title:
A-3
Exhibit B
CORNERSTONE REALTY INCOME TRUST, INC.
(a Virginia corporation)
[Title of Securities]
DELAYED DELIVERY CONTRACT
_____________, 19__
Cornerstone Realty Income Trust, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
Dear Sirs:
The undersigned hereby agrees to purchase from Cornerstone Realty
Income Trust, Inc. (the "Company"), and the Company agrees to sell to the
undersigned on __________, 19__ (the "Delivery Date"), of the Company's [insert
title of security] (the "Securities"), offered by the Company's Prospectus dated
__________, 19__, as supplemented by its Prospectus Supplement dated
___________, 19__, receipt of which is hereby acknowledged, at a purchase price
of [$__________], on the Delivery Date, and on the further terms and conditions
set forth in this contract.
Payment for the Securities which the undersigned has agreed to purchase
on the Delivery Date shall be made to the Company or its order by certified or
official bank check in New York Clearing House funds at the office of , on the
Delivery Date, upon delivery to the undersigned of the Securities to be
purchased by the undersigned in definitive form and in such denominations and
registered in such names as the undersigned may designate by written or
telegraphic communication addressed to the Company not less than five full
business days prior to the Delivery Date.
The obligation of the undersigned to take delivery of and make payment
for Securities on the Delivery Date shall be subject only to the conditions that
(1) the purchase of Securities to be
A-4
made by the undersigned shall not on the Delivery Date be prohibited under the
laws of the jurisdiction to which the undersigned is subject and (2) the
Company, on or before __________, 199_, shall have sold to the Underwriters of
the Securities (the "Underwriters") such principal amount of the Securities as
is to be sold to them pursuant to the Terms Agreement dated __________, 199_
between the Company and the Underwriters. The obligation of the undersigned to
take delivery of and make payment for Securities shall not be affected by the
failure of any purchaser to take delivery of and make payments for Securities
pursuant to other contracts similar to this contract. The undersigned represents
and warrants to you that its investment in the Securities is not, as of the date
hereof, prohibited under the laws of any jurisdiction to which the undersigned
is subject and which govern such investment.
Promptly after completion of the sale to the Underwriters, the Company
will mail or deliver to the undersigned at its address set forth below notice to
such effect, accompanied by a copy of the opinion of counsel for the Company
delivered to the Underwriters in connection therewith.
By the execution hereof, the undersigned represents and warrants to the
Company that all necessary action for the due execution and delivery of this
contract and the payment for and purchase of the Securities has been taken by it
and no further authorization or approval of any governmental or other regulatory
authority is required for such execution, delivery, payment or purchase, and
that, upon acceptance hereof by the Company and mailing or delivery of a copy as
provided below, this contract will constitute a valid and binding agreement of
the undersigned in accordance with its terms.
This contract will inure to the benefit of and be binding upon the
parties hereto and their respective successors, but will not be assignable by
either party hereto without the written consent of the other.
It is understood that the Company will not accept Delayed Delivery
Contracts for a number of Securities in excess of ________ and that the
acceptance of any Delayed Delivery Contract is in the Company's sole discretion
and, without limiting the foregoing, need not be on a first-come, first-served
basis. If this contract is acceptable to the Company, it is requested that the
Company sign the form of acceptance on a copy hereof and mail or deliver a
signed copy hereof to the undersigned at its address set forth below. This will
become a binding contract between the Company and the undersigned when such copy
is so mailed or
A-5
delivered.
This Agreement shall be governed by the laws of the State of New York.
Yours very truly,
-----------------------------
(Name of Purchaser)
By:__________________________
(Title)______________________
(Address)____________________
Accepted as of the date first above written.
CORNERSTONE REALTY INCOME TRUST, INC.
By:__________________________
(Title)
PURCHASER-PLEASE COMPLETE AT TIME OF SIGNING
The name and telephone number of the representative of the Purchaser
with whom details of delivery on the Delivery Date may be discussed are as
follows: (Please print.)
Telephone No.
Name (including Area Code
--------------------
A-6