Exhibit 1
PLACEMENT AGENT AGREEMENT
August 6, 1997
Security Capital Markets Group Incorporated
000 Xxxxxxx Xxxxxx
Xxxxx Xx, Xxx Xxxxxx 00000
Dear Sirs:
Security Capital Atlantic Incorporated, a Maryland corporation
("ATLANTIC"), is issuing as a dividend, at no cost, to each of its shareholders
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the right (a "Right") to subscribe for and purchase shares of common stock, par
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value $.01 per share ("Shares"), of ATLANTIC. The issuance of such Rights and
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the offering of such underlying Shares by ATLANTIC is herein referred to as the
"Rights Offering." A holder of Rights who validly exercises all of such
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holder's Rights will have the further right to oversubscribe for additional
Shares, to the extent that all of the Shares offered in the Rights Offering are
not purchased by the exercise of Rights (the "Oversubscription Privilege").
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Simultaneously with the Rights Offering, Security Capital Markets Group
Incorporated (the "Agent"), an affiliate of ATLANTIC's manager, Security Capital
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(Atlantic) Incorporated (the "REIT Manager"), will act as a placement agent for
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ATLANTIC and seek third-party investors to acquire Shares offered in the Rights
Offering that are not sold through the exercise of Rights or the
Oversubscription Privilege (the "Unsubscribed Shares"). The Agent and the REIT
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Manager are both subsidiaries of Security Capital Group Incorporated ("Security
Capital").
ATLANTIC has prepared and filed with the Securities and Exchange Commission
(the "Commission") in accordance with the provisions of the Securities Act of
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1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Securities Act"), a registration statement (File No. 333-
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27067) on Form S-11 relating to the Rights Offering. The registration statement
as amended to the date of this Agreement is hereinafter referred to as the
"Registration Statement" and the related prospectus in the form first used to
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confirm sales of the Shares in the Rights Offering is hereinafter referred to as
the "Prospectus."
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ARTICLE I
EMPLOYMENT OF THE AGENT
In reliance upon the representations and warranties and subject to the
terms and conditions of this Agreement:
Section 1.1. Best Efforts. ATLANTIC and the REIT Manager employ the Agent
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as ATLANTIC's exclusive agent to sell for ATLANTIC's account the Unsubscribed
Shares, if any, on a cash basis only, at the offering price as set forth in the
Prospectus. The Agent agrees to use its best efforts, as agent for ATLANTIC, to
sell the Unsubscribed Shares, if any, subject to the terms and conditions set
forth in this Agreement and in the Prospectus. The Agent shall deliver to
prospective purchasers of Unsubscribed Shares the Prospectus and any other
materials the Agent deems appropriate. It is understood between the parties
that there is no firm commitment by the Agent to purchase any or all of the
Shares.
Section 1.2. Compensation. The Agent shall not receive any commission,
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discount or special compensation from ATLANTIC in connection with the Rights
Offering or the sale of Unsubscribed Shares. Upon consummation of the Rights
Offering and the sale of the Shares thereunder (the "Closing"), the REIT Manager
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or Security Capital shall pay to the Agent a fee of $250,000 for the Agent's
services in assisting ATLANTIC in the Rights Offering.
Section 1.3. Expenses. In addition to the fee described in Section 1.2
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hereof, ATLANTIC will pay, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming effective
or is terminated, all of the Agent's reasonable costs and expenses, including
fees of counsel, incident to the performance of the Agent's obligations under
this Agreement; provided, however, that, if this Agreement is terminated prior
to the Closing, the Agent shall only be reimbursed for its actual accountable
out-of-pocket costs and expenses.
Section 1.4. Obligations Not Exclusive. ATLANTIC agrees that the
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obligations of the Agent under this Agreement: (a) shall not preclude the Agent
from contemporaneously participating in, acting as placement agent for, or
underwriting the offering of securities of other issuers; (b) shall not impose
any obligation on the Agent to require its registered representatives, some or
all of whom may be independent contractors, to offer and sell the Shares; and
(c) shall require the Agent to make an effort to find purchasers for the
Unsubscribed Shares only to the extent the Agent is motivated to do so by the
compensation and other provisions of this Agreement.
Section 1.5. Offering Solely As Agent. In offering the Unsubscribed
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Shares for sale, the Agent shall offer them solely as an agent for ATLANTIC, and
such offer shall be made upon the terms and subject to the conditions set forth
in this Agreement and the Prospectus. The Agent shall commence making such
offer as an agent for ATLANTIC as soon after the date hereof as it in its sole
discretion may deem advisable; provided, however, that if the Agent does not
commence such offering within ten business days after the date hereof, it shall
so advise ATLANTIC.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ATLANTIC
In order to induce the Agent to enter into this Agreement, ATLANTIC hereby
represents and warrants to and agrees with the Agent as follows:
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Section 2.1. Registration Statement and Prospectus. The Registration
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Statement has been declared effective by the Commission under the Securities
Act; no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceeding for that purpose has been instituted or, to
the knowledge of ATLANTIC, threatened by the Commission; and the Registration
Statement and the Prospectus (as amended or supplemented, if applicable) comply,
or will comply, as the case may be, in all material respects with the Securities
Act and do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the date of the
Prospectus and any amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or, in the case of the Prospectus, necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and the Prospectus, as amended or supplemented at the date of the
Closing (the "Closing Date"), if applicable, will not contain an untrue
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statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; except that the foregoing representations and warranties
shall not apply to statements or omissions in the Registration Statement or the
Prospectus made in reliance upon and in conformity with written information
furnished to ATLANTIC through the Agent or by or on behalf of the Agent
specifically for use therein.
Section 2.2. Financial Statements. The financial statements of ATLANTIC
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together with related schedules and notes included in the Registration Statement
and the Prospectus present fairly the financial position of ATLANTIC and the
results of its operations and the changes in its financial position at the
respective dates and for the respective periods for which they apply; such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as otherwise stated therein.
Section 2.3. Independent Public Accountant. Ernst & Young LLP, which has
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certified or shall certify certain of the financial statements included in the
Registration Statement and the Prospectus, are independent certified public
accountants within the meaning of the Securities Act.
Section 2.4. No Material Adverse Change. Except as described in the
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Registration Statement or the Prospectus, subsequent to the dates as of which
information is given in the Registration Statement and the Prospectus and as of
the date hereof, (a) there shall not have been any material adverse change in
the condition (financial or other), properties or business of ATLANTIC; (b)
ATLANTIC shall not have entered into any material transaction other than in the
ordinary course of business; (c) ATLANTIC shall not have incurred any material
obligations, contingent or otherwise, other than in the ordinary course of
business; (d) there shall not have been any change in the capital stock or long-
term debt (except current payments) of ATLANTIC and (e) ATLANTIC shall not have
paid or declared any dividends or other distributions on its capital stock,
other than regular periodic dividends.
Section 2.5. Organization and Standing. ATLANTIC is duly organized and is
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validly existing as a corporation in good standing under the laws of the State
of Maryland, with full power and authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do business
and is in good standing in each jurisdiction in which the character of
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the business conducted by it or the location of the properties owned or leased
by it makes such qualification necessary. ATLANTIC holds all material licenses,
certificates and permits from governmental authorities necessary for the conduct
of its business as described in the Prospectus.
Section 2.6. No Violation. ATLANTIC is not in violation of its Charter,
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its Bylaws or other governing documents, nor is it in default in the performance
of any obligation, agreement or condition contained in any license, contract,
indenture, mortgage, deed of trust, lease or loan agreement or in any bond,
debenture, note or any other evidence of indebtedness to which it is a party or
by which it is bound, except where such default does not materially adversely
affect the condition (financial or other), properties or business of ATLANTIC.
The performance of this Agreement and the consummation of the transactions
herein contemplated will not conflict with the ATLANTIC's Charter, Bylaws or
other governing documents of ATLANTIC, or result in a breach of, or default
under, any agreement, indenture, mortgage, deed of trust, lease or other
instrument to which ATLANTIC is a party or by which it is bound, or any law,
rule, regulation or decree of any court, governmental agency or body having
jurisdiction over ATLANTIC or its properties or result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or asset
of ATLANTIC, except as any of the foregoing would not materially adversely
affect the condition (financial or other), properties or business of ATLANTIC.
ATLANTIC is not in violation of any law, rule, regulation or court decree to
which it may be subject nor has it failed to obtain any license, permit,
franchise or other governmental authorization necessary to the ownership of its
property or to the conduct of its business, which violation or failure is likely
to have a material adverse effect on the condition (financial or other),
properties or business of ATLANTIC. Except as required by the Securities Act,
the Exchange Act or applicable state securities or blue sky laws, no consent,
approval, authorization or order of any court, governmental agency or body is
required in connection with the consummation of the transactions contemplated by
this Agreement.
Section 2.7. Capitalization. The authorized, issued and outstanding
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capitalization of ATLANTIC is as described in the Prospectus and all of the
issued and outstanding Shares have been duly authorized and validly issued and
are fully paid and nonassessable.
Section 2.8. Legality of Shares. The Shares to be sold by ATLANTIC in the
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Rights Offering have been duly authorized and, upon issuance and delivery and
payment therefor in the manner described in the Prospectus, will be validly
issued, fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus. No further approval or authority of the
shareholders or the Board of Directors of ATLANTIC will be required for the
issuance and sale of the Shares as contemplated herein. Except as described in
the Prospectus, there are no preemptive rights or other rights to subscribe for
or to purchase, or any restrictions upon the voting or transfer of any Shares to
be sold by ATLANTIC pursuant to ATLANTIC's Charter, Bylaws or any agreement or
other instrument to which ATLANTIC is a party. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated in
this Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any Shares.
Section 2.9. Authority. ATLANTIC has full right, power and authority to
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enter into this Agreement, and this Agreement has been duly authorized, executed
and delivered by ATLANTIC
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and constitutes a valid and binding agreement of ATLANTIC enforceable against
ATLANTIC in accordance with its terms, except as its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and judicial limitations on the
right of specific performance or by general equitable principles, and except as
enforceability of indemnification provisions hereof may be limited by federal
securities laws.
Section 2.10. Property. Except as otherwise described in the Registration
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Statement and the Prospectus, ATLANTIC and it subsidiaries have good and
marketable title or good and indefeasible title (or such substantially
equivalent quality of title as provided by the applicable title insurance
policy), free and clear of all liens and encumbrances to all of the real
property described in the Registration Statement and the Prospectus as being
owned by it or its subsidiaries except liens and encumbrances which are not
material in the aggregate and do not materially interfere with the conduct of
the business of ATLANTIC or its subsidiaries, and, except as otherwise described
in the Registration Statement and the Prospectus, has valid and binding leases
to the real property described in the Registration Statement and the Prospectus
as under lease to it or its subsidiaries with such exceptions as do not
materially interfere with the conduct of the business of ATLANTIC or its
subsidiaries.
Section 2.11. No Litigation. Except as set forth in the Registration
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Statement and the Prospectus, there are no actions, suits or proceedings pending
before or by any court, governmental agency or body or any arbitrator, which
might have a material adverse effect on the condition (financial or other),
properties or business of ATLANTIC and, to the best of ATLANTIC's knowledge, no
such action, suit or proceeding is contemplated.
Section 2.12. Price Manipulation. ATLANTIC has not taken and will not
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take, directly or indirectly, any action designed to cause or result in, or that
has constituted or that might reasonably be expected to constitute, the unlawful
stabilization or manipulation of the price of the Shares to facilitate the sale
or resale of the Shares.
Section 2.13. REIT Status. Commencing with ATLANTIC's taxable year ended
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December 31, 1993, ATLANTIC has met the requirements for qualification as a real
estate investment trust under the Internal Revenue Code of 1986, as amended (the
"Code"), and ATLANTIC's present and contemplated operations, assets and income
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continue to meet such requirements.
Section 2.14. Finder. ATLANTIC knows of no outstanding claims for
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services in the nature of a finder's fee or origination fee with respect to the
sale of the Shares hereunder resulting from its acts for which the Agent may be
responsible.
Section 2.15. Exhibits. There are no contracts or other documents which
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are required to be filed as exhibits to the Registration Statement by the
Securities Act which have not been so filed and each contract to which ATLANTIC
is a party and to which reference is made in the Prospectus has been duly and
validly executed, is in full force and effect in all material respects in
accordance with its terms, and none of such contracts has been assigned by
ATLANTIC. ATLANTIC knows of no present situation or condition or fact which
would prevent compliance with the terms of such contracts, as amended to date.
Except as set forth in the Registration Statement and the Prospectus
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and except for amendments or modifications of such contracts in the ordinary
course of business, ATLANTIC has no intention of exercising any right which it
may have to cancel any of its obligations under any of such contracts and has no
knowledge that any other party to any of such contracts has any intention not to
render full performance under such contracts.
Section 2.16. Tax Returns. ATLANTIC has filed all federal and state tax
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returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes have
become due. All taxes with respect to which ATLANTIC is obligated have been
paid or adequate accruals have been set up to cover any such unpaid taxes.
ARTICLE III
COVENANTS OF ATLANTIC
ATLANTIC covenants and agrees with the Agent that:
Section 3.1. Delivery of Registration Statement and Prospectus. ATLANTIC
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will furnish to the Agent, from time to time and without charge, copies of the
Registration Statement (one of which will be signed and will include all
exhibits), each preliminary prospectus, the Prospectus and all amendments and
supplements to any of such documents, in each case as soon as available and in
such quantities as the Agent may from time to time reasonably request.
Section 3.2. Filing of Prospectus. ATLANTIC will file the Prospectus in a
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form approved by the Agent pursuant to, and within the period permitted by, Rule
424 under the Securities Act.
Section 3.3. Use of Prospectus. ATLANTIC authorizes the Agent to use the
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Prospectus as from time to time amended or supplemented in connection with the
offering and sale of the Shares and in accordance with the applicable provisions
of the Securities Act and applicable state securities or blue sky laws.
Section 3.4. Further Amendments and Supplements. If, during such period
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of time as in the opinion of the Agent or its counsel a prospectus relating to
the Rights Offering is required to be delivered under the Securities Act, any
event occurs or any event known to ATLANTIC relating to or affecting ATLANTIC
shall occur as a result of which the Prospectus as then amended or supplemented
would contain an untrue statement of a material fact, or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend or supplement the Prospectus to comply with the Securities
Act, ATLANTIC will forthwith notify the Agent thereof and prepare and file with
the Commission such further amendment to the Registration Statement or
supplement or amendment to the Prospectus as may be required and furnish and
deliver to the Agent, at the cost of ATLANTIC, a reasonable number of copies of
the amended or supplemented Prospectus which as so amended or supplemented will
not contain an untrue statement of a material fact or omit to state a material
fact necessary to make the Prospectus not misleading in light of the
circumstances
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when it is delivered to a purchaser or prospective purchaser, and which will
comply in all respects with the Securities Act; and in the event the Agent is
required to deliver a prospectus 90 days or more after the Closing Date, upon
request will prepare promptly such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of Section 10 of the
Securities Act.
Section 3.5. Objection of Agent to Amendments or Supplements. After the
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date hereof, ATLANTIC will not at any time file any amendment or supplement to
the Registration Statement or the Prospectus unless and until a copy of such
amendment or supplement has been previously furnished to the Agent within a
reasonable time period prior to the proposed filing thereof, or to which the
Agent or counsel for the Agent has reasonably objected, in writing, on the
ground that such amendment or supplement is not in compliance with the
Securities Act.
Section 3.6. Events Relating to Registration Statement and Prospectus.
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For so long as the delivery of a prospectus is required in connection with the
offering or sale of the Shares, ATLANTIC will promptly advise the Agent (a) when
any amendment to the Registration Statement shall have become effective and when
any amendment or supplement to the Prospectus shall be filed with the
Commission, (b) when the Commission shall make a request or suggestion for any
amendment to the Registration Statement or the Prospectus or for additional
information and the nature and substance thereof, (c) of the issuance by the
Commission of an order suspending the effectiveness of the Registration
Statement pursuant to Section 8 of the Securities Act or of the initiation or
notice of intended initiation of any actions or proceedings for that purpose,
(d) of the happening of any event which in the judgment of ATLANTIC makes any
material statement in the Registration Statement or the Prospectus untrue or
which requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading and (e) of the
refusal to qualify or the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, or of the initiation or notice of intended
initiation of any actions or proceedings for any of such purposes. ATLANTIC
will use every reasonable effort to prevent the issuance of any such order, to
prevent any such refusal to qualify or any such suspension, and to obtain as
soon as possible a lifting of any such order, the reversal of any such refusal
or the termination of any such suspension.
Section 3.7. Preparation and Filing of Amendments and Supplements.
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ATLANTIC will prepare and file promptly with the Commission, upon request of the
Agent, such amendments or supplements to the Registration Statement or the
Prospectus, in form satisfactory to counsel for ATLANTIC, as in the opinion of
counsel to the Agent and counsel to ATLANTIC may be necessary in connection with
the offering or distribution of the Shares and will use its best efforts to
cause the same to become effective as promptly as possible.
Section 3.8. Blue Sky Qualification. ATLANTIC will, when and as requested
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by the Agent, use reasonable efforts to qualify the Rights Offering or such part
thereof as the Agent may determine for sale under the state securities or blue
sky laws of such states as the Agent may reasonably request, and to continue
such qualification in effect so long as required for the purposes of the
distribution of the Shares; provided, however, that ATLANTIC shall not be
obligated to (a) file any general consent to service of process, (b) qualify as
a foreign business in any jurisdiction in which it is not so qualified or (c)
take any action that would subject it to income taxation in any
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such jurisdiction. The blue sky work shall be undertaken by counsel selected by
ATLANTIC and shall be at ATLANTIC's expense.
Section 3.9. Reports and Financial Statements. ATLANTIC will file on a
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timely basis all reports and any definitive proxy or information statements
required to be filed by ATLANTIC with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act for so long as the delivery of a
prospectus is required in connection with the offering or sale of the Shares.
ATLANTIC at its own expense will prepare and give and will continue to give such
financial statements and other information to and as may be required by the
Commission, or the proper public bodies of the states in which the Shares may be
qualified.
Section 3.10. Earning Statement. ATLANTIC will make generally available
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to its security holders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Securities Act), an earning statement of
ATLANTIC and its subsidiaries (which need not be audited) complying with Section
11(a) of the Securities Act (including, at ATLANTIC's option, Rule 158 under the
Securities Act).
Section 3.11. Reports and Financial Statements to the Agent. During the
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period of five years from the effective date of the Registration Statement,
ATLANTIC shall make available to the Agent copies of all periodic and special
reports furnished to the security holders of ATLANTIC and of all information,
documents, and current, quarterly or annual reports filed by ATLANTIC with the
Commission. Upon request in writing from the Agent, ATLANTIC shall furnish to
the Agent such other information as may reasonably be requested and which may be
properly disclosed to the Agent with reference to the property, business and
operations of ATLANTIC and its subsidiaries, if any.
Section 3.12. Expenses Paid by ATLANTIC. ATLANTIC will pay, whether or
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not the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement, including,
without limitation, all costs and expenses (a) incident to the preparation,
issuance and delivery of the Shares, (b) incident to the preparation, printing
and filing under the Securities Act of the Registration Statement, the
Prospectus and any preliminary prospectus (including in each case all exhibits,
amendments and supplements thereto), (c) incurred in connection with the
registration or qualification and determination of eligibility for investment of
the Shares under the laws of such jurisdictions as the Agent may designate and
(d) in connection with the printing and delivery of this Agreement and the
furnishing to the Agent of copies of the Registration Statement and the
Prospectus, including mailing and shipping, as herein provided.
Section 3.13. Post-Effective Availability of Prospectus. For so long as a
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prospectus is required to be delivered under the Securities Act, ATLANTIC will
comply, at its own expense, with all requirements imposed upon it by the
Securities Act, as in effect from time to time, and by any order of the
Commission, so far as necessary to permit the continuance of sales or dealings
in the Shares.
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Section 3.14. Application of Proceeds. ATLANTIC will apply the net
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proceeds from the sale of the Shares substantially in the manner set forth in
the Registration Statement and the Prospectus.
Section 3.15. Cooperation with Agent's Due Diligence. ATLANTIC will
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cooperate with the Agent in such investigation as the Agent may make or cause to
be made of all the properties, business and operations of ATLANTIC in connection
with the purchase and public offering of the Shares, and ATLANTIC will make
available to the Agent in connection therewith such information in its
possession as the Agent may reasonably request.
Section 3.16. Compliance with Conditions Precedent. ATLANTIC will use all
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reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Agent in Article VI hereof.
ARTICLE IV
COVENANTS OF THE REIT MANAGER
The REIT Manager covenants and agrees with the Agent that:
Section 4.1. Cooperation with Agent's Due Diligence. The REIT Manager
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will cooperate with the Agent in such investigation as the Agent may make or
cause to be made of all the properties, business and operations of ATLANTIC in
connection with the purchase and public offering of the Shares, and the REIT
Manager will make available to the Agent in connection therewith such
information in its possession as the Agent may reasonably request.
ARTICLE V
INDEMNIFICATION AND CONTRIBUTION
Section 5.1. Indemnification by ATLANTIC. ATLANTIC will indemnify and
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hold harmless the Agent, each of the Agent's directors and officers, and each
person, if any, who controls the Agent within the meaning of the Securities Act
against any loss, claim, damage or liability, joint or several, to which the
Agent or any such controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (a) an untrue statement or
alleged untrue statement made by ATLANTIC in Article II hereof or (b) an untrue
statement or alleged untrue statement of a material fact contained (i) in the
Registration Statement or any preliminary prospectus or the Prospectus or any
amendment or supplement thereto or (ii) in any blue sky application or other
document executed by ATLANTIC specifically for that purpose or based upon
written information furnished by ATLANTIC filed in any state or other
jurisdiction in order to qualify any or all of the Shares under the securities
laws thereof (any such application, document or information being hereinafter
called a "Blue Sky Application") or (c) the omission or alleged omission to
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state in the Registration
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Statement or any preliminary prospectus or the Prospectus or any amendment or
supplement thereto or in any Blue Sky Application a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
will reimburse the Agent and each such controlling person for any legal or other
expenses reasonably incurred by the Agent or such controlling person in
connection with investigating or defending against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action;
provided, however, that ATLANTIC will not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to ATLANTIC through the Agent or by or on behalf
of the Agent specifically for use in the preparation of the Registration
Statement or any such preliminary prospectus or the Prospectus or any such
amendment or supplement thereto or any such Blue Sky Application; and provided,
further, that the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any untrue statement, alleged untrue statement,
omission or alleged omission made in any preliminary prospectus but eliminated
or remedied in the Prospectus, such indemnity agreement shall not inure to the
benefit of the Agent from whom the person asserting any loss, claim, damage or
liability purchased the Shares which are the subject thereof (or to the benefit
of any person who controls the Agent), if a copy of the Prospectus was not sent
or given to such person with or prior to the written confirmation of the sale of
such Shares to such person. This indemnity agreement is in addition to any
liability which ATLANTIC may otherwise have and shall survive the delivery of
and payment for the Unsubscribed Shares.
Section 5.2. Indemnification by Agent. The Agent will indemnify and hold
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harmless ATLANTIC, each of ATLANTIC's directors, each of ATLANTIC's officers who
has signed the Registration Statement, and each person, if any, who controls
ATLANTIC within the meaning of the Securities Act, against any loss, claim,
damage or liability to which ATLANTIC or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage or liability (or action in respect thereof)
arises out of or is based upon (a) an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
preliminary prospectus or the Prospectus or any amendment or supplement thereto
or in any Blue Sky Application or (b) the omission or alleged omission to state
in the Registration Statement or any preliminary prospectus or the Prospectus or
any amendment or supplement thereto or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to ATLANTIC through the Agent
or by or on behalf of the Agent specifically for use in the preparation of the
Registration Statement or any such preliminary prospectus or the Prospectus or
any such amendment or supplement thereto or any such Blue Sky Application; and
will reimburse any legal or other expenses reasonably incurred by ATLANTIC or
any such director or officer or controlling person in connection with
investigating or defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action. This
indemnity agreement is in addition to any liability which the Agent may
otherwise have and shall survive the delivery of and payment for the
Unsubscribed Shares.
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Section 5.3. Notice. Promptly after receipt by an indemnified party under
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this Article V of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Article V, notify in writing the indemnifying party of the
commencement thereof within a reasonable time thereafter; the omission so to
notify the indemnifying party will relieve it from any liability under this
Article V as to the particular item for which indemnification is then being
sought, but not from any other liability which it may have to any indemnified
party. In case any such action, suit or proceeding is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly and with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel who shall be
reasonably satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to the indemnified
party under this Article V for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, in the judgment
of the indemnified party, it is advisable for the indemnified party and its
controlling person to be represented by separate counsel, the indemnified party
shall have the right to employ separate counsel to represent the indemnified
party and such controlling person, in which event the reasonable fees and
expenses of such separate counsel shall be borne by the indemnifying party.
Section 5.4. Contribution. In order to provide for just and equitable
------------
contribution in any case in which ATLANTIC or the Agent (or any of their
respective directors or officers or any person who controls either of them
within the meaning of the Securities Act) makes claim for indemnification
pursuant to this Article V but it is judicially determined (by entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the provisions of this Article V provide for indemnification in such case, then,
and in each such case, (a) ATLANTIC and each person who controls ATLANTIC, in
the aggregate, and (b) the Agent, shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from all others) in such proportion so that the Agent is responsible for the
portion represented by the percentage that the fee received by the Agent
pursuant to Section 1.2 hereof bears to the aggregate public offering price for
all Shares offered by ATLANTIC in the Rights Offering, and ATLANTIC and its
controlling persons, in the aggregate, are responsible for the remaining
portion; provided, however, that if such allocation is not permitted by
applicable law then the relative fault of ATLANTIC and the Agent in connection
with the statements or omissions which resulted in such damages and other
relevant equitable considerations shall also be taken into account. The
relative fault shall be determined by reference to, among other things, whether
in the case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by
ATLANTIC or by the Agent and the parties' relative intent, knowledge, access to
the information and opportunity to correct or prevent such untrue statements or
omissions. ATLANTIC and the Agent agree that it would not be just and equitable
if the respective obligations of ATLANTIC and the Agent to contribute pursuant
to this Section 5.4 were to be determined by pro rata or per capita allocation
of the aggregate damages (even if the Agent and its controlling person in the
aggregate were treated as one entity for such purpose) or by any other method of
allocation that does not take account of
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the equitable considerations referred to in the first sentence of this Section
5.4. For purposes of this Section 5.4, the term "damages" shall include any
legal or other expenses reasonably incurred by the indemnified party in
connection with investigating or defending against or appearing as a third-party
witness in any action or claim that is the subject of the contribution
provisions of this Section 5.4. Notwithstanding the provisions of this Section
5.4, the Agent and its controlling person in the aggregate shall not be required
to contribute any amount in excess of the amount by which the total price of the
Unsubscribed Shares sold by it exceeds the amount of any damages that the Agent
and its controlling person in the aggregate have otherwise been required to pay
by reason of such untrue statement or omission. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any person having liability under Section 11 of the
Securities Act other than ATLANTIC and the Agent and persons controlling
ATLANTIC or the Agent.
Promptly after receipt by any party to this Agreement of notice of the
commencement of any action, suit or proceeding, such person will, if a claim for
contribution in respect thereof is to be made against another party, notify the
contributing party of the commencement thereof within a reasonable time
thereafter; but the omission so to notify the contributing party will not
relieve the contributing party from any liability which it may have to any party
other than for contribution. Any notice given pursuant to any other paragraph
of this Section 5 shall be deemed to be the like notice hereunder. In case any
such action, suit or proceeding is brought against any party, and such person
notifies a contributing party of the commencement thereof, the contributing
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified.
ARTICLE VI
CONDITIONS OF THE AGENT'S OBLIGATIONS
The Agent's obligations hereunder shall be subject to the accuracy of the
representations and warranties on the part of ATLANTIC herein contained, to the
performance by ATLANTIC and the REIT Manager of all of their agreements herein
contained, to the fulfillment of or compliance by ATLANTIC with all covenants
and conditions hereof, and to the following additional conditions:
Section 6.1. Filing of Prospectus. The Prospectus shall have been filed
--------------------
with the Commission pursuant to Rule 424 under the Securities Act within the
permitted time period, no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceeding for that purpose
shall have been initiated or threatened by the Commission or be pending and all
requests for additional information on the part of the Commission shall have
been complied with to the reasonable satisfaction of the Agent.
Section 6.2. Accuracy of Prospectus. As of the Closing Date, ATLANTIC
----------------------
shall not have disclosed in writing to the Agent that the Registration Statement
or the Prospectus or any
-12-
amendment or supplement thereto contains an untrue statement of a fact which, in
the opinion of counsel to ATLANTIC, is material, or omits to state a fact which,
in the opinion of such counsel, is material and is required to be stated
therein, or is necessary to make the statements therein not misleading.
Section 6.3. Casualty and Other Calamity. Between the date hereof and the
---------------------------
Closing Date, ATLANTIC shall not have sustained any loss on account of fire,
explosion, flood, accident, calamity or any other cause, of such character as
materially adversely affects the condition (financial or other), properties or
business of ATLANTIC, whether or not such loss is covered by insurance.
Section 6.4. Litigation and Other Proceedings. Between the date hereof
--------------------------------
and the Closing Date, there shall be no litigation instituted or threatened
against ATLANTIC and there shall be no proceeding instituted or threatened
against ATLANTIC before or by any federal or state commission, regulatory body
or administrative agency or other governmental body, domestic or foreign,
wherein an unfavorable ruling, decision or finding would materially adversely
affect the condition (financial or other), properties or business of ATLANTIC.
Section 6.5. Lack of Material Change. Except as described in the
-----------------------
Registration Statement and the Prospectus, subsequent to the date of the last
audited balance sheet included in the Registration Statement or the Prospectus
and prior to the Closing Date, (a) ATLANTIC shall have conducted its business
in the usual and ordinary manner as the same was being conducted on the date of
such last audited balance sheet; (b) there shall not have been any material
adverse change in the condition (financial or other), properties or business of
ATLANTIC; (c) ATLANTIC shall not have entered into any material transaction
other than in the ordinary course of business; (d) ATLANTIC shall not have
incurred any material obligations, contingent or otherwise, other than in the
ordinary course of business; (e) there shall not have been any change in the
capital stock or long-term debt (except current payments) of ATLANTIC; and (f)
ATLANTIC shall not have paid or declared any dividends or other distributions on
the Shares, other than regular periodic dividends and the distribution of the
Rights.
Section 6.6. Opinion of Counsel. The Agent shall have received an opinion
------------------
of Xxxxx, Xxxxx & Xxxxx as to the due organization and existence of ATLANTIC and
to the effect that the Shares, when issued, will be duly authorized, validly
issued, fully paid and nonassessable, and as to such other matters as may be
reasonably requested by the Agent. In addition to the foregoing opinions such
counsel shall state that, in the course of its representation of ATLANTIC, such
counsel has no reason to believe that, as of its effective date, the
Registration Statement (other than the financial statements and related
schedules and other financial information included therein, as to which such
counsel need express no opinion) 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, as of its date,
the Prospectus (other than the financial statements and related schedules and
other financial information included therein, as to which such counsel need
express no opinion) contained an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading or that, as of the
Closing Date, either the Registration Statement or the Prospectus (other than
the financial statements and related schedules and other financial information
-13-
included therein, as to which such counsel need express no opinion) contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were make, not misleading.
Section 6.7. Comfort Letter. On the date of this Agreement and also on
--------------
the Closing Date, Ernst & Young LLP shall have delivered to the Agent (as well
as to ATLANTIC's Board of Directors) a letter or letters, dated the respective
date of delivery thereof, in form and substance reasonably satisfactory to the
Agent (as well as to ATLANTIC's Board of Directors), to the effect set forth in
Annex I hereto.
-------
Section 6.8. Blue Sky Qualifications. The Rights Offering shall be
-----------------------
qualified in such states as the Agent may reasonably request pursuant to Section
3.8, and each such qualification shall be in effect and not subject to any stop
order or other proceeding on the date of this Agreement.
Section 6.9. Approval of Agent's Counsel. All opinions, letters,
---------------------------
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Agent, whose approval shall
not be unreasonably withheld. The suggested form of such documents shall be
provided to counsel to the Agent upon request.
Section 6.10. Officers' Certificates. Any certificate signed by an
----------------------
officer of ATLANTIC and delivered to the Agent or to counsel to the Agent will
be deemed a representation and warranty by ATLANTIC to the Agent as to the
statements made therein.
ARTICLE VII
TERMINATION
Section 7.1. Termination Because of Non-Compliance. This Agreement may be
-------------------------------------
terminated by the Agent by notice to ATLANTIC in the event that ATLANTIC or the
REIT Manager shall have failed or been unable to comply with any of the terms,
conditions or provisions of this Agreement on the part of ATLANTIC or the REIT
Manager to be performed, complied with or fulfilled (including but not limited
to those specified in Articles I, II, III and VI hereof) within the respective
times herein provided for, unless compliance therewith or performance or
satisfaction thereof shall have been expressly waived by the Agent in writing.
Section 7.2. Market Out Termination. This Agreement may be terminated by
----------------------
the Agent by notice to ATLANTIC at any time if, in the reasonable judgment of
the Agent, payment for and delivery of the Unsubscribed Shares is rendered
impracticable or inadvisable because (a) additional material governmental
restrictions not in force and effect on the date hereof shall have been imposed
upon trading in securities generally, or minimum or maximum prices shall have
been generally established on the New York Stock Exchange, or trading in
securities generally on such Exchange shall have been suspended, or a general
moratorium shall have been established by federal or state authorities or (b) a
war involving the United States or other national calamity shall have occurred
-14-
or (c) substantial and material changes in the condition of the market (either
generally or with reference to the sale of the Shares subject to the Rights
Offering) beyond normal fluctuations are such that it would be undesirable,
impracticable or inadvisable to proceed with this Agreement or with the Rights
Offering or (d) of any matter materially adversely affecting ATLANTIC.
Section 7.3. ATLANTIC's Right to Terminate. In the event any action or
-----------------------------
proceeding of the type referred to in Section 8.2 hereof shall be instituted or
threatened against the Agent at any time prior to the date hereof, or in the
event there shall be filed by or against the Agent in any court pursuant to any
federal, state, local or municipal statute, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of the Agent's assets or if the Agent makes an assignment for the benefit of
creditors, ATLANTIC shall have the right on three days' written notice to the
Agent to terminate this Agreement.
Section 7.4. Effect of Termination Hereunder. Any termination of this
-------------------------------
Agreement pursuant to this Article VII shall be without liability of any
character (including, but not limited to, loss of anticipated profits or
consequential damages) on the part of any party hereto, except that ATLANTIC
shall remain obligated to pay the costs and expenses provided to be paid by it
specified in Section 3.12 and ATLANTIC and the Agent shall be obligated to pay,
respectively, all losses, claims, damages or liabilities, joint or several,
under Article V.
SECTION VIII
AGENT'S REPRESENTATIONS AND WARRANTIES
The Agent represents and warrants to and agrees with ATLANTIC that:
Section 8.1. Registration as Broker-Dealer and Member of NASD. The Agent
------------------------------------------------
is registered as a broker-dealer with the Commission and is registered as a
broker-dealer in each state within the United States in which it will offer the
Unsubscribed Shares and is a member in good standing of the National Association
of Securities Dealers, Inc.
Section 8.2. No Pending Proceedings. There is not now pending or
----------------------
threatened against the Agent any action or proceeding of which it has been
advised, either in any court of competent jurisdiction, before the Commission or
any state securities commission concerning its activities as a broker or dealer,
nor has the Agent been named as a "cause" in any such action or proceeding.
Section 8.3. Delivery of Documents. The Agent will deliver a copy of the
---------------------
Prospectus to each subscriber at or prior to such time as is required under the
Securities Act to be delivered by the Agent to such person, and the Agent will
use only such supplemental sales material in connection with the sales of the
Unsubscribed Shares (a) as has been either prepared or approved by ATLANTIC and
delivered to the Agent and (b) only in the manner and in the jurisdictions
authorized by ATLANTIC.
-15-
Section 8.4. Distribution Sheets. Upon request, the Agent shall furnish
-------------------
to ATLANTIC after the Closing a breakdown by states of the number of
Unsubscribed Shares sold in each state in which the Unsubscribed Shares are
offered.
ARTICLE IX
NOTICES
Except as otherwise expressly provided in this Agreement:
Section 9.1. Notice to ATLANTIC. Whenever notice is required by the
------------------
provisions of this Agreement to be given to ATLANTIC, such notice shall be given
in writing addressed to ATLANTIC as follows:
Security Capital Atlantic Incorporated
Six Piedmont Center
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Section 9.2. Notice to the Agent. Whenever notice is required by the
-------------------
provisions of this Agreement to be given to the Agent, such notice shall be
given in writing addressed to the Agent as follows:
Security Capital Markets Group Incorporated
000 Xxxxxxx Xxxxxx
Xxxxx Xx, Xxx Xxxxxx 00000
Attn: X. Xxxxx Canon
ARTICLE X
MISCELLANEOUS
Section 10.1. Benefit. This Agreement is made solely for the benefit of
-------
the Agent, ATLANTIC, their respective officers, directors and any controlling
person referred to in Section 15 of the Securities Act, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successor" or the term
"successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Shares.
Section 10.2. Survival. The respective agreements, representations,
--------
warranties, covenants and other statements of ATLANTIC or its officers set forth
in or made pursuant to this Agreement and the indemnity agreements of ATLANTIC
and the Agent contained in Article V hereof shall survive and remain in full
force and effect, regardless of (a) any investigation made by or on behalf
-16-
of ATLANTIC or the Agent or any officer or director thereof or any controlling
person of ATLANTIC or of the Agent, (b) delivery of or payment for the
Unsubscribed Shares and (c) the Closing, and any successor of ATLANTIC and the
Agent or any controlling person, officer or director thereof, as the case may
be, shall be entitled to the benefits hereof.
Section 10.3. Governing Law. The validity, interpretation and
-------------
construction of this Agreement and of each part hereof will be governed by the
laws of the State of Maryland.
Section 10.4. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which may be deemed an original and all of which
together will constitute one and the same instrument.
-17-
Please confirm that the foregoing correctly sets forth the Agreement
between you, the REIT Manager and ATLANTIC.
Very truly yours,
SECURITY CAPITAL ATLANTIC INCORPORATED
By:
--------------------------------------
Xxxxxxx X. Xxxxx
Secretary
SECURITY CAPITAL (ATLANTIC) INCORPORATED
By:
--------------------------------------
Xxxxxxx X. Xxxxx
Secretary
We hereby confirm as of the date hereof that the above letter sets forth
the Agreement between ATLANTIC, the REIT Manager and us.
SECURITY CAPITAL MARKETS GROUP
INCORPORATED
By:
--------------------------------------
X. Xxxxx Canon
President
SECURITY CAPITAL GROUP INCORPORATED
By:
--------------------------------------
Xxxxxxx X. Xxxxx
Secretary
-18-
ANNEX I
Pursuant to Section 6.7 of the Placement Agent Agreement, Ernst & Young LLP
shall furnish letters to the Agent (as well as to ATLANTIC's Board of Directors)
to the effect that:
(a) They are independent certified public accountants with respect to
ATLANTIC and its subsidiaries within the meaning of the Securities Act and
the applicable published rules and regulations thereunder;
(b) In their opinion, the financial statements and financial statement
schedule audited by them and included in the Registration Statement and the
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Exchange Act and the
related published rules and regulations thereunder;
(c) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the minutes of the meetings of ATLANTIC's Board of Directors, a
review of the unaudited financial statements referred to below, inquiries
of certain officials of ATLANTIC and its subsidiaries who have
responsibility for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing came
to their attention that caused them to believe that:
(i) any material modifications should be made to the unaudited
financial statements included in the Registration Statement and the
Prospectus for them to be in conformity with generally accepted
accounting principles;
(ii) the unaudited financial statements included in the
Registration Statement and the Prospectus do not comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act and the Exchange Act and the related published rules and
regulations thereunder;
(iii) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the shareholders'
equity or any increase in the consolidated long-term debt of ATLANTIC
and its subsidiaries or other items specified by the Agent or ATLANTIC's
Board of Directors, as the case may be, or any decreases in the
consolidated total assets of ATLANTIC and its subsidiaries or other
items specified by the Agent or ATLANTIC's Board of Directors, as the
case may be, in each case as compared with amounts shown in the latest
balance sheet included in the Registration Statement and the Prospectus,
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described
in such letter;
(iv) for the period from the date of the latest financial
statements included in the Registration Statement and the Prospectus to
the specified date referred to in
I-1
clause (iii) there were any decreases in consolidated net earnings from
operations or the per share amount of consolidated net earnings from
operations or other items specified by the Agent or ATLANTIC's Board of
Directors, as the case may be, or any increases in any items specified
by the Agent or ATLANTIC's Board of Directors, as the case may be, in
each case as compared with the corresponding period of the preceding
year and with any other period of corresponding length specified by the
Agent or ATLANTIC's Board of Directors, as the case may be, except in
each case for increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
(v) any unaudited pro forma financial statements included in the
Registration Statement or the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act and the published rules and regulations thereunder or the
pro forma adjustments have not been properly applied to the historical
amounts in the computation of those statements;
(d) In addition to the audit referred to in their report(s) included in
the Prospectus and the limited procedures referred to in paragraph (c)
above, they have carried out certain specified procedures, not constituting
an audit in accordance with generally accepted auditing standards, with
respect to certain items identified by the Agent or ATLANTIC's Board of
Directors, as the case may be, on certain pages of the Prospectus and,
except as described in such letter, compared or recalculated certain of such
items to ATLANTIC's audited or unaudited financial statements or support
schedules and found them to be in agreement.
I-2
