8-K: Current report filing

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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Date of Report (Date of earliest event reported): MARCH 8, 1998
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BAY APARTMENT COMMUNITIES, INC.
(Exact name of Registrant as specified in charter)



MARYLAND 1-12672 77-0404318
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)



4340 STEVENS CREEK BOULEVARD, SUITE 275, SAN JOSE, CA 95129
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(Address of principal executive offices) (Zip Code)



(408) 983-1500
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(Registrant's telephone number, including area code)





ITEM 5 - OTHER EVENTS

On March 9, 1998, Bay Apartment Communities, Inc. (the "Company") and
Avalon Properties, Inc. ("Avalon") entered into an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which Avalon will merge (the "Merger") with
and into the Company, with the Company being the surviving corporation. Pursuant
to the Merger Agreement, at the effective time of the Merger each outstanding
share of common stock of Avalon (the "Avalon Common Stock") will be converted
into the right to receive 0.7683 shares of common stock of the Company (the
"Company Common Stock"). Holders of preferred stock of Avalon will receive
shares of comparable preferred stock of the Company on a one-for-one basis.

A copy of the Merger Agreement is attached hereto as Exhibit 99.1 and
is incorporated herein by reference, and a copy of the Press Release of the
Company issued in connection with the execution of the Merger Agreement is
attached hereto as Exhibit 99.2 and is incorporated herein by reference.

In connection with the execution of the Merger Agreement, the Company
and Avalon entered into a Stock Option Agreement pursuant to which Avalon
granted to the Company an option to purchase, upon the occurrence of certain
events, up to an aggregate of 19.9% of the outstanding shares of Avalon Common
Stock. In addition, the Company and Avalon entered into a Stock Option Agreement
pursuant to which the Company granted to Avalon an option to purchase, upon the
occurrence of certain events, up to an aggregate of 19.9% of the outstanding
shares of Company Common Stock. Copies of the Stock Option Agreements are
attached hereto as Exhibits 99.3 and 99.4 and are incorporated herein by
reference.

The Board of Directors of the Company also has adopted a Shareholder
Rights Agreement (the "Rights Agreement"). In connection with the adoption of
the Rights Agreement, the Board of Directors declared a dividend distribution of
one Preferred Stock Purchase Right (a "Right") for each outstanding share of
Company Common Stock to stockholders of record as of the close of business on
March 10, 1998 (the "Record Date"). Each Right entitles the registered holder
thereof to purchase from the Company a unit consisting of one one-thousandth of
a share of Series E Junior Participating Cumulative Preferred Stock, par value
$0.01 per share, of the Company, at a cash exercise price of $160.00 per Unit,
subject to adjustment.

Initially, the Rights are not exercisable and are attached to and trade
with all shares of Company Common Stock outstanding as of, or issued subsequent
to, the Record Date. The Rights will separate from the Company Common Stock and
will become exercisable upon the earlier of (i) the close of business on the
tenth calendar day following the first public announcement that a person or
group of affiliated or associated persons has acquired beneficial ownership of
10% or more of the outstanding shares of Company Common Stock (an "Acquiring
Person"), or (ii) the close of business on the tenth business day following the




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commencement of a tender offer or exchange offer that would result upon its
consummation in a person or group becoming the beneficial owner of 10% or more
of the outstanding shares of Company Common Stock.

In the case of certain stockholders of the Company who beneficially
owned 10% or more of the outstanding shares of Company Common Stock as of
March 9, 1998 (such stockholders are referred to in the Rights Agreement as
"grandfathered persons"), the Rights generally will be distributed only if any
such stockholder acquires or proposes to acquire additional shares of Company
Common Stock. In addition, a "grandfathered person" generally will become an
Acquiring Person only if such person acquires additional shares of Company
Common Stock. The description and terms of the Rights are set forth in the
Rights Agreement, which is incorporated herein by reference to Exhibit 4.1 of
the Company's Registration Statement on Form 8-A filed with the Securities and
Exchange Commission in connection with the adoption of the Rights Agreement.


ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS