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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
OCTOBER 22, 1996
AVALON PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
MARYLAND 1-12452 06-1379111
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
</TABLE>
15 RIVER ROAD, WILTON, CONNECTICUT 06897
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
203-761-6500
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ITEM 5. OTHER EVENTS
On October 22, 1996 Avalon Properties, Inc. sold 4,300,000 shares of Series
B Cumulative Redeemable Preferred Stock ("Preferred Stock") to a syndicate of
underwriters managed by PaineWebber Incorporated, Dean Witter Reynolds Inc.,
Prudential Securities Incorporated and Smith Barney Inc. under its existing
shelf registration statement at a per share price to the public of $25. The
annual dividend on the stock is $2.24 per share for a yield of 8.96% per annum.
Dividends are paid quarterly on or about February 15, May 15, August 15 and
November 15 of each year. The first dividend will be a partial dividend,
prorated for the period the shares are outstanding and will be paid on November
15, 1996. The Series B Preferred Stock is not redeemable prior to October 15,
2001; after October 15, 2001 the shares may be redeemed for cash at the option
of the Company in whole or in part, at a redemption price of $25.00 per share.
The Company intends to use the net cash proceeds from the sale of the Preferred
Stock (approximately $104,113,750) to retire indebtedness under the Company's
unsecured credit facility.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Not Applicable
(b) PRO FORMA FINANCIAL INFORMATION:
Not Applicable
(c) EXHIBITS:
Exhibit No.
- -----------
1. Underwriting Agreement dated October 17, 1995.
3.1 Definitive Articles Supplementary Establishing and Fixing the Rights
and Preferences of a Series of Shares of Preferred Stock (Series B
Preferred Stock), incorporated by reference to Exhibit 1 of Form 8-A/A
of Avalon Properties, Inc., dated and filed with the Securities and
Exchange Commission on October 23, 1996.
5. Opinion as to the legality of the securities.
8. Opinion as to tax matters.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 22, 1996 AVALON PROPERTIES, INC.
/s/ Thomas J. Sargeant
-----------------------------------
By: Thomas J. Sargeant
Chief Financial Officer
and Treasurer
323868.c1
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4,000,000 Shares
AVALON PROPERTIES, INC.
8.96% Series B Cumulative Redeemable Preferred Stock
(par value $0.01 per share)
UNDERWRITING AGREEMENT
----------------------
October 17, 1996
PAINEWEBBER INCORPORATED
DEAN WITTER REYNOLDS INC.
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
As Representatives of the
several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Avalon Properties, Inc., a Maryland corporation (the ``COMPANY''), proposes
to sell an aggregate of 4,000,000 shares (the ``FIRM SHARES'') of the Company's
8.96% Series B Cumulative Redeemable Preferred Stock, $.01 par value per share
(the ``PREFERRED SHARES''), to you and to the other Underwriters named in
Schedule I (collectively, the ``UNDERWRITERS''), for whom you are acting as
representatives (the ``REPRESENTATIVES'') in connection with the offering and
sale of the Firm Shares. The Company has also agreed to grant to you and the
other Underwriters an option (the ``OPTION'') to purchase up to an additional
600,000 Preferred Shares (the ``OPTION SHARES'') on the terms and for the
purposes set forth in Section 1(b) hereof. The Firm Shares and the Option
Shares are hereinafter collectively referred to as the ``SHARES''.
The public offering price per share for the Shares and the purchase price per
share for the Shares to be paid by the several Underwriters shall be agreed upon
by the Company and the Representatives, acting on behalf of the several
Underwriters, and such agreement shall be set forth in a separate written
instrument substantially in the form of Exhibit A hereto (the ``PRICE
---------
DETERMINATION AGREEMENT''). The Price Determination Agreement may take the form
of an exchange of any standard form of written telecommunication among the
Company and the Representatives and shall specify such applicable information as
is indicated in Exhibit A hereto.
---------
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The offering of the Shares will be governed by this Agreement, as supplemented
by the Price Determination Agreement. From and after the date of the execution
and delivery of the Price Determination Agreement, this Agreement shall be
deemed to incorporate, and, unless the context otherwise indicates, all
references contained herein to ``this Agreement'' and to the phrase ``herein''
shall be deemed to include, the Price Determination Agreement.
The Company confirms as follows its agreements with the Representatives and
the several other Underwriters.
1. AGREEMENT TO SELL AND PURCHASE.
------------------------------
(a) On the basis of the representations, warranties and agreements of the
Company herein contained and subject to all the terms and conditions of this
Agreement, the Company agrees to sell to each Underwriter named below, and each
Underwriter, severally and not jointly, agrees to purchase from the Company at
the purchase price per share for the Firm Shares to be agreed upon by the
Representatives and the Company in accordance with Section 1(c) hereof and set
forth in the Price Determination Agreement, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I, plus such additional number
of Firm Shares which such Underwriter may become obligated to purchase pursuant
to Section 9 hereof.
(b) Subject to all the terms and conditions of this Agreement, the Company
grants the Option to the several Underwriters to purchase, severally and not
jointly, up to 600,000 Option Shares from the Company at the same price per
share as the Underwriters shall pay for the Firm Shares. The Option may be
exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time (but not more
than once) on or before the 30th day after the date of this Agreement, upon
written or telegraphic notice (the ``OPTION SHARES NOTICE'') by the
Representatives to the Company. The date for the closing of the sale of the
Option Shares (the ``OPTION CLOSING DATE'') shall be determined by you but shall
be no later than 10 days after delivery of the Option Shares Notice. On the
Option Closing Date, the Company will issue and sell to the Underwriters the
number of Option Shares set forth in the Option Shares Notice, and each
Underwriter will purchase such percentage of the Option Shares as is equal to
the percentage of Firm Shares that such Underwriter is purchasing, as adjusted
by the Representatives in such manner as they deem advisable to avoid fractional
shares. The right to purchase the Option Shares or any portion thereof may be
surrendered and terminated at any time upon notice by the Representatives to the
Company.
(c) The public offering price per share for the Firm Shares and the
purchase price per share for the Firm Shares to be paid by the several
Underwriters shall be agreed upon and set forth in the Price Determination
Agreement.
(2) DELIVERY AND PAYMENT. Delivery of the Firm Shares shall be made to the
--------------------
Representatives for the accounts of the Underwriters against payment of the
purchase price by certified or official bank check payable in same-day funds to
the order of the Company at the
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office of PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New
York 10019. Such payments shall be made at 10:00 a.m., New York City time, on
the third business day following the date of this Agreement (or if the New York
Stock Exchange or American Stock Exchange or commercial banks in the City of New
York are not open on such day, the next day on which such exchanges and banks
are open), or at such time on such other date, not later than eight full
business days after the date of this Agreement, as may be agreed upon by the
Company and the Representatives (such date is hereinafter referred to as the
``CLOSING DATE'').
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above at the time and date (which may be the
Closing Date) specified in the Option Shares Notice.
If requested by the Representatives, certificates evidencing the Shares
shall be in definitive form and shall be registered in such names and in such
denominations as the Representatives shall request at least two business days
prior to the Closing Date or the Option Closing Date, as the case may be, by
written notice to the Company. For the purpose of expediting the checking and
packaging of certificates for the Shares, the Company agrees to make such
certificates available for inspection at least 24 hours prior to the Closing
Date or the Option Closing Date, as the case may be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Shares and Option Shares by the Company to the
respective Underwriters shall be borne by the Company. The Company will pay and
save each Underwriter and any subsequent holder of the Shares harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to such Underwriter of the Firm Shares and Option Shares.
(3) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents,
---------------------------------------------
warrants and covenants to each Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement (Registration No. 333-00766) on Form S-3 relating to the
Shares, including a prospectus, has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
``ACT''), and the rules and regulations (the ``RULES AND REGULATIONS'') of the
Securities and Exchange Commission (the ``COMMISSION'') thereunder and has been
filed with the Commission and has become effective. Such registration statement
and prospectus may have been amended or supplemented prior to the date of this
Agreement; any such amendment or supplement was so prepared and filed, and any
such amendment filed after the effective date of such registration statement has
become effective. 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 Company's knowledge, threatened by the Commission. Copies
of such registration statement and prospectus, any such amendments or
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supplements and all documents incorporated by reference therein that were filed
with the Commission on or prior to the date of this Agreement have been
delivered to the Representatives. A prospectus supplement (the ``PROSPECTUS
SUPPLEMENT'') setting forth the terms of the Preferred Shares and of their sale
and distribution has been or will be so prepared and will be filed pursuant to
Rule 424(b) of the Rules and Regulations on or before the second business day
after the date hereof (or such earlier time as may be required by the Rules and
Regulations). The registration statement, as it may have heretofore been
amended, is referred to herein as the ``REGISTRATION STATEMENT,'' and the final
form of prospectus included in the Registration Statement, as supplemented by
the Prospectus Supplement, is referred to herein as the ``PROSPECTUS''. Each
form of Prospectus, or Prospectus and Prospectus Supplement heretofore made
available for use in offering the Shares is referred to herein as a
``PRELIMINARY PROSPECTUS.'' Any reference herein to the Registration Statement,
the Prospectus, any amendment or supplement thereto or any Preliminary
Prospectus shall be deemed to refer to and include the exhibits thereto (or, in
the case of the Prospectus or Preliminary Prospectus, to the exhibits to the
Registration Statement) and the documents incorporated by reference therein, and
any reference herein to the terms ``amend,'' ``amendment'' or ``supplement''
with respect to Registration Statement or Prospectus shall be deemed to refer to
and include the filing after the execution hereof of any document with the
Commission deemed to be incorporated by reference therein.
(b) Each part of the Registration Statement, when such part became or
becomes effective, each Preliminary Prospectus on the date of filing thereof
with the Commission, and the Prospectus and any amendment or supplement thereto,
on the date of filing thereof with the Commission and at the Closing Date, and
if later, the Option Closing Date, including the financial statements included
or to be included or incorporated by reference or to be incorporated by
reference into the Prospectus, conformed or will conform in all material
respects with the requirements of the Act, the Securities Exchange Act of 1934,
as amended (the ``EXCHANGE ACT''), the rules and regulations thereunder (the
``EXCHANGE ACT RULES AND REGULATIONS'') and the Rules and Regulations and will
contain all statements required to be stated therein in accordance with the Act,
the Exchange Act, the Exchange Act Rules and Regulations and the Rules and
Regulations; each part of the Registration Statement, when such part became or
becomes effective, did not or will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; each Preliminary Prospectus on
the date of filing thereof with the Commission, and the Prospectus and any
amendment or supplement thereto, on the date of filing thereof with the
Commission and at the Closing Date, did not or will not include an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing representations and warranties in this
Section 3(b) do not apply to any statements or omissions made in reliance on and
in conformity with information relating to any Underwriter furnished in writing
to the Company by the Representatives specifically for inclusion in the
Registration Statement or Prospectus or any amendment or supplement thereto. The
Company acknowledges that the statements set forth under the heading
``Underwriting'' in the Registration Statement, the Preliminary Prospectus and
the Prospectus constitute the only information relating to any Underwriter
furnished in writing to the Company by the Representatives on behalf of the
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Underwriters expressly for inclusion in the Registration Statement, the
Preliminary Prospectus or the Prospectus. The Company has not distributed any
offering material in connection with the offering or sale of the Shares other
than the Registration Statement, the Preliminary Prospectus, the Prospectus or
any other materials, if any, permitted by the Act.
(c) The documents incorporated or to be incorporated by reference in the
Registration Statement, the Prospectus, any amendment or supplement thereto or
any Preliminary Prospectus or from which information is so incorporated by
reference, when they became or become effective or were or are filed with the
Commission, as the case may be, complied or will comply in all material respects
with the requirements of the Act or the Exchange Act, as applicable, the
Exchange Act Rules and Regulations and the Rules and Regulations.
(d) The only subsidiaries (as defined in the Rules and Regulations) of the
Company are the subsidiaries listed on Exhibit C hereto (the ``SUBSIDIARIES'').
---------
The Company and each of its subsidiaries is, and at the Closing Date will be, an
entity duly organized or formed, as the case may be, and, in the case of an
entity that is not a general partnership, validly existing and in good standing
under the laws of the jurisdiction of its organization or incorporation. The
Company and each of its subsidiaries has, and at the Closing Date will have,
full power and authority to conduct all the activities conducted by it, to own
or lease all the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus. The Company and
each of its subsidiaries is, and at the Closing Date will be, duly licensed or
qualified to do business and is and will be in good standing as a corporation,
limited liability company or limited partnership, as the case may be, in all
jurisdictions in which the nature of the activities conducted by it or the
character of the assets owned or leased by it makes such licensing or
qualification necessary except where the failure to be so qualified does not
have a material adverse effect on the business, properties, financial position
or results of the Company and its subsidiaries, taken as a whole. Except for
the stock or other equity interests of the subsid iaries and as disclosed in the
Registration Statement, the Company does not own, and at the Closing Date will
not own, directly or indirectly, any shares of stock or any other equity or
long- term debt securities of any corporation or have any equity interest in any
firm, partnership, joint venture, association or other entity. Complete and
correct copies of the Amended and Restated Articles of Incorporation and Amended
and Restated Bylaws of the Company and the charter documents of each of its
subsidiaries and all amendments thereto have been delivered to the
Representatives, and no changes therein will be made subsequent to the date
hereof and prior to the Closing Date or, if later, the Option Closing Date.
(e) The outstanding shares of common stock, $.01 par value (the ``COMMON
STOCK''), and the outstanding shares of 9% of Series A Cumulative Redeemable
Preferred Stock, $.01 par value (the ``SERIES A PREFERRED''), of the Company
have been, and the Shares to be issued and sold by the Company upon such
issuance and payment pursuant hereto of the purchase price thereof will be, duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to any preemptive or similar right. The description of the Shares in the
Registration Statement and the Prospectus is, and at the Closing Date will be,
in all material respects, complete and accurate. Except as set forth in the
Registration Statement, the Company
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does not have outstanding, and at the Closing Date will not have outstanding,
any options to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, any Common Stock, Series A Preferred or Shares, any shares of
capital stock of any subsidiary or any such warrants, convertible securities or
obligations.
(f) The financial statements and schedules of the Company included or
incorporated by reference in the Registration Statement or the Prospectus
present fairly the consolidated financial condition of the Company as of the
respective dates thereof and the consolidated results of operations and cash
flows of the Company for the respective periods covered thereby, except in the
case of interim unaudited financial statements, for normal recurring year end
adjustments, all in conformity with generally accepted accounting principles
applied on a consistent basis throughout the entire period involved, except as
otherwise disclosed in the Prospectus. No other financial statements or
schedules of the Company are required by the Act, the Exchange Act or the Rules
and Regulations to be included in the Registration Statement or the Prospectus.
Coopers & Lybrand L.L.P., independent public accountants (the ``ACCOUNTANTS''),
who have reported on those of such financial statements and schedules which are
audited, are independent accountants with respect to the Company as required by
the Act and the Rules and Regulations. The statements included in the
Registration Statement with respect to the Accountants pursuant to Rule 509 of
Regulation S-K of the Rules and Regulations are true and correct in all material
respects.
(g) The Company maintains a system of internal accountings control
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(h) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus and prior to the Closing Date,
except as set forth in or contemplated by the Registration Statement and the
Prospectus, (i) there has not been and will not have been any change in the
capitalization of the Company, or in the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company and its subsidiaries, arising for any reason whatsoever, (ii) neither
the Company nor any of its subsidiaries has incurred nor will it incur any
material liabilities or obligations, direct or contingent, nor has it entered
into nor will it enter into any material transactions other than pursuant to
this Agreement and the transactions referred to herein and (iii) the Company has
not and will not have paid or declared any dividends or other distributions of
any kind on any class of its capital stock.
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(i) The Company is not an ``investment company'' or an ``affiliated
person'' of, or ``promoter'' or ``principal underwriter'' for, an ``investment
company,'' as such terms are defined in the Investment Company Act of 1940, as
amended.
(j) Except as set forth in the Registration Statement and the Prospectus,
there are no actions, suits or proceedings pending or, to the Company's best
knowledge, threatened against or affecting the Company or any of its
subsidiaries or any of their respective officers in their capacity as such,
before or by any Federal or state court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, wherein
an unfavorable ruling, decision or finding might materially and adversely affect
the Company or any of its subsidiaries or its business, properties, business
prospects, condition (financial or otherwise) or results of operations.
(k) The Company and each of its subsidiaries has, and at the Closing Date
will have, (i) all governmental licenses, permits, consents, orders, approvals
and other authorizations necessary to carry on its business as contemplated in
the Prospectus, (ii) complied in all respects with all laws, regulations and
orders applicable to it or its business and (iii) performed all its obligations
required to be performed by it, and is not, and at the Closing Date will not be,
in default, under any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement, lease, contract or
other agreement or instrument (collectively, a ``CONTRACT OR OTHER AGREEMENT'')
to which it is a party or by which its property is bound or affected, the
violation of which would have a material adverse effect on the business,
properties, financial position or results of operations of the Company and its
subsidiaries, taken as a whole. To the best knowledge of the Company and each
of its subsidiaries, no other party under any contract or other agreement to
which it is a party is in default in any material respect thereunder. The
Company is not, nor at the Closing Date will be, in violation of any provision
of its Amended and Restated Articles of Incorporation or Amended and Restated
Bylaws. No subsidiary of the Company is, nor at the Closing Date will any of
them be, in violation of any provision in their respective charter documents.
(l) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by the Company of the transactions on its part herein contemplated,
except such as have been obtained under the Act or the Rules and Regulations and
such as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution by the Underwriters of the Shares to be sold
by the Company.
(m) The Company has full corporate power and corporate authority to enter
into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company and is enforceable against the Company in accordance with the terms
hereof. The performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation or imposition
of any lien, charge or encumbrance upon any of the assets of the Company or any
of its subsidiaries pursuant to the terms or provisions of, or result in a
breach or violation of any of
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the terms or provisions of, or constitute a default under, or give any other
party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, the Amended and Restated Articles of
Incorporation, Amended and Restated Bylaws of the Company or the charter
documents of any of its subsidiaries, any contract or other agreement to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or any of its properties is bound or affected, or violate or
conflict with any judgment, ruling, decree, order, statute, rule or regulation
of any court or other governmental agency or body applicable to the business or
properties of the Company or any of its subsidiaries.
(n) The Company and each of its subsidiaries has good and marketable title
to all properties and assets described in the Prospectus as owned by it, free
and clear of all liens, charges, encumbrances or restrictions, except such as
(i) are described in the Prospectus or (ii) are not material to the business of
the Company or its subsidiaries, taken as a whole. The Company and each of its
subsidiaries has valid, subsisting and enforceable leases for the properties
described in the Prospectus as leased by it, with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such properties by the Company and such subsidiaries; no tenant under
any of the leases pursuant to which the Company leases its properties has an
option or right of first refusal to purchase the premises demised under such
lease; the use and occupancy of each of the properties of the Company complies
in all material respects with all applicable codes and zoning laws and
regulations; the Company has no knowledge of any pending or threatened
condemnation or zoning change that will in any material respect affect the size
of, use of, improvements of, construction on, or access to any of the properties
of the Company; and the Company has no knowledge of any pending or threatened
proceeding or action that will in any manner affect the size of, use of,
improvements on, construction on, or access to any of the properties of the
Company.
(o) Title insurance in favor of the Company is maintained with respect to
(i) each of the Current Communities (as such term is defined in the Prospectus)
in an amount at least equal to the cost of acquisition of such Current Community
and (ii) each of the Development Communities (as such term is defined in the
Prospectus) in an amount at least equal to the total budgeted cost of such
Development Community, except, in each case, where the failure to maintain such
title insurance would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries taken as a whole. Title insurance in favor
of the mortgagee is maintained in an amount equal to the maximum commitment of
the related loan.
(p) The Company has no knowledge of (i) the unlawful presence of any
hazardous substances, hazardous materials, toxic substances or waste materials
(collectively, ``HAZARDOUS MATERIALS'') on any of the properties owned by it, or
(ii) any unlawful spills, releases, discharges or disposal of Hazardous
Materials that have occurred or are presently occurring off such properties as a
result of any construction on or operation and use of such properties, which
presence or occurrence would have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries taken as a whole. In connection with the
construction or operation and use of the
8
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properties owned by the Company, the Company represents that, as of the date of
this Agreement, it has no knowledge of any failure to comply with all applicable
local, state and federal environmental laws, regulations, ordinances and
administrative and judicial orders relating to the generation, recycling, reuse,
sale, storage, handling, transport and disposal of any Hazardous Materials,
which failure would have a material adverse effect on the condition, financial
or otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries taken as a whole.
(q) Property and casualty insurance in favor of the Company is maintained
with respect to each of the properties owned by it in an amount and on such
terms as is reasonable and customary for businesses of this type.
(r) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required. All such contracts and all contracts relating to any tax exempt
financings to which the Company or any subsidiary is a party have been duly
authorized, executed and delivered by the Company or such subsidiary, constitute
valid and binding agreements of the Company or such subsidiary and are
enforceable against the Company or such subsidiary in accordance with the terms
thereof.
(s) No statement, representation, warranty or covenant made by the Company
in this Agreement or made in any certificate or document required by this
Agreement to be delivered to the Representatives was or will be, when made,
inaccurate, untrue or incorrect.
(t) Neither the Company nor any of its directors, officers or controlling
persons has taken, directly or indirectly, any action intended, or which might
reasonably be expected, to cause or result, under the Act or otherwise, in, or
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(u) No holder of securities of the Company has rights to the registration
of any securities of the Company because of the filing of the Registration
Statement.
(v) The Company has applied to list the Shares on the New York Stock
Exchange.
(w) Neither the Company nor any of its subsidiaries is involved in any
material labor dispute nor, to the knowledge of the Company, is any such dispute
threatened.
(x) Neither the Company nor any of its subsidiaries nor, to the Company's
knowledge, any employee or agent of the Company or any subsidiary has made any
payment of funds of the Company or any subsidiary or received or retained any
funds in violation of any law, rule or regulation or of a character required to
be disclosed in the Prospectus.
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(y) The Company has continuously been organized and operated in conformity
with the requirements for qualification as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the ``CODE'') for all taxable
years commencing with its taxable year ended December 31, 1993. The Company has
filed an election to be taxable as a real estate investment trust for its
taxable year ended December 31, 1993, and such election has not been terminated.
The Company's method of operation will permit it to continue to meet the
requirements for taxation as a real estate investment trust under the Code. The
Company intends to continue to operate in a manner which would permit it to
qualify as a real estate investment trust under the Code.
(4) AGREEMENTS OF THE COMPANY. The Company agrees with the several
-------------------------
Underwriters as follows:
(a) The Company will cause the Prospectus Supplement to be filed as
required by Section 3(a) hereof (but only if you have not reasonably objected
thereto by notice to the Company after having been furnished a copy within a
reasonable time prior to filing) and will notify you promptly of such filing.
The Company will not during such period as the Prospectus is required by law to
be delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto in good faith.
(b) The Company will notify the Representatives promptly, and will confirm
such advice in writing, (1) when any post-effective amendment to the
Registration Statement becomes effective, (2) of any request by the Commission
for amendments or supplements to the Registration Statement or the Prospectus or
for additional information, (3) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose or the threat thereof, (4) of the
happening of any event during the period mentioned in the second sentence of
Section 4(e) that in the judgment of the Company makes any statement made in the
Registration Statement or the Prospectus untrue or that requires the making of
any changes in the Registration Statement or the Prospectus in order to make the
statements therein, in light of the circumstances in which they are made, not
misleading and (5) of receipt by the Company or any representative or attorney
of the Company of any other communication from the Commission relating to the
Company, the Registration Statement, any Preliminary Prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment.
(c) The Company will furnish to the Representatives without charge two
signed copies of the Registration Statement and of any post-effective amendment
thereto, including financial statements and schedules, and all exhibits thereto
(including any document filed under the Exchange Act and deemed to be
incorporated by reference into the Prospectus), and will
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<PAGE>
furnish to the Representatives upon request and without charge, for transmittal
to each of the other Underwriters, a copy of the Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
but without exhibits.
(d) The Company will comply with all the provisions of any undertakings
contained in the Registration Statement.
(e) The Company will deliver to each of the Underwriters, without charge,
as many copies of the Prospectus containing the Prospectus Supplement or any
amendment or supplement thereto as the Representatives may reasonably request.
The Company consents to the use of the Prospectus or any amendment or supplement
thereto by the several Underwriters and by all dealers to whom the Shares may be
sold, both in connection with the offering or sale of the Shares and for any
period of time thereafter during which the Prospectus is required by law to be
delivered in connection therewith. If during such period of time any event shall
occur which in the judgment of the Company or counsel to the Underwriters should
be set forth in the Prospectus in order to make any statement therein, in the
light of the circumstances under which it was made, not misleading, or if it is
necessary to supplement or amend the Prospectus to comply with law, the Company
will forthwith prepare and duly file with the Commission an appropriate
supplement or amendment thereto, and will deliver to each of the Underwriters,
without charge, such number of copies of such supplement or amendment to the
Prospectus as the Representatives may reasonably request. The Company shall not
file any document under the Exchange Act before the termination of the offering
of the Shares by the Underwriters if such document would be deemed to be
incorporated by reference into the Prospectus to which the Representatives
reasonably object.
(f) Prior to any public offering of the Shares the Company will cooperate
with the Representatives and counsel to the Underwriters in connection with the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives may
request including, without limitation, other jurisdictions outside of the United
States; provided, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not now so subject.
(g) During the period of five years commencing on the date hereof, the
Company will furnish to the Representatives and each other Underwriter who may
so request copies of such financial statements and other periodic and special
reports as the Company may from time to time distribute generally to the holders
of any class of its capital stock, and will furnish to the Representatives and
each other Underwriter who may so request a copy of each annual or other report
it shall be required to file with the Commission.
(h) The Company will make generally available to holders of its securities
as soon as may be practicable but in no event later than the last day of the
fifteenth full calendar month following the end of the Company's current fiscal
quarter, an earnings statement
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<PAGE>
(which need not be audited but shall be in reasonable detail) for a period of 12
months beginning after the date upon which the Prospectus Supplement is filed
pursuant to Rule 424 under the Act, and satisfying the provisions of Section
11(a) of the Act (including Rule 158 of the Rules and Regulations).
(i) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay, or reimburse
if paid by the Representatives, all fees, costs and expenses incident to the
performance of the obligations of the Company under this Agreement, including
but not limited to fees, costs and expenses of or relating to (1) the
preparation, printing and filing of the Registration Statement and exhibits to
it, each Preliminary Prospectus, the Prospectus and any amendment or supplement
to the Registration Statement or the Prospectus, (2) the preparation and
delivery of certificates representing the Shares, (3) the printing of this
Agreement, the Agreement Among Underwriters, any Dealer Agreements and any
Underwriters' Questionnaire, (4) furnishing (including costs of shipping and
mailing) such copies of the Registration Statement, the Prospectus and any
Preliminary Prospectus, and all amendments and supplements thereto, as may be
requested for use in connection with the offering and sale of the Shares by the
Underwriters or by dealers to whom Shares may be sold, (5) the listing of the
Shares on the New York Stock Exchange, (6) filings required to be made by or on
behalf of the Company or the Underwriters, including without limitation filings
to be made by the Company with the Commission, and the fees, disbursements and
other charges of counsel for the Company in connection therewith, (7) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdic tions designated pursuant to
Section 4(f), including the fees, disbursements and other charges of counsel to
the Underwriters in connection therewith, and the preparation and printing of
preliminary, supplemental and final Blue Sky memoranda, (8) counsel to the
Company and any surveyors, engineers, appraisers, photographers, accountants and
other professionals engaged by or on behalf of the Company, (9) the transfer
agent and registrar for the Shares, and (10) preparation of slides, overheads
and other presentation material to be used in any ``road show'' or other
presentation to potential investors and the hotel, travel and other expenses of
the Company's employees in connection with any such ``road show'' or
presentation.
(j) If this Agreement shall be terminated by the Company pursuant to any of
the provisions hereof (otherwise than pursuant to Section 8 hereof) or if for
any reason the Company shall be unable to perform its obligations hereunder or
thereunder, the Company will reimburse the several Underwriters for all out-of-
pocket expenses (including the fees, disbursements and other charges of counsel
to the Underwriters) reasonably incurred by them in connection herewith.
(k) The Company will not at any time, directly or indirectly, take any
action intended, or which might reasonably be expected, to cause or result in,
or which will constitute, stabilization of the price of the Shares to facilitate
the sale or resale of any of the Shares.
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<PAGE>
(l) The Company will apply the net proceeds from the offering and sale of
the Shares to be sold by the Company in the manner set forth in the Prospectus
under ``Use of Proceeds.''
(m) The Company will continue to elect to qualify as a ``real estate
investment trust'' under the Code, and will use its best efforts to continue to
meet the requirements to qualify as a ``real estate investment trust.''
(5) CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. In addition to the
-------------------------------------------------
execution and delivery of the Price Determination Agreement, the obligations of
each Underwriter hereunder are subject to the following conditions:
(a) The Prospectus shall have been filed as required by Section 3(a) and
(i) no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall be pending or
threatened by the Commission, (ii) no order suspending the effectiveness of the
Registration Statement or the qualification or registration of the Shares under
the securities or Blue Sky laws of any jurisdiction shall be in effect and no
proceeding for such purpose shall be pending before or threatened or
contemplated by the Commission or the authorities of any such jurisdiction,
(iii) any request for additional information on the part of the staff of the
Commission or any such authorities shall have been complied with to the
satisfaction of the staff of the Commission or such authorities and (iv) after
the date hereof no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted to
the Representatives and the Representatives did not object thereto in good
faith, and the Representatives shall have received certificates, dated the
Closing Date and the Option Closing Date and signed by the Chief Executive
Officer or the Chairman of the Board of Directors of the Company and the Chief
Financial Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of clauses (i),
(ii) and (iii).
(b) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Registration Statement and the
Prospectus and (ii) neither the Company nor any of its subsidiaries shall have
sustained any material loss or interference with its business or properties from
fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree, which is not set forth in the Registration Statement
and the Prospectus, if in the judgment of the Representatives any such
development makes it impracticable or inadvisable to consummate the sale and
delivery of the Shares by the Underwriters at the public offering price.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding
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<PAGE>
instituted against the Company or any of its subsidiaries or any of their
respective officers or directors in their capacities as such, before or by any
Federal, state or local court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would materially and
adversely affect the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries taken as a whole.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct in all material respects at the Closing Date
and, with respect to the Option Shares, at the Option Closing Date, as if made
at the Closing Date and, with respect to the Option Shares, at the Option
Closing Date, and all covenants and agreements contained herein to be performed
on the part of the Company and all conditions contained herein to be fulfilled
or complied with by the Company at or prior to the Closing Date and, with
respect to the Option Shares, at or prior to the Option Closing Date, shall have
been duly performed, fulfilled or complied with.
(e) The Representatives shall have received one or more opinions, dated the
Closing Date and, with respect to the Option Shares, the Option Closing Date,
satisfactory in form and substance to counsel for the Underwriters, from
Goodwin, Procter & Hoar, counsel to the Company, to the effect set forth in
Exhibit B.
- ---------
(f) The Representatives shall have received an opinion, dated the Closing
Date and the Option Closing Date, from O'Melveny & Myers, counsel to the
Underwriters, with respect to the Registration Statement, the Prospectus and
this Agreement, which opinion shall be satisfactory in all respects to the
Representatives.
(g) Concurrently with the execution and delivery of this Agreement, the
Accountants shall have furnished to the Representatives a letter, dated the date
of its delivery, addressed to the Representatives and in form and substance
satisfactory to the Representatives, confirming that they are independent
accountants with respect to the Company as required by the Act and the Rules and
Regulations and with respect to the financial and other statistical and
numerical information contained in the Registration Statement or incorporated by
reference therein. At the Closing Date and, as to the Option Shares, the Option
Closing Date, the Accountants shall have furnished to the Representatives a
letter, dated the date of its delivery, which shall confirm, on the basis of a
review in accordance with the procedures set forth in the letter from the
Accountants, that nothing has come to their attention during the period from the
date of the letter referred to in the prior sentence to a date (specified in the
letter) not more than three days prior to the Closing Date and the Option
Closing Date which would require any change in their letter dated the date
hereof if it were required to be dated and delivered at the Closing Date and the
Option Closing Date.
(h) Concurrently with the execution and delivery of this Agreement and at
the Closing Date and, as to the Option Shares, the Option Closing Date, there
shall be furnished to the Representatives an accurate certificate, dated the
date of its delivery, signed by each of the
14
<PAGE>
Chief Executive Officer and the Chief Financial Officer of the Company, in form
and substance satisfactory to the Representatives, to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus (including any documents filed under
the Exchange Act and deemed to be incorporated by reference into the Prospectus)
and (A) as of the date of such certificate, such documents are true and correct
in all material respects and do not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not untrue
or misleading and (B) in the case of the certificate delivered at the Closing
Date and the Option Closing Date, no event has occurred as a result of which it
is necessary to amend or supplement the Prospectus in order to make the
statements therein not untrue or misleading in any material respect and there
has been no document required to be filed under the Exchange Act and the
Exchange Act Rules and Regulations that upon such filing would be deemed to be
incorporated by reference into the Prospectus that has not been so filed.
(ii) Each of the representations and warranties of the Company contained
in this Agreement were, when originally made, and are, at the time such
certificate is delivered, true and correct in all material respects.
(iii) Each of the covenants required to be performed by the Company
herein on or prior to the delivery of such certificate has been duly, timely and
fully performed and each condition herein required to be complied with by the
Company on or prior to the date of such certificate has been duly, timely and
fully complied with.
(i) The Shares shall be qualified for sale in such states as the
Representatives may reasonably request, each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
and the Option Closing Date.
(j) The Company shall have furnished to the Representatives such
certificates, in addition to those specifically mentioned herein, as the
Representatives may have reasonably requested as to the accuracy and
completeness at the Closing Date and the Option Closing Date of any statement in
the Registration Statement or the Prospectus or any documents filed under the
Exchange Act and deemed to be incorporated by reference into the Prospectus, as
to the accuracy at the Closing Date and the Option Closing Date of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations here under, or as to the fulfillment of the
conditions concurrent and precedent to the obligations hereunder of the
Representatives.
(6) INDEMNIFICATION.
---------------
(a) The Company will indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person,
if any, who controls each Underwriter within the meaning of Section 15 of the
Act or Section 20 of the
15
<PAGE>
Exchange Act, from and against any and all losses, claims, liabilities, expenses
and damages (and actions in respect thereof) (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, liabilities, expenses
or damages arise out of or are based on a breach of any representation,
warranty, agreement or covenant made by the Company in this Agreement or based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any amendment or supplement to the Registration Statement or the
Prospectus or in any documents filed under the Exchange Act and deemed to be
incorporated by reference into the Prospectus, or the omission or alleged
omission to state in such document a material fact required to be stated in it
or necessary to make the statements in it not misleading, provided that the
Company will not be liable to the extent that such loss, claim, liability,
expense or damage arises from the sale of the Shares in the public offering to
any person by a Underwriter and is based on an untrue statement or omission or
alleged untrue statement or omission made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representatives on behalf of any Underwriter expressly for inclusion in any
Preliminary Prospectus, the Registration Statement or the Prospectus and
provided further that the Company shall not be liable to any Underwriter under
the indemnity agreement in this subsection with respect to the Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results solely from an untrue statement or alleged untrue statement
of material fact contained in, or the omission or alleged omission of a material
fact from, such Preliminary Prospectus which untrue statement or omission was
corrected in the Prospectus, if the Company shall sustain the burden of proving
that such Underwriter sold Shares to the person alleging such loss, claim,
damage or liability without sending or giving, at or prior to the written
confirmation of such sale, a copy of the Prospectus (or of the Prospectus as
then amended or supplemented) if the Company had previously furnished copies
thereof to such Underwriter. The Company acknowledges that the statements set
forth under the heading ``Underwriting'' in the Preliminary Prospectus and the
Prospectus constitute the only information relating to any Underwriter furnished
in writing to the Company by the Representatives on behalf of the Underwriters
expressly for inclusion in the Registration Statement, the Preliminary
Prospectus or the Prospectus. This indemnity agreement will be in addition to
any liability that the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, each director of the Company and each
officer of the Company who signs the Registration Statement to the same extent
as the foregoing indemnity from the Company to each Underwriter, but only
insofar as losses, claims, liabilities, expenses or damages (or actions in
respect thereof) arise out of or are based on any untrue statement or omission
or alleged untrue statement or omission of a material fact contained in any part
of the Registration Statement when such part became effective, or in the
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged
16
<PAGE>
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance on and in
conformity with information relating to any Underwriter furnished in writing to
the Company by the Representatives on behalf of such Underwriter expressly for
use in the Registration Statement, the Preliminary Prospectus or the Prospectus.
This indemnity will be in addition to any liability that each Underwriter might
otherwise have. The Company acknowledges that the statements set forth under the
heading ``Underwriting'' in the Registration Statement, the Preliminary
Prospectus and the Prospectus constitute the only information relating to any
Underwriter furnished in writing to the Company by the Representatives on behalf
of the Underwriters expressly for inclusion in the Registration Statement, the
Preliminary Prospectus or the Prospectus.
(c) Any party that proposes to assert the right to be indemnified under
this Section 6 will, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 6, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 6 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel satisfactory to the indemnified party, and after notice
from the indemnifying party to the indemnified party of its election to assume
the defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other
17
<PAGE>
charges will be reimbursed by the indemnifying party promptly as they are
incurred. An indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Underwriters, the
Company and the Underwriters will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company
and any one or more of the Underwriters may be subject in such proportion as
shall be appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and the Underwriters, on the other, with respect to the statements or omissions
which resulted in such loss, claim, liability, expense or damage, or action in
respect thereof, as well as any other relevant equitable considerations with
respect to such offering. Such relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Company or the Representatives on behalf of the Underwriters, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 6(d) were to be determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 6(d) shall be deemed to
include, for purpose of this Section 6(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts received by it, and no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution
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<PAGE>
from any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this Section 6(d) are
several in proportion to their respective underwriting obligations and not
joint. For purposes of this Section 6(d), any person who controls a party to
this Agreement within the meaning of the Act will have the same rights to
contribution as that party, and each officer of the Company who signed the
Registration Statement will have the same rights to contribution as the Company,
subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 6(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 6(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(7) REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All representations,
--------------------------------------------------
warranties, agreements and covenants of the Company herein or in certificates
delivered pursuant hereto, and the agreements of the several Underwriters
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any controlling persons, or the Company or any of its officers, directors or
any controlling persons, and shall survive (i) termination of this Agreement and
(ii) delivery of and payment for the Shares hereunder.
(8) TERMINATION. The obligations of the several Underwriters under this
-----------
Agreement may be terminated at any time on or prior to the Closing Date (or,
with respect to the Option Shares, on or prior to the Option Closing Date), by
notice to the Company from the Representatives, without liability on the part of
any Underwriter to the Company, if, prior to delivery and payment for the Shares
(or the Option Shares, as the case may be), in the sole judgment of the
Representatives, (i) trading in any of the equity securities of the Company
shall have been suspended by the Commission, by an exchange that lists the
Shares or by the National Association of Securities Dealers Automated Quotation
National Market System, (ii) trading in securities generally on the New York
Stock Exchange shall have been suspended or limited or minimum or maximum prices
shall have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall
have been imposed upon trading in securities generally by such exchange or by
order of the Commission or any court or other governmental authority, (iii) a
general banking moratorium shall have been declared by either Federal or New
York State authorities or (iv) any material adverse change in the financial or
securities markets in the United States or in political, financial or economic
conditions in the United States or any outbreak or material escalation of
hostilities or declaration by the United States of a national emergency or war
or other calamity or crisis shall have occurred the effect of any of which is
such as to make it, in the sole judgment of the Representatives, impracticable
or inadvisable to market the Shares on the terms and in the manner contemplated
by the Prospectus.
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<PAGE>
(9) SUBSTITUTION OF UNDERWRITERS. If any one or more of the Underwriters
----------------------------
shall fail or refuse to purchase any of the Firm Shares which it or they have
agreed to purchase hereunder, and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Shares, the other
Underwriters shall be obligated, severally, to purchase the Firm Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase, in the proportions which the number of Firm Shares which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of Firm Shares which all such non-defaulting Underwriters have so agreed
to purchase, or in such other proportions as the Representatives may specify;
provided that in no event shall the maximum number of Firm Shares which any
Underwriter has become obligated to purchase pursuant to Section 1 be increased
pursuant to this Section 9 by more than one-ninth of the number of Firm Shares
agreed to be purchased by such Underwriter without the prior written consent of
such Underwriter. If any Underwriter or Underwriters shall fail or refuse to
purchase any Firm Shares and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
exceeds one-tenth of the aggregate number of the Firm Shares and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Firm Shares are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company for the purchase or sale of any Shares under this Agreement. In any such
case either the Representatives or the Company shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. Any action taken
pursuant to this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
(10) MISCELLANEOUS. Notice given pursuant to any of the provisions of this
-------------
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 15 River Road,
Suite 210, Wilton, Connecticut 06897, Attention: Thomas J. Sargeant, or (b) if
to the Underwriters, to the Representatives at the offices of PaineWebber
Incorporated, 1285 Avenue of the Americas, New York, New York 10019, Attention:
Corporate Real Estate Department. Any such notice shall be effective only upon
receipt. Any notice under Section 8 or 9 hereof may be made by telex or
telephone, but if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the several
Underwriters and the Company and of the controlling persons, directors and
officers referred to in Section 6, 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 ``successors and assigns'' as used in this Agreement shall
not include a purchaser, as such purchaser, of Shares from any of the several
Underwriters.
20
<PAGE>
Any action required or permitted to be taken by the Representatives under
this Agreement may be taken by them jointly or by PaineWebber Incorporated.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company and the Underwriters each hereby irrevocably waive any right
they may have to a trial by jury in respect of any claim based upon or arising
out of this Agreement or the transactions contemplated hereby.
----------------------------
21
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the several Underwriters.
Very truly yours,
AVALON PROPERTIES, INC.
By: /s/ Charles H. Berman
------------------------------
Name:
Title:
Confirmed as of the date first
above mentioned:
PAINEWEBBER INCORPORATED
DEAN WITTER REYNOLDS INC.
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
Acting on behalf of themselves
and as the Representatives of the
other several Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INCORPORATED
By: /s/ Frederick T. Caven
---------------------------------------
Name:
Title:
22
<PAGE>
SCHEDULE I
Underwriters
Number of
Name of Firm Shares to
Underwriters be Purchased
- ------------ --------------
PaineWebber Incorporated............................ 774,000
Dean Witter Reynolds Inc. .......................... 774,000
Prudential Securities Incorporated.................. 774,000
Smith Barney Inc. .................................. 774,000
Alex, Brown & Sons Incorporated..................... 88,000
A.G. Edwards & Sons Inc. ........................... 88,000
Bear, Stearns & Co. Inc. ........................... 88,000
Dillon, Read & Co. Inc. ............................ 88,000
Donaldson, Lufkin & Jenrette Securities Corp. ...... 88,000
J.P. Morgan Securities Inc. ........................ 88,000
Lehman Brothers..................................... 88,000
Oppenheimer & Co., Inc. ............................ 88,000
Cowen & Co. ........................................ 40,000
Legg Mason Wood Walker Inc. ........................ 40,000
McDonald & Co. Securities Inc. ..................... 40,000
McGinn, Smith & Co. Inc. ........................... 40,000
Wheat First Butcher Singer.......................... 40,000
Total............................................... 4,000,000
=========
23
<PAGE>
EXHIBIT A
Form of Price Determination Agreement
-------------------------------------
AVALON PROPERTIES, INC.
_____________________
Price Determination Agreement
-----------------------------
October ___, 1996
PAINEWEBBER INCORPORATED
DEAN WITTER REYNOLDS INC.
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
As Representatives of the several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Reference is made to the Underwriting Agreement, dated concurrently herewith
(the ``UNDERWRITING AGREEMENT''), among Avalon Properties, Inc., a Maryland
corporation (the ``COMPANY''), and the several Underwriters named in Schedule I
thereto or hereto (the ``UNDERWRITERS''), for whom PaineWebber Incorporated,
Dean Witter Reynolds Inc., Prudential Securities Incorporated and Smith Barney
Inc. are acting as representatives (the ``REPRESENTATIVES''). The Underwriting
Agreement provides for the purchase by the Underwriters from the Company,
subject to the terms and conditions set forth therein, of an aggregate of
4,000,000 shares (the ``FIRM SHARES'') of the Company's ____% Series B
Cumulative Redeemable Preferred Stock, par value $.01 per share. This Agreement
is the Price Determination Agreement referred to in the Underwriting Agreement.
Pursuant to Section 1 of the Underwriting Agreement, the undersigned agree
with the Representatives as follows:
1. The public offering price per share for the Firm Shares shall be
$______.
24
<PAGE>
2. The purchase price per share for the Firm Shares to be paid by the
several Underwriters shall be $_______ representing an amount equal to the
public offering price set forth above, less $______ per share.
The Company represents and warrants to each of the Underwriters that the
representations and warranties of the Company set forth in Section 3 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.
As contemplated by the Underwriting Agreement, attached as Schedule I is a
completed list of the several Underwriters, which shall be a part of this
Agreement and the Underwriting Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
If the foregoing is in accordance with your understanding of the agreement
among the Underwriters and the Company, please sign and return to the Company a
counterpart hereof, whereupon this instrument along with all counterparts and
together with the Underwriting Agreement shall be a binding agreement among the
Underwriters and the Company in accordance with its terms and the terms of the
Underwriting Agreement.
Very truly yours,
AVALON PROPERTIES, INC.
By: _________________________
Name:
Title:
25
<PAGE>
Confirmed as of the date
first above mentioned:
PAINEWEBBER INCORPORATED
DEAN WITTER REYNOLDS INC.
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
Acting on behalf of themselves
and as the Representatives
of the other several Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INCORPORATED
By: ________________________
Name:
Title:
26
<PAGE>
Exhibit B
Form of Opinion of
Counsel to the Company
----------------------
1. The Company and each of its subsidiaries is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, is duly licensed or qualified to do business and is in good
standing as a foreign corporation in all jurisdictions in which the nature of
the activities conducted by it or the character of the assets owned or leased by
it makes such license or qualification necessary, has full power and authority
to conduct all the activities conducted by it, to own or lease all the assets
owned or leased by it and to conduct its business as described in the
Registration Statement and the Prospectus and has all governmental licenses,
permits, consents, orders, approvals and other authorizations necessary to carry
on its business as contemplated in the Prospectus. The Company is the sole
record and beneficial owner of all of the capital stock of each of its
subsidiaries.
2. All of the outstanding shares of Common Stock and Series A Preferred have
been, and the Shares when paid for by the Underwriters in accordance with the
terms of the Agreement will be, duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar right.
3. No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with the authorization, issuance, transfer, sale or delivery of the
Shares by the Company, in connection with the execution, delivery and
performance of the Agreement by the Company or in connection with the taking by
the Company of any action contemplated thereby, except such as have been
obtained
27
<PAGE>
under the Act and the Rules and Regulations and such as may be required by the
by-laws and rules of the NASD in connection with the purchase and distribution
by the Underwriters of the Shares. All references in this opinion to the
Agreement shall include the Price Determination Agreement.
4. The authorized and outstanding capital stock of the Company is as set
forth in the Registration Statement and the Prospectus. The description of the
Shares contained in the Prospectus conforms to the terms thereof contained in
the Company's Amended and Restated Articles of Incorporation.
5. The Registration Statement and the Prospectus (including any documents
incorporated by reference into the Prospectus, at the time they were filed)
comply or complied in all material respects as to form with the requirements of
the Act, the Exchange Act, the Exchange Act Rules and Regulations and the Rules
and Regulations (except that we express no opinion as to financial statements,
schedules and other financial and statistical data contained in the Registration
Statement or the Prospectus or incorporated by reference therein).
6. We have participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to our attention which has caused us to
believe that, both as of the date of filing of the Prospectus and as of the
Closing Date and the Option Closing Date, the Registration Statement, or any
amendment thereto, contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that any Prospectus
or any amendment or supplement thereto including any documents incorporated by
reference into the Prospectus, at the
28
<PAGE>
time such Prospectus was issued, at the time any such amended or supplemented
Prospectus was issued, at the Closing Date and the Option Closing Date,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances in which they were made not
misleading (except that we express no opinion as to financial statements,
schedules and other financial or statistical data contained in the Registration
Statement or the Prospectus or incorporated by reference therein).
7. The Registration Statement has become effective under the Act and, to the
best of our knowledge, no order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been instituted
or is threatened, pending or contemplated.
8. We have reviewed all contracts, instruments or other documents referred to
in the Registration Statement and the Prospectus and such contracts or other
documents are fairly summarized or disclosed therein, and filed as exhibits
thereto as required, and, after due inquiry, we do not know of any contracts,
instruments or other documents required to be so sum marized or disclosed or
filed or required to be filed under the Exchange Act if upon such filing they
would be incorporated, in whole or in part, by reference therein which have not
been so summarized or disclosed or filed.
9. All descriptions in the Prospectus of statutes, regulations or legal or
governmental proceedings are accurate and fairly present the information
required to be shown.
29
<PAGE>
10. The Company has full corporate power and authority to enter into the
Agreement, and the Agreement has been duly authorized, executed and delivered by
the Company, is a valid and binding agreement of the Company and, except for the
indemnification and contribution provisions thereof, as to which we express no
opinion, and subject to applicable bankruptcy laws, is enforceable against the
Company in accordance with the terms thereof.
11. The execution and delivery of the Agreement by the Company, the
consummation by the Company of the transactions therein contemplated and the
compliance by the Company with the terms of the Agreement do not and will not
result in the creation or imposition of any lien, charge or encumbrance upon any
of the assets of the Company or any of its subsidiaries pursuant to the terms or
provisions of, or result in a breach or violation of any of the terms or
provisions of, or constitute a default or result in the acceleration of any
obligation under, the Amended and Restated Articles of Incorporation or Amended
and Restated Bylaws of the Company or organizational documents of any of its
subsidiaries, any indenture, mortgage, deed of trust, voting trust agreement,
loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument known to us to
which the Company or any of its subsidiaries is a party or by which it or any of
its properties is bound or affected, or any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or body
applicable to the business or properties of the Company or any of its
subsidiaries (except that we express no opinion as to the securities or Blue Sky
laws of any jurisdiction other than the United States).
30
<PAGE>
12. Delivery of certificates for the Shares will transfer valid and
marketable title thereto to each Underwriter that has purchased such Shares in
good faith and we are not aware, after due inquiry, of any adverse claim with
respect thereto, and such Shares are free and clear of all liens, encumbrances
and claims.
13. We know of no actions, suits or proceedings pending or threatened against
or affecting the Company or any of its subsidiaries or the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company or any of its subsi diaries, or any of their respective officers
in their capacities as such, before or by any Federal or state or foreign court,
commission, regulatory body, administrative agency or other governmental body,
wherein an unfavorable ruling, decision or finding might materially and
adversely affect the Company or any of its subsidiaries or its business,
properties, business prospects, condition (financial or otherwise) or results of
operations, except as set forth in or contemplated by the Registration Statement
and the Prospectus.
14. To the best of our knowledge, neither the Company nor any of its
subsidiaries is in violation of its organizational documents or in default (nor
has an event occurred which with notice or lapse of time or both would
constitute a default or acceleration) in the performance of any obligation,
agreement or condition contained in any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or instrument known
to us to which the Company or any of its subsidiaries is a party or by which it
or its properties is bound or
31
<PAGE>
affected and neither the Company nor any of its subsidiaries is in violation of
any judgment, ruling, decree, order, franchise, license or permit known to us or
any statute, rule or regulation of any court or other governmental agency or
body applicable to the business or properties of the Company or any of its
subsidiaries, which violation or default might have a material adverse effect on
the business, properties, business prospects, condition (financial or otherwise)
or results of operations of the Company or any of its subsidiaries.
15. The Company is not an ``investment company'' or an ``affiliated person''
of, or ``promoter'' or ``principal underwriter'' for, an ``investment company,''
as such terms are defined in the Investment Company Act of 1940, as amended.
16. The Shares have been duly authorized for listing by the New York Stock
Exchange upon official notice of issuance.
In rendering the foregoing opinion, counsel may rely, to the extent they deem
such reliance proper, on the opinions (in form and substance reasonably
satisfactory to Underwriters' counsel) of other counsel reasonably acceptable to
Underwriters' counsel as to matters governed by the laws of jurisdictions other
than the United States, and as to matters of fact, upon certificates of officers
of the Company and of government officials; provided that such counsel shall
state that the opinion of any other counsel is in form satisfactory to such
counsel and, in such counsel's opinion, such counsel and the Representatives are
justified in relying on such opinions of other counsel. Copies of all such
opinions and certificates shall be furnished to counsel to the Underwriters on
the Closing Date.
32
<PAGE>
Exhibit C
Subsidiaries of the Company
Avalon Town Green II, Inc.
Avalon Chase Ridge, Inc.
Avalon Chase Glen, Inc.
Avalon Chase Grove, Inc.
Avalon Chase Hampton II, Inc.
Avalon Chase Heritage, Inc.
Avalon Chase Knoll, Inc.
Avalon Chase Lea, Inc.
Lexington Ridge-Avalon, Inc.
Avalon Town Meadows, Inc.
Avalon Town View, Inc.
Avalon 4100 Massachusetts Avenue, Inc.
Town Cove Jersey City Urban Renewal, Inc.
Avalon Transactions, Inc.
Avalon Captain's Walk, Inc.
Avalon Decoverly, Inc.
Avalon Lake Arbor, Inc.
Avalon Commons, Inc.
Falkland Partners
Town Run Associates
4100 Massachusetts Avenue Associates L.P.
Avalon Lake Arbor Associates L.P.
Avalon Decoverly Associates L.P.
Town Grove L.L.C.
Town Close Associates L.P.
Smithtown Galleria Associates Limited Partnership
Avalon Collateral, Inc.
Avalon Fairway II, Inc.
Avalon Fairway Hills I Associates
Avalon Fairway Hills II Associates
33
<PAGE>
[LETTERHEAD FOR GOODWIN, PROCTOR & HOAR LLP APPEARS HERE]
October 22, 1996
Avalon Properties, Inc.
15 River Road
Wilton, CT 06897
Ladies and Gentlemen:
This opinion is furnished in connection with the offering and sale of
4,300,000 shares (the "Shares") of 8.96% Series B Cumulative Redeemable
Preferred Stock, par value $.01 per shares (the "Shares") of Avalon Properties,
Inc., a Maryland corporation (the "Company") pursuant to a Prospectus Supplement
dated October 17, 1996 and a Prospectus dated February 13, 1996 filed by the
Company pursuant to the Securities Act of 1933, as amended (the "Securities
Act").
In connection with rendering this opinion, we have examined the Articles of
Incorporation, as heretofore amended and restated and including Articles
Supplementary with respect to the Shares filed with State Department of
Assessments and Taxation of the State of Maryland on October 21, 1996, and the
Amended and Restated Bylaws of the Company; such records of the corporate
proceedings of the Company as we deemed material; a registration statement on
Form S-11 under the Securities Act relating to the Shares, No. 333-00766 (as
amended, the "Registration Statement"), the prospectus contained therein and
such other certificates, receipts, records and documents as we considered
necessary for the purposes of this opinion.
We are attorneys admitted to practice in The Commonwealth of Massachusetts.
We express no opinion concerning the laws of any jurisdictions other than the
laws of the United States of America, The Commonwealth of Massachusetts and the
Maryland General Corporation Law.
Based upon the foregoing, we are of the opinion that the Shares are legally
issued, fully paid and nonassessable.
The foregoing assumes that all requisite steps will be taken to comply with
the requirements of the Securities Act and applicable requirements of state laws
regulating the offer and sale of securities.
<PAGE>
[GOODWIN, PROCTOR & HOAR LLP LETTERHEAD APPEARS HERE]
Avalon Properties, Inc.
October 22, 1996
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
GOODWIN, PROCTER & HOAR
<PAGE>
[LETTERHEAD FOR GOODWIN, PROCTOR & HOAR LLP APPEARS HERE]
October 22, 1996
Avalon Properties, Inc.
11 Burtis Avenue
New Canaan, CT 06480
Ladies and Gentlemen:
These opinions are delivered to you in our capacity as counsel to Avalon
Properties, Inc. (the "Company") in connection with the offering and sale by the
Company of 4,600,000 shares of its 8.96% Series B Cumulative Redeemable
Preferred Stock, par value $.01 per share (the "Series B Preferred Shares"),
pursuant to a prospectus supplement dated October 17, 1996 (the "Prospectus
Supplement") which supplements the prospectus dated January 30, 1996 (the "Base
Prospectus") included in the registration statement on Form S-3 (File No. 333-
00766), as amended to date, filed by the Company with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the possible offering from time to time of an indeterminate amount of Debt
Securities, Preferred Shares, Common Shares and Warrants (as such terms are
defined in such registration statement) with an aggregate public offering price
of up to $327,670,000 (such registration statement, as amended when it became
effective is referred to herein as the "Registration Statement") This opinion
relates to (i) the Company's qualification for federal income tax purposes as a
real estate investment trust ("REIT") within the meaning of Sections 856-860 of
the Internal Revenue Code of 1986, as amended (the "Code") and (ii) the accuracy
of the section entitled "Certain Federal Income Tax Considerations" in the
Prospectus Supplement.
In rendering the following opinions, we have examined the Articles of
Incorporation and Bylaws of the Company and such other records, certificates and
documents as we have deemed necessary or appropriate for purposes of rendering
the opinions set forth herein.
We have reviewed the Registration Statement, the Base Prospectus and the
Prospectus Supplement and the descriptions set forth therein of the Company and
its investments and activities. We have relied upon the representations of
officers of the Company that the Company has been and will be owned and operated
in such a manner that the Company has and will continue to satisfy the
requirements for qualification as a REIT under the Code. We have neither
independently investigated nor verified such representations, and we assume that
such representations are true, correct and complete, and that all
representations made "to the best knowledge and belief of any person(s) or
party(ies) are and will be true, correct and complete as if made without such
qualification. We assume that the Company has been and will be operated in
accordance with applicable laws and the terms and conditions of applicable
documents. In addition, we have relied on certain additional facts and
assumptions described below.
In rendering the opinions set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to us and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. We have
also assumed, without investigation, that all documents, certificates,
representations, warranties and covenants on which we have relied in rendering
the opinions set forth below and that were given or dated earlier than the date
of this letter continue to remain accurate, insofar as relevant to the opinions
set forth herein, from such earlier date through and including the date of this
letter.
The conclusions set forth below are based upon the Code, the Income Tax
Regulations and Procedure and Administration Regulations promulgated thereunder
and existing administrative and judicial interpretations thereof, all of which
are subject to change. No assurance can therefore be given that the federal
income tax consequences described below will not be altered in the future.
Based upon and subject to the foregoing, we are of the opinion that
1. Commencing with the Company's first taxable year ended December 31,
1993, the Company has been organized in conformity with the requirements for
qualification as a "real estate investment trust" under the Code, and its method
of operation, as described in the representations referred to above, will enable
it to continue to meet the requirements for qualification and taxation as a
"real estate investment trust" under the Code.
2. The statements in the Prospectus Supplement set forth under the caption
"Federal Income Tax Considerations" to the extent such information constitutes
matters of law, summaries of legal matters, or legal conclusions, have been
reviewed by us and are accurate in all material respects.
<PAGE>
GOODWIN, PROCTER & HOAR LLP
Avalon Properties, Inc.
October 22, 1996
Page 2
We express no opinion with respect to the transactions described herein and
in the Registration Statement other than those expressly set forth herein. You
should recognize that our opinions are not binding on the Internal Revenue
Service ("the IRS") and that the IRS may disagree with the opinions contained
herein. Although we believe that our opinions will be sustained if challenged,
there can be no assurance that this will be the case. Except as specifically
discussed above, the opinions expressed herein are based upon the law as it
currently exists. Consequently, future changes in the law may cause the federal
income tax treatment of the transactions described herein to be materially and
adversely different from that described above.
We consent to being named as Counsel to the Company in the Prospectus
Supplement, to the references in the Prospectus Supplement to our firm and to
the inclusion of this opinion letter as an exhibit to the Prospectus Supplement.
Very truly yours,
Goodwin, Procter & Hoar LLP
