Proxy Agreement - Bay Apartment Communities Inc. and Central States, Southeast and Southwest Areas Pension Fund
PROXY AGREEMENT
This Proxy Agreement, dated as of March 9, 1998 (this "Agreement"), is
among Bay Apartment Communities, Inc., a Maryland corporation (the "Company"),
and Central States, Southeast and Southwest Areas Pension Fund (the
"Stockholder") acting by and through its agent, LaSalle Advisors Capital
Management, Inc. ("LaSalle"), a registered investment advisor and successor to
LaSalle Advisors Limited Partnership.
RECITALS:
A. As of the date hereof, the Stockholder owns 2,308,800 shares of
Series A Preferred Stock, par value $0.01 per share (the "Series A Preferred
Stock"), of the Company (such shares are hereinafter referred to as the
"Shares");
B. The Company and the Stockholder desire to effect certain amendments
to the Company's Articles of Incorporation, as amended, relating to the
liquidation and voting rights of the Series A Preferred Stock (the "Charter
Amendments"), which Charter Amendments are set forth on Exhibit A hereto;
C. The Company proposes to enter into an Agreement and Plan of Merger,
dated on or about the date hereof (as the same may be amended from time to time,
the "Merger Agreement"), which will provide, on the terms and subject to the
conditions thereof, for the merger of Avalon Properties, Inc. with and into the
Company and/or any of its affiliates (the "Merger"); and
D. As a condition to the willingness of the Company to recommend that
the Company's stockholders approve the Charter Amendments at an annual or
special meeting, the Company has requested that the Stockholder agree, and, in
order to induce the Company to recommend that the Company's stockholders approve
such Charter Amendments at such a meeting, the Stockholder is willing to agree,
to enter into this Agreement to grant the Company an irrevocable proxy to vote,
or to otherwise cause to be voted, the Shares pursuant to the terms and
conditions hereof.
NOW, THEREFORE, the parties hereto agree as follows:
I. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to the Company as
follows:
1.1 Due Authority. The Stockholder has full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by or on behalf of the Stockholder and, assuming its due
authorization, execution and delivery by the
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Company, constitutes a legal, valid and binding obligation of the Stockholder,
enforceable against it in accordance with its terms.
1.2 No Conflict; Consents. (a) The execution and delivery of this
Agreement by the Stockholder does not, and the performance by the Stockholder of
its obligations under this Agreement and the compliance by the Stockholder with
the provisions hereof do not and will not, conflict with or violate (i) the
advisory agreement between LaSalle and the Stockholder (the "Advisory
Agreement") or (ii) any law, statute, rule, regulation, order, writ, judgment or
decree referred to in the Advisory Agreement applicable to the Stockholder or
the Shares.
(b) The execution and delivery of this Agreement by the
Stockholder does not, and the performance of this Agreement by the Stockholder
will not, require any consent, approval, authorization or permit of, or filing
with (except for applicable requirements, if any, of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), or notification to, any government or
regulatory authority by the Stockholder.
(c) No other person or entity has, or will have during the Proxy
Term (subject to the Stockholder's right to terminate the Advisory Agreement, it
being understood that no such termination shall affect any of the Company's
rights or any of the Stockholder's obligations hereunder or under the
Irrevocable Proxy (the "Irrevocable Proxy") given to the Company by Mellon Bank,
N.A. ("Mellon")), any right, directly or indirectly, to vote or control or
affect the voting of the Shares.
1.3 Title to Shares. Mellon, as custodian, (a) is the record owner of
the Shares free and clear, to the Stockholder's knowledge, of any proxy or
voting restriction other than pursuant to this Agreement and (b) has, and during
the Proxy Term will have (subject to the possible termination of Mellon's right
to act as custodian, it being understood that no such termination shall affect
any of the Company's rights or any of the Stockholder's obligations hereunder or
under the Irrevocable Proxy), sole voting power (subject to the direction of
LaSalle) with respect to the Shares.
1.4 Acknowledgment of Reliance. The Stockholder understands and
acknowledges that the Company is agreeing to recommend that the Company's
stockholders approve the Charter Amendments in reliance upon the Stockholder's
execution and delivery of this Agreement.
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II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Stockholder as
follows:
2.1 Due Authority. The Company has full power, corporate or otherwise,
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by or
on behalf of the Company and, assuming its due authorization, execution and
delivery by the Stockholder, constitutes a legal, valid and binding obligation
of the Company, enforceable against it in accordance with its terms.
2.2 No Conflict; Consents. (a) The execution and delivery of this
Agreement does not, and the performance by the Company of its obligations
contemplated by this Agreement and its compliance with any provisions hereof do
not and will not, (i) conflict with or violate any law, statute, rule,
regulation, order, writ, judgment or decree applicable to such party, (ii)
conflict with or violate the Company's charter or bylaws, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company is a party or by which the
Company is bound.
(b) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with (except for
applicable requirements, if any, of the Exchange Act) or notification to, any
governmental or regulatory authority by the Company.
III. CERTAIN COVENANTS OF THE STOCKHOLDER
The Stockholder hereby covenants and agrees with the Company as follows:
3.1 Transfer of Shares. Except pursuant to that certain Shareholder
Agreement, dated the date hereof, between the Company and the Stockholder,
during the Proxy Term the Stockholder shall not, and shall not permit anyone
else to, (a) sell, transfer, encumber, pledge, assign or otherwise dispose of
any of the Shares, (b) deposit the Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Shares or grant any proxy or
power of attorney with respect thereto, or (c) enter into any contract, option
or other legally binding undertaking providing for any transaction provided in
(a) or (b) hereof, unless the proposed transferee or pledgee shall have entered
into a written agreement with the Company, containing terms and conditions
satisfactory to the Company, in which such transferee or pledgee shall agree to
be bound by all the terms and conditions of this Agreement.
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3.2 Proxy. (a) The Stockholder, by this Agreement, hereby constitutes
and appoints the Company, with full power of substitution, during and for the
Proxy Term, as the Stockholder's true and lawful attorney and irrevocable proxy,
for and in the Stockholder's name, place and stead, to vote each of the Shares
owned by the Stockholder as Stockholder's proxy, at every meeting of the
stockholders of the Company or any adjournment thereof or in connection with any
written consent of the Company's stockholders, in favor of the Charter
Amendments. The Stockholder intends the foregoing proxy to be, and it shall be,
irrevocable and coupled with an interest during the Proxy Term and hereby
revokes any proxies previously granted by the Stockholder with respect to the
Shares.
(b) The Stockholder hereby further agrees, with respect to any
Shares not voted pursuant to paragraph (a) above, including without limitation
any Shares owned beneficially but not of record by the Stockholder, that during
the Proxy Term, at every meeting of the stockholders of the Company or any
adjournment thereof or in connection with any written consent of the Company's
stockholders, the Stockholder shall vote or cause to be voted, all Shares
whether or not owned of record or beneficially by the Stockholder except as
specifically requested in writing by the Company in advance, in favor of the
Charter Amendments.
(c) For the purposes of this Agreement, "Proxy Term" means the
period from the date hereof until the earlier of (i) the final adjournment of
the Company's next annual meeting of stockholders and (ii) the consummation of
the Merger in accordance with the terms of the Merger Agreement.
(d) The Stockholder agrees that it will not enter into any
agreement or understanding with any person or entity or take any action during
the Proxy Term which will permit any person or entity to vote or give
instructions to vote the Shares in any manner inconsistent with the terms of
this Section 3.2. The Stockholder further agrees to take such further action and
execute and deliver, and cause others to execute and deliver such other
instruments as may be necessary to effectuate the intent of this Agreement,
including without limitation, proxies and other documents permitting the Company
or any of its officers to vote the Shares or to direct the record owners thereof
to vote the Shares in accordance with this Agreement. Without limiting the
foregoing, the Stockholder will use commercially reasonable efforts to, and will
instruct the record owner of the Shares to, deliver to the Company a duly
executed Irrevocable Proxy in the form attached hereto as Exhibit B not later
than five business days after the date hereof.
(e) The Stockholder further approves and consents to, if and to
the extent such approval or consent is necessary pursuant to or for the purposes
of Section (5) of the Articles Supplementary to the Company's Articles of
Incorporation for the Series A Preferred Stock, the creation, authorization and
issuance of one or more new classes or series of stock having terms (other than
the number of shares, dividend rates, payment dates, and redemption provisions)
substantially similar to the existing terms of the Articles Supplementary for
the Company's Series C and Series D Preferred Stock.
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3.3 Legend. The Stockholder agrees that it will use commercially
reasonable efforts to, and will instruct the custodian of the shares to, tender
to the Company, within ten days after the date hereof, the certificate
representing the Shares and the Company may inscribe upon such certificate the
following legend, which the Company shall cause to be removed promptly following
the Proxy Term or as otherwise mutually agreed by the parties: "The shares of
Series A Preferred Stock, par value $.01 per share, of Bay Apartment
Communities, Inc. (the "Company") represented by this certificate are subject to
a Proxy Agreement dated as of March 9, 1998, and may not be sold or otherwise
transferred except in accordance therewith. Copies of such Agreement may be
obtained at the principal executive offices of the Company upon request and
without charge."
IV. MISCELLANEOUS; GENERAL PROVISIONS
4.1 Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
4.2 Entire Agreement. This Agreement constitutes the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties with respect to the subject matter hereof.
4.3 Amendments. This Agreement may not be modified, amended, waived,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
4.4 Assignment. This Agreement may not be assigned by either party
hereto by operation of law or otherwise without the other party's consent and is
binding on each party's successors and permitted assignees.
4.5 Parties in Interest. This Agreement is binding upon, and shall inure
solely to the benefit of, each party hereto and nothing in this Agreement,
express or implied, is intended to or will confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
4.6 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof or was otherwise breached. It is
accordingly agreed that the parties will be entitled to specific relief
hereunder including, without limitation, an injunction or injunctions
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to prevent and enjoin breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, in any state or federal
court in the State of Maryland, in addition to any other remedy to which they
may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with respect to any such remedy are hereby waived.
4.7 Governing Law; Jurisdiction and Venue. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
Maryland without regard to its rules of conflict of laws. The parties hereto
hereby irrevocably and unconditionally consent to and submit to the exclusive
jurisdiction of the federal and state Maryland courts for any litigation arising
out of or relating to this Agreement and the transactions contemplated hereby
(and agree not to commence any litigation relating thereto except in such
courts), waive any objection to the laying of venue of any such litigation in
such Maryland courts and agree not to plead or claim in any such Maryland court
that such litigation brought therein has been brought in any inconvenient forum.
4.8 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
BAY APARTMENT COMMUNITIES, INC.
By: /s/ Gilbert M. Meyer
-------------------------------------
Name: Gilbert M. Meyer
Title: President
CENTRAL STATES, SOUTHEAST AND
SOUTHWEST AREAS PENSION FUNDS
By Its Authorized Agent:
LaSalle Advisors Capital Management, Inc.
By: /s/ Stanley J. Kraska, Jr.
-------------------------------------
Name: Stanley J. Kraska, Jr.
Title: Managing Director
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EXHIBIT A
AMENDMENTS TO THE CHARTER OF
BAY APARTMENT COMMUNITIES, INC.
RELATING TO THE SERIES A PREFERRED STOCK
1. Article SECOND, Section (3)(a) of the Articles Supplementary to the
Articles of Incorporation of Bay Apartment Communities, Inc., which were filed
with the State Department of Assessments and Taxation of the State of Maryland
on September 29, 1995 in order to designate the rights, preferences and
privileges of the Series A Preferred Stock, would be deleted and the following
inserted in lieu thereof:
"(3) LIQUIDATION RIGHTS.
(a) Subject to any prior rights of any class or series of stock,
in the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock by reason of their ownership
of such stock, an amount equal to all accrued but unpaid dividends for
each share of Series A Preferred Stock then held by them. If upon the
occurrence of such event, the assets and funds thus distributed among
the holders of the Series A Preferred Stock shall be insufficient to
permit the payment to such holders of the full amounts to which they are
entitled under the preceding sentence, then, subject to any prior rights
of any classes or series of stock, the entire assets and funds of the
Corporation legally available for distribution shall be distributed
ratably to the holders of the Series A Preferred Stock and the holders
of any other shares of Stock on a parity for liquidation purposes with
the Series A Preferred Stock in proportion to the aggregate amounts owed
to each such holder."
2. Article SECOND, Section (5) of the Articles Supplementary to the
Company's Articles of Incorporation, which were filed with the State Department
of Assessments and Taxation of the State of Maryland on September 29, 1995 in
order to designate the rights, preferences and privileges of the Series A
Preferred Stock, would be deleted and the following inserted in lieu thereof:
"(5) VOTING RIGHTS.
Except as indicated in this Section 5, or except as otherwise
from time to time required by applicable law, the holders of shares of Series A
Preferred Stock shall not be entitled to vote on any matter on which the holders
of shares of Common Stock are entitled to vote, except that the holders of a
majority of the outstanding shares of Series A Preferred Stock, voting as a
separate class, shall be required to vote on and approve any material adverse
change in the
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rights, preferences or privileges of the Series A Preferred Stock. For purposes
of the foregoing, the creation of a new class of stock having rights,
preferences or privileges senior to, in parity with or junior to the rights,
preferences or privileges of the Series A Preferred Stock shall not be treated
as a material adverse change in the rights, preferences or privileges of the
Series A Preferred Stock, and the holders of Series A Preferred Stock shall not
have any right to vote on the creation of such new class of stock. Except as
provided above and as required by law, the holders of Series A Preferred Stock
are not entitled to vote on any merger or consolidation involving the
Corporation, on any share exchange or on a sale of all or substantially all of
the assets of the Corporation."
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EXHIBIT B
BAY APARTMENT COMMUNITIES, INC.
IRREVOCABLE PROXY
The undersigned holder of 2,308,800 shares of Series A Preferred Stock,
par value $.01 per share (the "Series A Preferred Stock"), of Bay Apartment
Communities, Inc., a Maryland corporation (the "Company"), hereby appoints
Messrs. Gilbert M. Meyer and Jeffrey B. Van Horn, each a shareholder and
individually the President and the Secretary of the Company, respectively, and
each of them singly, as proxies (the "Proxies"), each with full power of
substitution, for and in the name of the undersigned at an annual or special
meeting of the stockholders of the Company, and at any and all postponements or
adjournments thereof, to vote all shares of the Series A Preferred Stock of the
Company FOR the amendments to the Company's Articles of Incorporation relating
to the voting and liquidation rights of the Series A Preferred Stock which are
attached hereto as Exhibit I, as if the undersigned were present and voting such
shares. The undersigned hereby affirms that this Irrevocable Proxy is coupled
with an interest and is irrevocable, and ratifies and confirms all that the
Proxies may lawfully do or cause to be done by virtue hereof.
Executed this 22nd day of April, 1998.
WITNESS: MELLON BANK, N.A., CUSTODIAN
/s/ Jacqueline Davis By: Boston Safe Deposit and Trust Company
------------------------- Mellon Bank, N.A.
DTC No: 964
Name: /s/ Sandra M. Spontak
-----------------------------------
Title: Trust Officer
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EXHIBIT I
AMENDMENTS TO THE CHARTER OF
BAY APARTMENT COMMUNITIES, INC.
RELATING TO THE SERIES A PREFERRED STOCK
1. Article SECOND, Section (3)(a) of the Articles Supplementary to the
Articles of Incorporation of Bay Apartment Communities, Inc., which were filed
with the State Department of Assessments and Taxation of the State of Maryland
on September 29, 1995 in order to designate the rights, preferences and
privileges of the Series A Preferred Stock, would be deleted and the following
inserted in lieu thereof:
"(3) LIQUIDATION RIGHTS.
(a) Subject to any prior rights of any class or series of stock,
in the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock by reason of their ownership
of such stock, an amount equal to all accrued but unpaid dividends for
each share of Series A Preferred Stock then held by them. If upon the
occurrence of such event, the assets and funds thus distributed among
the holders of the Series A Preferred Stock shall be insufficient to
permit the payment to such holders of the full amounts to which they are
entitled under the preceding sentence, then, subject to any prior rights
of any classes or series of stock, the entire assets and funds of the
Corporation legally available for distribution shall be distributed
ratably to the holders of the Series A Preferred Stock and the holders
of any other shares of Stock on a parity for liquidation purposes with
the Series A Preferred Stock in proportion to the aggregate amounts owed
to each such holder."
2. Article SECOND, Section (5) of the Articles Supplementary to the
Company's Articles of Incorporation, which were filed with the State Department
of Assessments and Taxation of the State of Maryland on September 29, 1995 in
order to designate the rights, preferences and privileges of the Series A
Preferred Stock, would be deleted and the following inserted in lieu thereof:
"(5) VOTING RIGHTS.
Except as indicated in this Section 5, or except as otherwise
from time to time required by applicable law, the holders of shares of Series A
Preferred Stock shall not be entitled to vote on any matter on which the holders
of shares of Common Stock are entitled to vote, except that the holders of a
majority of the outstanding shares of Series A Preferred Stock, voting as a
separate class, shall be required to vote on and approve any material adverse
change in the
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rights, preferences or privileges of the Series A Preferred Stock. For purposes
of the foregoing, the creation of a new class of stock having rights,
preferences or privileges senior to, in parity with or junior to the rights,
preferences or privileges of the Series A Preferred Stock shall not be treated
as a material adverse change in the rights, preferences or privileges of the
Series A Preferred Stock, and the holders of Series A Preferred Stock shall not
have any right to vote on the creation of such new class of stock. Except as
provided above and as required by law, the holders of Series A Preferred Stock
are not entitled to vote on any merger or consolidation involving the
Corporation, on any share exchange or on a sale of all or substantially all of
the assets of the Corporation."
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