<PAGE>
                                                                    EXHIBIT 4.6
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                         BAY APARTMENT COMMUNITIES, INC.

                                     Issuer

                                       to

                       STATE STREET BANK AND TRUST COMPANY

                                     Trustee


                            -------------------------

                          First Supplemental Indenture

                          Dated as of January 20, 1998

                            -------------------------



                                   $50,000,000
                                       of
                          6.250% Senior Notes due 2003

                                   $50,000,000
                                       of
                          6.500% Senior Notes due 2005

                                   $50,000,000
                                       of
                          6.625% Senior Notes due 2008




 ------------------------------------------------------------------------------
<PAGE>
      FIRST SUPPLEMENTAL INDENTURE, dated as of January 20, 1998 (the
"Supplemental Indenture"), between BAY APARTMENT COMMUNITIES, INC., a
corporation duly organized and existing under the laws of the State of Maryland
(herein called the "Company"), and STATE STREET BANK AND TRUST COMPANY, a trust
company organized and existing under the laws of The Commonwealth of
Massachusetts, as Trustee (herein called the "Trustee").

                             RECITALS OF THE COMPANY

      The Company has heretofore delivered to the Trustee an Indenture dated as
of January 16, 1998 (the "Senior Indenture"), a form of which has been filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, as an exhibit to the Company's Registration Statement on Form S-3, as
amended (File No. 333-41511), providing for the issuance from time to time of
Senior Debt Securities of the Company (the "Securities").

      Section 301 of the Senior Indenture provides for various matters with
respect to any series of Securities issued under the Senior Indenture to be
established in an indenture supplemental to the Senior Indenture.

      Section 901(7) of the Senior Indenture provides for the Company and the
Trustee to enter into an indenture supplemental to the Senior Indenture to
establish the form or terms of Securities of any series as provided by Sections
201 and 301 of the Senior Indenture.

      The Board of Directors of the Company has duly adopted resolutions
authorizing the Company to execute and deliver this Supplemental Indenture.

      All the conditions and requirements necessary to make this Supplemental
Indenture, when duly executed and delivered, a valid and binding agreement in
accordance with its terms and for the purposes herein expressed, have been
performed and fulfilled.

             NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

      For and in consideration of the premises and the purchase of each of the
series of Securities provided for herein by the Holders thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders of
the Notes or for either thereof, as follows:


            ARTICLE ONE - RELATION TO SENIOR INDENTURE; DEFINITIONS.

      SECTION 1.1. Relation to Senior Indenture. This Supplemental Indenture
constitutes an integral part of the Senior Indenture.


                                        2
<PAGE>
      SECTION 1.2. Definitions. For all purposes of this Supplemental Indenture,
except as otherwise expressly provided for or unless the context otherwise
requires:

            (1) Capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Senior Indenture;

            (2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this Supplemental
Indenture; and

            (3) In the event that any of the following definitions differs from
its respective definition set forth in the Senior Indenture, the definition set
forth herein shall control.

            "Acquired Indebtedness" means Indebtedness of a Person (i) existing
at the time such Person becomes a Subsidiary or (ii) assumed in connection with
the acquisition of assets from such Person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary or such acquisition. Acquired Indebtedness shall be deemed
to be incurred on the date of the related acquisition of assets from any Person
or the date the acquired Person becomes a Subsidiary.

            "Annual Service Charge" for any period means the maximum amount
which is payable during such period for interest on, and original issue discount
of, Indebtedness of the Company and its Subsidiaries and the amount of dividends
which are payable during such period in respect of any Disqualified Stock.

            "Business Day" means any day, other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which banking institutions in the City
of New York or in the City of Chicago are authorized or required by law,
regulation or executive order to close.

            "Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.

            "Consolidated Income Available for Debt Service" for any period
means Earnings from Operations of the Company and its Subsidiaries, plus amounts
which have been deducted, and minus amounts which have been added, for the
following (without duplication): (i) interest on Indebtedness of the Company and
its Subsidiaries, (ii) provision for taxes of the Company and its Subsidiaries
based on income, (iii) amortization of debt discount and other deferred
financing costs, (iv) provisions for gains and losses on properties and property
depreciation and amortization, (v) the effect of any noncash charge resulting
from a change in accounting principles in determining Earnings from Operations
for such period and (vi) amortization of deferred charges.


                                        3
<PAGE>
            "Corporate Trust Office" means the office of the Trustee at which,
at any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Two International
Place, Boston, Massachusetts 02110 and, for purposes of the Place of Payment
provisions of Sections 305 and 1002 of the Senior Indenture, is located at the
office of State Street Bank and Trust Company, N.A., 61 Broadway, New York, New
York 10005.

            "Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which by the terms of such Capital Stock (or by the terms
of any security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock), (ii) is convertible into or exchangeable or exercisable for Indebtedness
or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for Capital Stock which is not Disqualified Stock), in each
case on or prior to the Stated Maturity of the Notes.

            "Earnings from Operations" for any period means net earnings
excluding gains and losses on sales of investments, extraordinary items, and
property valuation losses, net as reflected in the financial statements of the
Company and its Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.

            "Encumbrance" means any mortgage, lien, charge, pledge or security
interest of any kind.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder by the Commission.

            "GAAP" means generally accepted accounting principles as used in the
United States applied on a consistent basis as in effect from time to time;
provided that solely for purposes of any calculation required by the financial
covenants contained herein, "GAAP" shall mean generally accepted accounting
principles as used in the United States on the date hereof, applied on a
consistent basis.

            "Indebtedness" of the Company or any Subsidiary means, without
duplication, any indebtedness of the Company or any Subsidiary, whether or not
contingent, in respect of (i) borrowed money or evidenced by bonds, notes,
debentures or similar instruments, (ii) indebtedness for borrowed money secured
by any Encumbrance existing on property owned by the Company or any Subsidiary,
(iii) the reimbursement obligations, contingent or otherwise, in connection with
any letters of credit actually issued (other than letters of credit issued to
provide credit enhancement or support with respect to other indebtedness of the
Company or any Subsidiary otherwise reflected as Indebtedness hereunder) or
amounts representing the balance deferred and unpaid of the purchase price of
any property or services, except any such


                                        4
<PAGE>
balance that constitutes an accrued expense or trade payable, or all conditional
sale obligations or obligations under any title retention agreement, (iv) the
principal amount of all obligations of the Company or any Subsidiary with
respect to redemption, repayment or other repurchase of any Disqualified Stock,
(v) any lease of property by the Company or any Subsidiary as lessee which is
reflected on the Company's consolidated balance sheet as a capitalized lease in
accordance with GAAP, or (vi) interest rate swaps, caps or similar agreements
and foreign exchange contracts, currency swaps or similar agreements, to the
extent, in the case of items of indebtedness under (i) through (iii) above, that
any such items (other than letters of credit) would appear as a liability on the
Company's consolidated balance sheet in accordance with GAAP, and also includes,
to the extent not otherwise included, any obligation by the Company or any
Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
Indebtedness of another Person (other than the Company or any Subsidiary) (it
being understood that Indebtedness shall be deemed to be incurred by the Company
or any Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).

            "Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any 2003 Note, 2005 Note or 2008 Note, as
the case may be, the excess, if any, of (i) the aggregate present value as of
the date of such redemption or accelerated payment of each dollar of principal
being redeemed or paid and the amount of interest (exclusive of interest accrued
to the date of redemption or accelerated payment) that would have been payable
in respect of such dollar if such redemption or accelerated payment had not been
made, determined by discounting, on a semi-annual basis, such principal and
interest at the Reinvestment Rate (determined on the third Business Day
preceding the date such notice of Redemption is given or declaration of
acceleration is made) from the respective dates on which such principal and
interest would have been payable if such redemption or accelerated payment had
not been made, over (ii) the aggregate principal amount of the Notes being
redeemed or paid.

            "Notes" has the meaning specified in Section 2.1 hereof.

            "Reinvestment Rate" means .25% (twenty-five one hundredths of one
percent) plus the arithmetic mean of the yields under the respective headings
"This Week" and "Last Week" published in the Statistical Release under the
caption "Treasury Constant Maturities" for the maturity (rounded to the nearest
month) corresponding to the remaining life to maturity, as of the payment date
of the principal being redeemed or paid. If no maturity exactly corresponds to
such maturity, yields for the two published maturities most closely
corresponding to such maturity shall be calculated pursuant to the immediately
preceding sentence and the Reinvestment Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding in each of such
relevant periods to the nearest month. For such purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.


                                        5
<PAGE>
            "Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination of the
Make-Whole Amount, then such other reasonably comparable index which shall be
designated by the Company.

            "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership or other entity of which a majority of
(i) the voting power of the voting equity securities or (ii) the outstanding
equity interests are owned, directly or indirectly, by such Person. For the
purposes of this definition, "voting equity securities" means equity securities
having voting power for the election of directors, whether at all times or only
so long as no senior class of security has such voting power by reason of any
contingency.

            "Total Assets" as of any date means the sum of (i) the Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined in accordance with GAAP (but excluding accounts receivable and
intangibles).

            "Total Unencumbered Assets" means the sum of (i) those Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its Subsidiaries not subject to an Encumbrance
for borrowed money, determined in accordance with GAAP (but excluding accounts
receivable and intangibles).

            "2003 Notes" has the meaning specified in Section 2.1 hereof.

            "2005 Notes" has the meaning specified in Section 2.1 hereof.

            "2008 Notes" has the meaning specified in Section 2.1 hereof.

            "Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the Company
and its Subsidiaries on such date, before depreciation and amortization,
determined on a consolidated basis in accordance with GAAP.

            "Unsecured Indebtedness" means Indebtedness which is not secured by
any Encumbrance upon any of the properties of the Company or any Subsidiary.


                                        6
<PAGE>
                       ARTICLE TWO - THE SERIES OF NOTES.

      The following provisions of this Article Two are made pursuant to Section
301 of the Senior Indenture in order to establish and set forth the terms of the
series of Securities described in Section 2.1.

      SECTION 2.1. Title of the Securities. There shall be a series of
Securities designated the "6.250% Senior Notes due 2003" (the "2003 Notes"), a
series of Securities designated the "6.500% Senior Notes due 2005" (the "2005
Notes") and a series of Securities designated the "6.625% Senior Notes due 2008"
(the "2008 Notes" and, together with the 2003 Notes and the 2005 Notes, the
"Notes").

      SECTION 2.2. Limitation on Aggregate Principal Amount.

      (1) The aggregate principal amount of the 2003 Notes shall be limited to
$50,000,000, and, except as provided in this Section and in Section 306 of the
Senior Indenture, the Company shall not execute and the Trustee shall not
authenticate or deliver 2003 Notes in excess of such aggregate principal amount.

      (2) The aggregate principal amount of the 2005 Notes shall be limited to
$50,000,000, and, except as provided in this Section and in Section 306 of the
Senior Indenture, the Company shall not execute and the Trustee shall not
authenticate or deliver 2005 Notes in excess of such aggregate principal amount.

      (3) The aggregate principal amount of the 2008 Notes shall be limited to
$50,000,000, and, except as provided in this Section and in Section 306 of the
Senior Indenture, the Company shall not execute and the Trustee shall not
authenticate or deliver 2008 Notes in excess of such aggregate principal amount.

      Nothing contained in this Section 2.2 or elsewhere in this Supplemental
Indenture, or in the Notes, is intended to or shall limit execution by the
Company or authentication or delivery by the Trustee of Notes under the
circumstances contemplated by Sections 303, 304, 305, 306, 906, 1107 and 1305 of
the Senior Indenture.

      SECTION 2.3. Interest and Interest Rates; Maturity Date of Notes. The 2003
Notes will bear interest at a rate of 6.250% per annum, the 2005 Notes will bear
interest at a rate of 6.500% per annum and the 2008 Notes will bear interest at
a rate of 6.625% per annum, in each case, from January 15, 1998 or from the
immediately preceding Interest Payment Date to which interest has been paid or
duly provided for, payable semi-annually in arrears on January 15 and July 15 of
each year, commencing July 15, 1998 (each, an "Interest Payment Date"), to the
Person in whose name such Note is registered at the close of business on
December 31 or June 30 (whether or not a Business Day), as the case may be, next


                                        7
<PAGE>
preceding such Interest Payment Date (each, a "Regular Record Date"). Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. The interest so payable on any Note which is not punctually paid or duly
provided for on any Interest Payment Date shall forthwith cease to be payable to
the Person in whose name such Note is registered on the relevant Regular Record
Date, and such defaulted interest shall instead be payable to the Person in
whose name such Note is registered on the Special Record Date or other specified
date determined in accordance with the Senior Indenture.

      If any Interest Payment Date or Maturity falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as if
it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or Maturity, as the case may be.

      The 2003 Notes will mature on January 15, 2003, the 2005 Notes will mature
on January 15, 2005 and the 2008 Notes will mature on January 15, 2008.

      SECTION 2.4. Limitations on Incurrence of Indebtedness.

            (1) The Company will not, and will not permit any Subsidiary to,
incur any Indebtedness if, immediately after giving effect to the incurrence of
such additional Indebtedness and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Indebtedness of the Company and
its Subsidiaries on a consolidated basis determined in accordance with GAAP is
greater than 60% of the sum of (without duplication) (i) the Total Assets of the
Company and its Subsidiaries as of the end of the calendar quarter covered in
the Company's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to the incurrence
of such additional Indebtedness and (ii) the purchase price of any real estate
assets or mortgages receivable acquired, and the amount of any securities
offering proceeds received (to the extent that such proceeds were not used to
acquire real estate assets or mortgages receivable or used to reduce
Indebtedness), by the Company or any Subsidiary since the end of such calendar
quarter, including those proceeds obtained in connection with the incurrence of
such additional Indebtedness.

            (2) In addition to the limitation set forth in subsection (1) of
this Section 2.4, the Company will not, and will not permit any Subsidiary to,
incur any Indebtedness if the ratio of Consolidated Income Available for Debt
Service to the Annual Service Charge for the four consecutive fiscal quarters
most recently ended prior to the date on which such additional Indebtedness is
to be incurred shall have been less than 1.5:1, on a pro forma basis after
giving effect thereto and to the application of the proceeds therefrom, and
calculated on the assumption that (i) such Indebtedness and any other
Indebtedness incurred by the Company and its Subsidiaries since the first day of
such four-quarter period and the application of the proceeds therefrom,
including to refinance other Indebtedness, had occurred at the beginning


                                        8
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of such period; (ii) the repayment or retirement of any other Indebtedness by
the Company and its Subsidiaries since the first day of such four-quarter period
had been repaid or retired at the beginning of such period (except that, in
making such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such
Indebtedness during such period); (iii) in the case of Acquired Indebtedness or
Indebtedness incurred in connection with any acquisition since the first day of
such four-quarter period, the related acquisition had occurred as of the first
day of such period with the appropriate adjustments with respect to such
acquisition being included in such pro forma calculation; and (iv) in the case
of any acquisition or disposition by the Company or its Subsidiaries of any
asset or group of assets since the first day of such four-quarter period,
whether by merger, stock purchase or sale, or asset purchase or sale, such
acquisition or disposition or any related repayment of Indebtedness had occurred
as of the first day of such period with the appropriate adjustments with respect
to such acquisition or disposition being included in such pro forma calculation.

            (3) In addition to the limitations set forth in subsections (1) and
(2) of this Section 2.4, the Company will not, and will not permit any
Subsidiary to, incur any Indebtedness secured by any Encumbrance upon any of the
property of the Company or any Subsidiary if, immediately after giving effect to
the incurrence of such additional Indebtedness and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Indebtedness
of the Company and its Subsidiaries on a consolidated basis which is secured by
any Encumbrance on property of the Company or any Subsidiary is greater than 40%
of the sum of (without duplication) (i) the Total Assets of the Company and its
Subsidiaries as of the end of the calendar quarter covered in the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
most recently filed with the Commission (or, if such filing is not permitted
under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Indebtedness and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Indebtedness), by
the Company or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such additional
Indebtedness.

            (4) The Company and its Subsidiaries may not at any time own Total
Unencumbered Assets equal to less than 150% of the aggregate outstanding
principal amount of the Unsecured Indebtedness of the Company and its
Subsidiaries on a consolidated basis.

            (5) For purposes of this Section 2.4, Indebtedness shall be deemed
to be "incurred" by the Company or a Subsidiary whenever the Company or such
Subsidiary shall create, assume, guarantee or otherwise become liable in respect
thereof.

      SECTION 2.5. Redemption. The Notes may be redeemed at any time at the
option of the Company, in whole or in part, at a redemption price equal to the
sum of (i) the


                                        9
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principal amount of the Notes being redeemed plus accrued interest thereon to
the Redemption Date and (ii) the Make-Whole Amount, if any, with respect to such
Notes (the "Redemption Price").

      SECTION 2.6. Places of Payment. The Places of Payment where the Notes may
be presented or surrendered for payment, where the Notes may be surrendered for
registration of transfer or exchange and where notices and demands to and upon
the Company in respect of the Notes and the Senior Indenture may be served shall
be in (i) the Borough of Manhattan, The City of New York, New York, and the
office or agency for such purpose shall initially be located at the office of
State Street Bank and Trust Company, 61 Broadway, New York, New York 10005, and
(ii) the City of Boston, Massachusetts and the office or agency for such purpose
shall initially be located at the Corporate Trust Office.


      SECTION 2.7. Method of Payment. Payment of the principal of and interest
on the Notes will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York (which shall
initially be an office or agency of the Trustee), in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company, payments of principal and interest on the Notes (other than
payments of principal and interest due at Maturity) may be made (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register or (ii) by wire transfer to an account
maintained by the Person entitled thereto located within the United States.

      SECTION 2.8. Currency. Principal and interest on the Notes shall be
payable in U.S. dollars.

      SECTION 2.9. Registered Securities; Global Form. The Notes shall be
issuable and transferable in fully registered form as Registered Securities,
without coupons. The 2003 Notes, the 2005 Notes and the 2008 Notes each shall be
issued in the form of one or more permanent Global Securities. The depository
for the Notes shall be The Depository Trust Company ("DTC"). The Notes shall not
be issuable in definitive form except as provided in Section 305 of the Senior
Indenture.

      SECTION 2.10. Form of Notes. The 2003 Notes shall be substantially in the
form attached hereto as Exhibit A. The 2005 Notes shall be substantially in the
form attached hereto as Exhibit B. The 2008 Notes shall be substantially in the
form attached hereto as Exhibit C.

      SECTION 2.11. Registrar and Paying Agent. The Trustee shall initially
serve as Registrar and Paying Agent for the Notes.


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      SECTION 2.12. Defeasance. The provisions of Sections 1402 and 1403 of the
Senior Indenture, together with the other provisions of Article Fourteen of the
Senior Indenture, shall be applicable to the Notes. The provisions of Section
1403 of the Senior Indenture shall apply to the covenants set forth in Sections
2.4 and 2.15 of this Supplemental Indenture and to those covenants specified in
Section 1403 of the Senior Indenture.

      SECTION 2.13. Events of Default. The provisions of clause (5) of Section
501 of the Senior Indenture as applicable with respect to the Notes shall be
deemed to be amended and restated in their entirety to read as follows:

            (5) default under any bond, debenture, note, mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company (or by any
Subsidiary, the repayment of which the Company has guaranteed or for which the
Company is directly responsible or liable as obligor or guarantor), having an
aggregate principal amount outstanding of at least $10,000,000, whether such
indebtedness now exists or shall hereafter be created, which default shall have
resulted in such indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable, without
such indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days after there shall have been
given written notice, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 10% in
principal amount of the Outstanding Securities of that series a written notice
specifying such default and requiring the Company to cause such indebtedness to
be discharged or cause such acceleration to be rescinded or annulled and stating
that such notice is a "Notice of Default" hereunder; provided, however, that
such a default on indebtedness which constitutes tax-exempt financing having an
aggregate principal amount outstanding not exceeding $25,000,000 that results
solely from a failure of an entity providing credit support for such
indebtedness to honor a demand for payment on a letter of credit shall not
constitute an Event of Default.

      SECTION 2.14. Acceleration of Maturity; Rescission and Annulment. The
provisions of the first paragraph of Section 502 of the Senior Indenture as
applicable with respect to the Notes shall be deemed to be amended and restated
in their entirety to read as follows:

            If an Event of Default with respect to Securities of any series at
the time Outstanding occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
Securities of that series are Original Issue Discount Securities or Indexed
Securities, such portion of the principal as may be specified in the terms
thereof) of, and the Make-Whole Amount, if any, on, all the Securities of that
series to be due and payable immediately, by a notice in writing to the Company
(and to the Trustee if given by the Holders), and upon any such declaration such
principal or specified portion thereof shall


                                       11
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become immediately due and payable. If an Event of Default with respect to the
Securities of any series set forth in Section 501(6) of the Senior Indenture
occurs and is continuing, then in every such case all the Securities of that
series shall become immediately due and payable, without notice to the Company,
at the principal amount thereof (or, if any Securities are Original Issue
Discount Securities or Indexed Securities, such portion of the principal as may
be specified in the terms thereof) plus accrued interest to the date the
Securities of that series are paid, plus the Make-Whole Amount, if any, on the
Securities of that series.

      SECTION 2.15. Provision of Financial Information. Whether or not the
Company is subject to Section 13 or 15(d) of the Exchange Act, the Company will,
to the extent permitted under the Exchange Act, file with the Commission the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to such Section 13 or
15(d) if the Company were so subject, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates") by
which the Company would have been required so to file such documents if the
Company were so subject.

      The Company will also in any event (x) within 15 days of each Required
Filing Date (i) if the Company is not then subject to Section 13 or 15(d) of the
Exchange Act, transmit by mail to all Holders, as their names and addresses
appear in the Security Register, without cost to such Holders, copies of the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act if the Company were subject to such Sections and (ii) file
with the Trustee copies of annual reports, quarterly reports and other documents
which the Company is required to file with the Commission or would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Company were subject to such Sections and (y) supply,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, copies of such documents to any prospective Holder.

      The Trustee shall not be required to examine any of the reports and other
documents filed therewith pursuant to the provisions of this Section 2.15 or
Section 7.03 of the Senior Indenture in order to determine whether the Company
is in compliance with the provisions of Section 2.4 of this Supplemental
Indenture.

      SECTION 2.16. Waiver of Certain Covenants. Notwithstanding the provisions
of Section 1009 of the Senior Indenture, the Company may omit in any particular
instance to comply with any term, provision or condition set forth in Sections
1004 to 1008, inclusive, of the Senior Indenture, with Sections 2.4 and 2.15 of
this Supplemental Indenture and with any other term, provision or condition with
respect to the Notes (except any such term, provision or condition which could
not be amended without the consent of all Holders of the Notes or such series
thereof, as applicable), if before or after the time for such compliance the
Holders of at least a majority in principal amount of all outstanding Notes, by
Act of such Holders, either waive such compliance in such instance or generally
waive compliance with such


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covenant or condition. Except to the extent so expressly waived, and until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.


                    ARTICLE THREE - MISCELLANEOUS PROVISIONS.

      SECTION 3.1. Ratification of Senior Indenture. Except as expressly
modified or amended hereby, the Senior Indenture continues in full force and
effect and is in all respects confirmed and preserved.

      SECTION 3.2. Governing Law. This Supplemental Indenture and the Notes
shall be governed by and construed in accordance with the laws of the State of
New York. This Supplemental Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended, and shall, to the extent applicable, be
governed by such provisions.

      SECTION 3.3. Counterparts. This Supplemental Indenture may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.



                  [Remainder of Page Intentionally Left Blank.]


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      IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed by their respective officers hereunto duly
authorized, all as of the day and year first written above.


                              BAY APARTMENT COMMUNITIES, INC.



                              By: /s/ Gilbert M. Meyer
                                 -----------------------------------------------
                                 Name:  Gilbert M. Meyer
                                 Title: Chairman of the Board, President and
                                        Chief Executive Officer



                              STATE STREET BANK AND TRUST COMPANY,
                                 as Trustee



                              By: /s/ Robert J. Dunn
                                 -----------------------------------------------
                                 Name:  Robert J. Dunn
                                 Title: Vice President


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