-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H1EcmDyspCmNS1EH+wXCvMaedCXuN8e8ZjlJ2yEaTkRZQ+opLFsye0YfN4oxrBV+ ucj3//5epvdjMmtdBcsReA== 0000927016-97-003432.txt : 19971223 0000927016-97-003432.hdr.sgml : 19971223 ACCESSION NUMBER: 0000927016-97-003432 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971216 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971222 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVALON PROPERTIES INC CENTRAL INDEX KEY: 0000911536 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 061379111 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12452 FILM NUMBER: 97742155 BUSINESS ADDRESS: STREET 1: 15 RIVER ROAD STREET 2: SUITE 210 CITY: WILTON STATE: CT ZIP: 06897 BUSINESS PHONE: 2037616500 MAIL ADDRESS: STREET 1: 15 RIVER ROAD STREET 2: SUITE 210 CITY: WILTON STATE: CT ZIP: 06897 8-K 1 FORM 8-K 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): DECEMBER 16, 1997 AVALON PROPERTIES, INC. (Exact name of Registrant as specified in its charter) MARYLAND 1-12452 06-1379111 (State or other jurisdiction (Commission File (I.R.S. Employer of incorporation) Number) Identification No.) 15 RIVER ROAD, WILTON, CONNECTICUT 06897 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: 203-761-6500 ITEM 5. OTHER EVENTS. Avalon Properties, Inc. (the "Company") completed the offering of $110,000,000 aggregate principal amount of its 6 7/8% Notes due 2007 ("Notes") on December 16, 1997. The offering of the Notes was made pursuant to a Prospectus Supplement dated December 11, 1997 relating to the Prospectus dated March 5, 1997 filed with the Company's shelf registration statement on Form S-3 (file no. 333-22281). The Notes bear interest at 6 7/8% from December 15, 1997, with interest payable each June 15 and December 15 beginning June 15, 1998. The entire principal amount of the Notes is due December 15, 2007. The Notes are redeemable at any time at the option of the Company, in whole or in part, at a redemption price equal to the principal amount and accrued interest of the Notes being redeemed, plus, in certain circumstances, a "Make Whole Amount." The Notes were issued under an Indenture and a First Supplemental Indenture between the Company and Signet Trust Company, as trustee, and a Second Supplemental Indenture between the Company and The Bank of New York, as successor trustee. The offering of the Notes was underwritten by PaineWebber Incorporated and J.P. Morgan Securities Inc. The underwriting discount was 0.65% and the price to the public was 99.821% of the principal amount of the Notes. The net proceeds to the Company from the sale of the Notes were approximately $109.1 million. The Company intends to use the net proceeds to fund a portion of the purchase price of the certain apartment communities expected to be acquired from owners of real estate affiliated with Trammell Crow Residential Midwest (the "New Communities"), to reduce outstanding borrowings under the Company's unsecured credit facilities incurred for acquisition and development activity, and for general corporate purposes, including potential future acquisitions and development other than the New Communities. Delivery of the Notes was made on December 16, 1997 through the facilities of The Depository Trust Company, against payment therefor in immediately available funds. 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 2 (c) EXHIBITS: Exhibit No. ----------- 1.1 Underwriting Agreement dated December 11, 1997. 4.1 Avalon Properties, Inc. 6 7/8% Note due 2007. 4.2 Indenture dated as of September 18, 1995 (Incorporated by reference to the corresponding exhibit to the Current Report on Form 8-K of Avalon Properties, Inc. dated as of September 18, 1995). 4.3 First Supplemental Indenture dated as of September 18, 1995 (Incorporated by reference to the corresponding exhibit to the Current Report on Form 8-K of Avalon Properties, Inc.dated as of September 18, 1995). 4.4 Second Supplemental Indenture dated as of December 16, 1997. 5.1 Opinion as to the legality of the Note. 3 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: December 19, 1997 AVALON PROPERTIES, INC. By: /s/ Thomas J. Sargeant ------------------------------------- By: Thomas J. Sargeant Title: Chief Financial Officer and Treasurer 4 EX-1.1 2 UNDERWRITING AGREEMENT EXHIBIT 1.1 $110,000,000 of 6.875% Notes due December 15, 2007 UNDERWRITING AGREEMENT ---------------------- December 11, 1997 PAINEWEBBER INCORPORATED J.P. MORGAN SECURITIES INC. c/o PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Ladies and Gentlemen: Avalon Properties, Inc., a Maryland corporation (the "Company), confirms its agreement with PaineWebber Incorporated and J.P. Morgan Securities Inc., as underwriters (the "Underwriters"), as follows: 1. DESCRIPTION OF SECURITIES. The Company proposes to issue and sell to you the principal amount of its debt securities identified on Schedule A hereto ---------- (the "Securities") to be issued under that certain Indenture dated as of September 18, 1995, as supplemented by the First Supplemental Indenture dated September 18, 1995, each between the Company and Signet Trust Company, and the Second Supplemental Indenture dated as of December 16, 1997 between the Company and Bank of New York (the "Trustee"), as successor Trustee (as so supplemented, the "Indenture"). 2. PURCHASE, SALE AND DELIVERY OF SECURITIES. On the basis of the representations, warranties and agreements contained herein, but subject to the terms and conditions set forth herein, the Company agrees to issue and sell the Securities to the Underwriters as hereinafter provided, and the Underwriters agree to purchase from the Company the Securities at the purchase price set forth on Schedule A hereto plus accrued ---------- interest, if any, from the date specified on Schedule A hereto to the date of ---------- payment and delivery. The Company understands that the Underwriters intend (i) to make a public offering of the Securities, and (ii) initially to offer the Securities upon the terms set forth in the Prospectus. Payment for the Securities shall be made to the Company or to its order in immediately available funds in the amount, on the date and at the place set forth on Schedule A hereto (or at such other time and place on the same date ---------- or such other date, not later than the third Business Day 1 thereafter, as the Underwriters and the Company may agree in writing). Such payment will be made upon delivery to the Underwriters of the Securities registered in such names and in such denominations as the Underwriters shall request nor less than two full Business Days prior to the date of delivery, with transfer taxes, if any, payable in connection with transfer to the Underwriters duly paid by the Company. As used herein, the term "Business Day" means any day other than a day on which banks are permitted or required to be closed in New York City. The time and date of such payment and delivery with respect to the Securities are referred to herein as the "Closing Date." The Securities will be delivered through the book entry facilities of The Depository Trust Company ("DTC") and will be made available for inspection by the Underwriters by 1:00 P.M. New York City time on the Business Day prior to the Closing Date at such place in New York City as the Underwriter, DTC and the Company shall agree. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents, warrants and covenants to the Underwriters that: (a) The Company meets the requirements for use of Form S-3 and a registration statement (Registration No. 333-22281) on Form S-3 with respect to the Securities being offered by the Company, including a prospectus, has been 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 "1933 Act Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, and has been filed with the Commission and has been declared effective. Such registration statement and prospectus may have been amended or supplemented prior to the date of this Underwriting 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 been declared 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. A prospectus supplement (the "Prospectus Supplement") setting forth the terms of the offering, sale and plan of distribution of the Securities being offered by the Company and additional information concerning the Company and its business has been or will be so prepared and will be filed pursuant to Rule 424(b) of the 1933 Act Rules and Regulations on or before the second business day after the date hereof (or such earlier time as may be required by the 1933 Act Rules and Regulations). Copies of such registration statement and prospectus, any such amendments or supplements and all documents incorporated by reference therein that were filed with the Commission on or prior to the date of this Underwriting Agreement have been delivered or made available to you and your counsel. Each form of prospectus, or prospectus and prospectus supplement, heretofore made available for use in offering the Securities, including, without limitation, the prospectus subject to completion dated December 5, 1997, is referred to herein as a "preliminary prospectus." Such 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." Any reference herein to the Registration Statement, the Prospectus, any preliminary prospectus or any amendment or supplement thereto shall be deemed to refer to and include the exhibits thereto (or, in the case of the Prospectus or any preliminary prospectus, the exhibits to the Registration Statement), the documents incorporated by reference therein, and any reference herein to the terms "amend," "amendment" or "supplement" with respect to the Registration Statement, Prospectus or any preliminary 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. For purposes of this Underwriting Agreement, all references to the 2 Registration Statement, the Prospectus, any preliminary prospectus or any amendment or supplement thereto shall be deemed to include any copy filed with the Commission pursuant to its Electronic Data Gathering Analysis and Retrieval System (EDGAR), and such copy shall be identical (except to the extent permitted by Regulation S-T) to any Prospectus delivered to you for use in connection with the offering of the Securities by the Company. (b) Each part of the Registration Statement (excluding any prospectus supplement with respect to an offering of securities other than the offering of the Securities contemplated hereby), 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 to such Registration Statement or such Prospectus, on the date of filing thereof with the Commission and at the Closing Date (as hereinafter defined) conformed or will conform in all material respects with the requirements of the Act and the 1933 Act Rules and Regulations; the Indenture, on the date of filing hereof with the Commission and at the Closing Date (as hereinafter defined) conformed or will conform in all material respects with the requirements of the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (the "TIA"), each part of the Registration Statement (excluding any prospectus supplement with respect to an offering of securities other than the offering of the Securities contemplated hereby), 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; except that the foregoing shall not apply to (i) that part of the Registration Statement which constitutes the Statement of Eligibility and Qualification under the TIA (the "Form T-1") and (ii) statements in, or omissions from, any such document in reliance upon, and in conformity with, written information concerning the Underwriters that was furnished to the Company by the Underwriters specifically for use in the preparation thereof. 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 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 of the Securities other than the preliminary prospectus, the Prospectus and any other materials, if any, permitted by the Act. (c) The documents incorporated by reference in the Registration Statement, the Prospectus and any amendment or supplement to such Registration Statement or such Prospectus, when they became or become effective under the Act or were or are filed with the Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, conformed or will conform in all material respects with the requirements of the Act, the 1933 Act Rules and Regulations, the Exchange Act and the rules and regulations of the Commission thereunder (the "Exchange Act Rules and Regulations"), as applicable. (d) The only subsidiaries (as defined in the 1933 Act Rules and Regulations) of the Company are the subsidiaries listed on Schedule B 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 3 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 subsidiaries 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 you, and no changes therein will be made subsequent to the date hereof and prior to the Closing Date. (e) The outstanding Common Shares, the outstanding shares of 9% Series A Cumulative Redeemable Preferred Stock, $.01 par value (the "Series A Preferred") and the outstanding shares of 8.96% Series B Cumulative Redeemable Preferred Stock, $.01 par value (the "Series B Preferred"), of the Company have been duly authorized, validly issued, fully paid and nonassessable and will not be subject to any preemptive or similar right. Except as set forth in the Registration Statement, the Company 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 Shares, Series A Preferred or Series B Preferred, any shares of capital stock of any subsidiary or any such warrants, convertible securities or obligations. (f) The Securities will be, as of the Closing Date, duly authorized by the Company for issuance and sale pursuant to this Underwriting Agreement and the Indenture, and when duly authenticated and delivered by the Trustee in accordance with the terms of the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee), and delivered to, and paid for by, the Underwriters pursuant to this Underwriting Agreement, will be valid and legally binding obligations of the Company entitled to the benefit of the Indenture and will be enforceable against the Company in accordance with their terms, subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, (b) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law), (c) the discretion of the court before which any proceeding therefor may be brought, and (d) applicable Federal and state securities laws and public policy which may limit the application of provisions relating to indemnification and contribution with respect to securities law matters (clauses (a), (b), (c) and (d) are collectively referred to as the "Enforceability Limitations"); the Indenture has been duly qualified under the TIA and prior to the issuance of the Securities will be duly authorized, executed and delivered by the Company, and assuming due authorization, execution and delivery thereof by the Trustee, will constitute a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the Enforceability 4 Limitations; the Securities and the Indenture will conform in all material respects to the statements relating thereto contained in the Prospectus; and the Securities are, in all material respects, in the form contemplated by the Indenture. (g) 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 1933 Act Rules and Regulations, the Exchange Act or the Exchange Act 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 1933 Act 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. (h) 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. (i) 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. (j) 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. (k) 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 5 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. (l) 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. (m) 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 1933 Act Rules and Regulations and such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution by you of the Securities to be sold by the Company. (n) The Company has full corporate power and corporate authority to enter into this Agreement and the Indenture. This Agreement has been duly authorized, executed and delivered by the Company and, subject to the Enforceability Limitations, constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. The Indenture has been duly authorized, and upon the execution of the Second Supplemental Indenture will have been executed and delivered by the Company and, subject to the Enforceability Limitations, will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. The execution and performance of this Agreement and the Indenture and the consummation of the transactions contemplated hereby and thereby 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 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. (o) The Company and each of its subsidiaries has good and marketable title to all 6 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. (p) 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. (q) 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 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. (r) 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. (s) 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 7 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. (t) 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 you was or will be, when made, inaccurate, untrue or incorrect. (u) 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 Securities. (v) 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. (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. (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 covenants and agrees with the Underwriters as follows: (a) The Company will cause the Prospectus Supplement to be filed as contemplated 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 Securities by any Underwriter or dealer (the "Prospectus Delivery Period"), file any amendment or supplement to the Registration Statement or the Prospectus, unless a copy thereof shall first have been submitted to the Underwriters within a reasonable period of time prior to the filing thereof and the Underwriters shall not have objected thereto in good faith. (b) The Company will notify you promptly, and will confirm such advice in 8 writing, (i) when any post-effective amendment to the Registration Statement becomes effective, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (iii) 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, (iv) of the suspension of the qualification or registration of the Securities for offering or sale in any jurisdiction, or of the initiation or threat of any proceeding for any such purpose; (v) of the happening of any event during the Prospectus Delivery Period 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 (vi) 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. (c) If at any time the Commission or any jurisdiction shall threaten to issue, or shall issue, any order suspending the effectiveness of the Registration Statement or suspending the qualification or registration of the Securities for sale in any jurisdiction, the Company will make every reasonable effort to prevent the issuance of such order and, if such an order should be issued, to obtain the withdrawal of such order at the earliest possible moment. (d) The Company will furnish to you without charge two signed copies of the Registration Statement and of any post-effective amendments 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). During the Prospectus Delivery Period the Company will promptly furnish to you, without charge, as many copies of each preliminary prospectus, the Prospectus (containing the Prospectus Supplement) and any amendment or supplement thereto as you may from time to time reasonably request. The Company consents to the use of the Prospectus, as amended or supplemented from time to time, by you and by all dealers to whom the Securities may be sold, both in connection with the offering or sale of the Securities and, thereafter, during the Prospectus Delivery Period. (e) The Company will comply with all requirements imposed upon it by the Act, the 1933 Act Rules and Regulations, the Exchange Act, the Exchange Act Rules and Regulations and the TIA, as from time to time in force, so far as necessary to permit the continuance of sales of, or dealings in, the Securities as contemplated by the provisions hereof and the Prospectus. (f) The Company will comply with all the provisions of any undertakings contained, or incorporated by reference, in the Registration Statement. (g) If during the Prospectus Delivery Period any event shall occur which in the judgment of the Company or your counsel 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, in the reasonable opinion of your counsel, 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. The Company shall not file any document under the Exchange Act before the termination of the offering of the Securities by you if such document would be deemed to be incorporated by reference into the Prospectus to which you reasonably object. 9 (h) Prior to any public offering of the Securities the Company will cooperate with you and your counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as you may request including, without limitation, 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. (i) During the period of five years commencing on the date hereof, the Company will furnish to you 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 you a copy of each annual, quarterly, current or other report it files with the Commission. (j) 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 (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). (k) 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 you, 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 (i) 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, (ii) the preparation and delivery of certificates representing the Securities, (iii) the printing of this Agreement and any Dealer Agreements, (iv) 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 Securities by you or by dealers to whom Securities may be sold, (v) filings required to be made by or on behalf of the Company or you, 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, (vi) the registration or qualification of the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions designated pursuant to Section 4(h), including the reasonable fees, disbursements and other charges of counsel to you in connection therewith, and the preparation and printing of preliminary, supplemental and final Blue Sky memoranda, (vii) counsel to the Company and any surveyors, engineers, appraisers, photographers, accountants and other professionals engaged by or on behalf of the Company, (viii) the transfer agent and registrar for the Securities, (ix) the Trustee under the Indenture, (x) the 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, (xi) Coopers & Lybrand L.L.P. or any other accountants engaged by the Company in connection with the offering of the Securities, (xii) Moody's Investors Service, Inc. ("Moody's") and Standard and Poor's Rating Services ("S&P" and, together with Moody's, the "Rating Agencies") in connection with the rating of the Securities at the request of the Company. 10 (l) 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, the Company will reimburse the Underwriters for all out-of-pocket expenses (including the fees, disbursements and other charges of their counsel) reasonably incurred by the Underwriters in connection herewith. (m) 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 Securities to facilitate the sale or resale of any of the Securities. (n) The Company will apply the net proceeds from the offering and sale of the Securities to be sold by the Company in the manner set forth in the Prospectus under the caption "Use of Proceeds." (o) 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." (p) The Company will take all reasonable action necessary to enable the Rating Agencies to provide their respective credit ratings of the Securities. (q) The Company will execute the supplemental indenture designating the Securities as the debt securities to be offered and their terms and provisions in accordance with the provisions of the Indenture. 5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. In addition to the execution and delivery of the Price Determination Agreement, the Underwriters' obligations hereunder are subject to the following conditions: (a) The Prospectus shall have been filed by the Company as required by Section 4(a) hereof 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 regis tration of the Securities 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, (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 you and you did not object thereto in good faith, and (v) you shall have received a certificate, dated the 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) You shall not in good faith have advised the Company that the Registration Statement, or any amendment thereto, contains an untrue statement of fact that in the reasonable 11 opinion of you or your counsel is material or omits to state a fact that in the reasonable opinion of you or your counsel is material and is required to be stated therein or is necessary to make the statements therein not misleading, or that the Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact that in the reasonable opinion of you and your counsel is material or is necessary, in the light of the circumstances under which they were made, to make the statements therein not misleading and which statement has not been or is not being corrected to your satisfaction. (c) Subsequent to the execution and delivery of this Underwriting Agreement and prior to the Closing Date, there shall not have occurred any downgrading in the rating accorded the Securities or any other debt securities of the Company by any Rating Agency nor shall any notice have been given to the Company of (i) any intended or potential downgrading by any Rating Agency in such securities, or (ii) any review or possible change by any Rating Agency that does not indicate a stable, positive or improving rating accorded such securities. (d) 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 (ii) there shall not have been any change on a consolidated basis, in the equity capitalization, short-term debt or long-term debt of the Company, or any adverse change in the rating assigned to any securities of the Company, in each case other than as set forth in or contemplated by the Registration Statement and the Prospectus, and (iii) 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 your judgment any such development makes it impracticable or inadvisable to offer or deliver the Securities on the terms and in the manner contemplated in the Prospectus. (e) 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 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. (f) Each of the representations and warranties of the Company contained herein shall be true and correct in all material respects at the Closing Date, as if made at the 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, shall have been duly performed, fulfilled or complied with. (g) You shall have received one or more opinions, dated the Closing Date, satisfactory in form and substance to your counsel, from Goodwin, Procter & Hoar LLP, counsel to the 12 Company, to the effect set forth in Exhibit A. --------- (h) You shall have received an opinion, dated the Closing Date, from O'Melveny & Myers LLP, your counsel, with respect to the Registration Statement, the Prospectus and this Agreement, which opinion shall be satisfactory in all respects to you. (i) Concurrently with the execution and delivery of this Agreement, the Accountants shall have furnished to you a letter, dated the date of its delivery, addressed to you and in form and substance satisfactory to you, confirming that they are independent accountants with respect to the Company as required by the Act and the 1933 Act 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, the Accountants shall have furnished to you 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 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. (j) On the Closing Date there shall have been furnished to you an accurate certificate, dated the date of its delivery, signed by each of the Chief Executive Officer and the Chief Financial Officer of the Company, in form and substance satisfactory to you, 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) 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. (k) The Securities shall be qualified for sale in such states as you may reasonably request, each such qualification shall be in effect and not subject to any stop order or other proceeding on the Closing Date. (l) The Company shall have furnished to you such certificates, in addition to those 13 specifically mentioned herein, as you may have reasonably requested as to the accuracy and completeness at the 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 of the representations and warranties of the Company herein, as to the performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to your obligations hereunder. (m) All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to you and your counsel. The Company will furnish you with such conformed copies of such opinions, certificates, letters and other documents as you shall reasonably request. 6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will indemnify and hold harmless each Underwriter, each of 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 Exchange Act from and against any and all losses, claims, liabilities, expenses and damages (and actions in respect thereof) (including, but not limited to, any and all investigative, legal and other expenses reasonably incurred in connection with, and any and all amounts paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), as and when incurred, to which any Underwriter, or any such person, 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 (i) 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, (ii) 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 or (iii) any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Securities or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, liability, expense or damage arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company shall not be liable under this clause (iii) to the extent it is finally judicially determined by a court of competent jurisdiction that such loss, claim, liability, expense 14 or damage resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its gross negligence or willful misconduct); provided that the Company will not be liable to the extent that such loss, claim, liability, expense or damage (A) arises from the sale of the Securities in the public offering to any person by an 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 such Underwriter expressly for inclusion in the Registration Statement, any preliminary prospectus or the Prospectus or (B) results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, such preliminary prospectus, which untrue statement or omission was completely corrected in the Prospectus (as then amended or supplemented) if the Company shall sustain the burden of proving that the Underwriters sold Securities to the person alleging such loss, claim, liability, expense or damage without sending or giving, at or prior to the written confirmation of such sale, a copy of the Prospectus (as then amended or supplemented) if the Company had previously furnished copies thereof to the Underwriters within a reasonable amount of time prior to such sale or such confirmation, and the Underwriters failed to deliver the corrected Prospectus, if required by law to have so delivered it and if delivered would have been a complete defense against the person asserting such loss, claim, liability, expense or damage. 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 made in reliance on and in conformity with information relating to any Underwriter furnished in writing to the Company by 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; provided, however, that in no case shall any Underwriter be liable or responsible for any amount in excess of the underwriting discounts and commissions received by such Underwriter. (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 (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) 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, (iii) 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 (iv) 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 15 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 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). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 6 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding. (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 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 16 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 and commissions 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 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). (e) The indemnity and contribution agreements contained in this Section 6 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of the Underwriters, (ii) acceptance of the Securities and payment therefore or (iii) any termination of this Agreement. 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 Securities 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, by notice to the Company from you, without liability on the part of any Underwriter to the Company, if, prior to delivery and payment for the Securities, in your sole judgment, (i) trading in any of the debt or equity securities of the Company shall have been suspended by the Commission, by the NASD or by an exchange that lists any securities of the Company or by the Nasdaq Stock Market, (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 your sole judgment, impracticable or inadvisable to market the Securities on the terms and in the manner contemplated by the Prospectus. 17 9. SUBSTITUTION OF UNDERWRITERS. If any one or more of the Underwriters shall fail or refuse to purchase any of the Securities which it or they have agreed to purchase hereunder, and the aggregate amount of Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate amount of the Securities, the other Underwriters shall be obligated, severally, to purchase the Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase, in the proportions which the amount of Securities which they have respectively agreed to purchase pursuant to Section 2 bears to the aggregate amount of Securities which all such non-defaulting Underwriters have so agreed to purchase, or in such other proportions as the non-defaulting Underwriters may specify; provided that in no event shall the maximum amount of Securities which any Underwriter has become obligated to purchase pursuant to Section 2 be increased pursuant to this Section 9 by more than one-ninth of the amount of Securities 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 Securities and the aggregate amount of Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase exceeds one-tenth of the aggregate amount of the Securities and arrangements satisfactory to the Underwriters and the Company for the purchase of such Securities 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 Securities under this Agreement. In any such case either the non-defaulting Underwriters 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. (a) 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, care of PaineWebber Incorporated, 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 hereof may be made by telex or telephone, but if so made shall be subsequently confirmed in writing. (b) 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 Securities from any of the several Underwriters. (c) Any action required or permitted to be taken by the Underwriters under this Agreement may be taken by them jointly or by PaineWebber Incorporated. (d) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN 18 ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE. (e) 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. (f) 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. (g) 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. (h) This Agreement may not be amended or otherwise modified or any provision hereof waived except by an instrument in writing signed by the Underwriters and the Company. [signature page follows] 19 Please confirm that the foregoing correctly sets forth the agreement among the Company and you. Very truly yours, AVALON PROPERTIES, INC. By: /s/ Thomas J. Sargeant -------------------------- Thomas J. Sargeant Chief Financial Officer Confirmed as of the date first above mentioned: PAINEWEBBER INCORPORATED J.P. MORGAN SECURITIES INC. By: PAINEWEBBER INCORPORATED By: /s/ Frederick T. Caven, Jr. ---------------------------------- Frederick T. Caven, Jr. Managing Director S-1 SCHEDULE A Underwriters - ------------
Aggregate Principal Amount of Securities to be Purchased ------------------------------- PaineWebber Incorporated $ 66,000,000 J.P. Morgan Securities Inc. 44,000,000 ------------------------------- Total $110,000,000 ============
Title of Securities: 6.875% Notes due 2007 - ------------------- Aggregate principal amount: $110,000,000 - -------------------------- Maturity Date: December 15, 2007 - ------------- Interest Rate: 6.875% per annum from December 15, 1997 - ------------- Coupon Payment Dates: June 15 and December 15 - -------------------- Price to Public: 99.821% - --------------- Underwriting Discount: 0.65% - --------------------- Net Price to Company: 99.171% - -------------------- Net Proceeds to be paid - ----------------------- to the Company: $109,088,100 -------------- Closing Date and Time: December 16, 1997, 10:00 a.m. (New York City time) - --------------------- Closing Location: Goodwin, Procter & Hoar LLP - ---------------- Exchange Place, Boston MA 02109 Schedule A-1 SCHEDULE B 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 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. Town Cove II Jersey City Urban Renewal, Inc. Avalon Transactions, Inc. Avalon Decoverly, Inc. Avalon Lake Arbor, Inc. Avalon Commons, Inc. Avalon Fairway II, Inc. Avalon Collateral, Inc. Avalon Ballston II, Inc. 4100 Massachusetts Avenue Associates, L.P. Avalon Lake Arbor Associates L.P. Avalon Decoverly Associates L.P. Bronxville West L.L.C. Town Grove L.L.C. Town Grove Associates L.P. Smithtown Galleria Associates Limited Partnership Avalon Ballston II Limited Partnership Avalon Oaks, Inc. Avalon DownREIT V, Inc. Avalon DownREIT V, L.P. Schedule B-1 EXHIBIT A Form of Opinion of Counsel to the Company ---------------------- In rendering the following 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 Underwriters 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. * * * * Whenever our opinion is indicated to be based on "our knowledge," it should be understood that during the course of our representation of the Company we have not undertaken any independent investigation to determine the existence or absence of facts. The words "our knowledge" and similar language used in certain of the opinions expressed below are limited to the knowledge of the lawyers within our firm who have had responsibility for our work on the transactions contemplated by the Underwriting Agreement or who have had responsibility for matters covered by the opinions enumerated below. The opinions expressed below are qualified to the extent that (i) the validity or enforceability of any provision of any agreement, instrument or document or any rights granted thereunder may be subject to or affected by any bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar law relating to or affecting the rights of creditors generally, (ii) the remedy of specific performance or any other equitable remedy may be unavailable in any jurisdiction or may be withheld as a matter of judicial discretion, (iii) equitable principles may be applied in construing or enforcing the provisions of any agreement, instrument or document (regardless of whether enforcement is sought in a proceeding in equity or at law) and (iv) applicable federal and state securities laws and public policy may limit the application of provisions relating to indemnification and contribution with respect to securities laws matters. You have not asked us to pass in this opinion upon the power and authority of the Underwriters to enter into the Underwriting Agreement or the Pricing Agreement or to effect the transactions contemplated thereby or as to the disclosure in the Prospectus or Registration Statement of information relating to the Underwriters. Accordingly, for the purposes of this opinion, we have assumed that the Underwriters have all requisite power and authority and have taken all necessary corporate and other action to enter into the Underwriting Agreement and the Pricing Agreement and to effect such transactions, and we do not express any opinion herein as to the disclosure or non-disclosure in the Prospectus, the Registration Statement or any other document of any information relating to the Underwriters. A-1 In rendering the opinions expressed in the first sentence of numbered paragraph 1 below as to valid existence of the Company, we have relied solely upon certificates of public officials and of the Company and our review of the corporate records of the actions of the board of directors and the stockholders of the Company. In rendering the opinions expressed in the second sentence of numbered paragraph 1 below as to the due qualification or registration of the Company, we have relied solely upon certificates of public officials and of the Company. In rendering the opinions expressed in the first sentence of numbered paragraph 2 below as to the valid existence of the Subsidiaries, we have relied solely upon certificates of public officials and of the Company and our review of the corporate or partnership records of the Subsidiaries, as applicable. In rendering the opinions expressed in the second sentence of numbered paragraph 2 below as to the due qualification or registration of the Subsidiaries, we have relied solely upon certificates of public officials and of the Company. In rendering our opinions expressed in numbered paragraph 7 below as to the effectiveness of the Registration Statement and the absence of a stop order or proceedings instituted or threatened by the Commission with respect thereto, we have relied solely upon oral telephonic advice from members of the Commission's staff. In rendering the opinions expressed below, we express no opinion other than as to the laws of the United States and the Commonwealth of Massachusetts and the General Corporation Law of the State of Maryland. To the extent that any other laws govern any of the matters as to which we express an opinion herein, we have assumed, without independent investigation, that the laws of such jurisdiction are identical to those of the Commonwealth of Massachusetts, and we express no opinion as to whether such assumption is reasonable or correct. Based on and subject to the foregoing, we are of the opinion that: 1. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Maryland. The Company is duly qualified or registered as a foreign corporation to transact business and is in good standing in the States of Connecticut, Illinois, Indiana, Michigan, Minnesota, Missouri, New Jersey, New York and Rhode Island, and the Commonwealths of Massachusetts, Pennsylvania and Virginia and the District of Columbia. The Company has full corporate power and authority to own, lease and operate its properties, to conduct the business in which it is engaged or proposes to engage as described in the Registration Statement and Prospectus and to enter into and perform its obligations under the Underwriting Agreement and the Pricing Agreement. 2. Each Subsidiary is a corporation validly existing as a limited partnership, corporation or limited liability company, as the case may be, in good standing under the laws of its state of organization or formation as set forth on Exhibit A hereto. Each Subsidiary is duly qualified or registered as a foreign corporation, foreign limited liability company or foreign partnership, as the case may be, to transact business and is in good standing in each jurisdiction listed in Exhibit A hereto opposite such Subsidiary's name. Each Subsidiary has corporate or partnership power, as the case may be, and authority to own, lease and operate its properties and to conduct its business as described in the A-2 Registration Statement and Prospectus. Except as disclosed in the Registration Statement with respect to the Subsidiaries and other partnerships and joint ventures of the Company, the Company owns no capital stock or other beneficial interest in any corporation, partnership, joint venture or other business entity. 3. The authorized and outstanding capital stock of the Company is as set forth in the Registration Statement and Prospectus, and all of the issued and outstanding shares of common stock, par value $.01 per share, Series A Cumulative Redeemable Preferred Stock, par value $.01 per share, and Series B Cumulative Redeemable Preferred Stock, par value $.01 per share, of the Company have been duly authorized and are validly issued, fully paid and nonassessable. 4. (i) The Securities have been duly authorized, executed and delivered by the Company and, when duly authenticated in accordance with the terms of the Indenture and delivered to and paid for by the Underwriters in accordance with the terms of the Underwriting Agreement, will constitute valid and binding obligations of the Company entitled to the benefits provided by the Indenture and enforceable against the Company in accordance with their terms; and the form of the Securities and the terms thereof have been established in conformity with the provisions of the Indenture; (ii) the Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms; (iii) the Indenture has been duly qualified under the TIA; (iv) the Indenture and the Securities conform in all material respects to the descriptions thereof in the Registration Statement and the Prospectus. 5. The Underwriting Agreement has been duly authorized, executed and delivered by the Company. 6. The execution and delivery of the Underwriting Agreement and the Indenture, the performance by the Company of its obligations set forth therein and the consummation of the transactions therein contemplated, (i) do not and will not result in the creation of any lien, charge or encumbrance upon any assets of the Company or any Subsidiary and (ii) do not and will not conflict with 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: (a) the Restated Articles or Restated By-Laws; (b) the organizational documents of any Subsidiary; (c) any agreement or instrument filed as an exhibit to the Registration Statement or incorporated therein by reference to which the Company or any Subsidiary is a party or by which any of them or any of their respective assets are bound; or (d) any law, rule, regulation, or to our knowledge, any judgment, order or administrative decree of any court or other governmental body applicable to the business or properties of the Company or any Subsidiary, except that we express no opinion under this paragraph 6 as to the Underwriting Agreement or with respect to the securities or blue sky laws of any jurisdiction other than the United States, it being understood that our opinion with respect to the federal securities laws of the United States in this paragraph 6 is limited to the performance by the Company of its contractual obligations under the Underwriting Agreement and excludes any matters covered by the statements herein following numbered paragraph 14 below. A-3 7. The Registration Statement as filed on February 24, 1997, was declared effective under the 1933 Act, and the post-effective amendment to the Registration Statement filed under Rule 462(b) became effective in accordance with the provisions of Rule 462(b); the Prospectus has been filed as required by Section 4(a) of the Underwriting Agreement; and, to the best of our knowledge and information, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission. 8. The Registration Statement and the Prospectus, as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the 1933 Act and the rules and regulations promulgated thereunder, it being understood, however, that no opinion is rendered with respect to the financial statements, schedules and other financial or statistical data included or incorporated by reference in the Registration Statement or the Prospectus. 9. Each document filed pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), and incorporated or deemed to be incorporated by reference in the Registration Statement and Prospectus complied when so filed as to form in all material respects with the requirements of the 1934 Act and the rules and regulations promulgated thereunder, it being understood, however, that no opinion is rendered with respect to the financial statements, schedules and other financial or statistical data included or incorporated by reference therein. 10. To our knowledge, no authorization, approval, consent or order of, or filing with, any court or governmental authority or agency is required for the consummation of the transactions contemplated by the Underwriting Agreement in connection with the issuance and sale of the Securities by the Company, except such as have been obtained under the 1933 Act and the 1934 Act, and such as may be required under state securities laws or New York real estate syndication law, or the by-laws of the National Association of Securities Dealers, Inc. in connection with the purchase and distribution of the Securities by the Underwriters. 11. Neither the Company nor any Subsidiary is an investment company within the meaning of the Investment Company Act of 1940, as amended. 12. The descriptions in the Registration Statement and Prospectus of statutes, legal and governmental proceedings, contracts and other documents are accurate in all material respects and fairly present the information required to be shown therein; and we do not know of any statutes or legal or governmental proceedings required to be described in the Prospectus that are not described as required, or of any contracts or documents of a character required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement that are not described and filed as required. 13. The information in the Prospectus under the headings "Description of Debt Securities" and "Description of Notes," to the extent that it constitutes matters of law or legal conclusions (other than with respect to the laws of any state other than the Commonwealth of Massachusetts and the Maryland General Corporation Law, as to which we express no opinion), has been reviewed by us and is correct in all material respects. 14. Since the commencement of its taxable year ended December 31, 1993, the Company has been organized and operated in conformity with the requirements for qualification as a real estate A-4 investment trust (a "REIT") pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). The form of organization of the Company, its current operation and its contemplated operations as described in the Prospectus will enable the Company to continue to meet the requirements for qualification as a REIT under the Code. The description of law and legal conclusions contained in the Prospectus under the captions "Federal Income Tax Considerations" and "Certain Federal Income Tax Considerations" are correct in all material respects, and the discussion therein fairly summarizes the federal income tax considerations that are material to a holder of the Securities. The limitations inherent in the independent verification of factual matters and the character of determinations involved in the registration process are such that we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, the Prospectus or the documents incorporated therein by reference and we make no representation that we have independently verified the accuracy, completeness or fairness of such statements. Without limiting the foregoing, we assume no responsibility for, and have not independently verified, the accuracy, completeness or fairness of the financial statements or notes thereto, financial schedules and other financial or statistical data included or incorporated by reference in the Registration Statement and the Prospectus, and we have not examined the accounting, financial or statistical records from which such statements and notes, schedules and data are derived. However, in the course of our acting as counsel to the Company in connection with the preparation of the Registration Statement and the Prospectus and the public offering of the Securities we participated in conferences and telephone conversations with representatives of the Company, Coopers and Lybrand LLP, accountants for the Company, your representatives and representatives of O'Melveny & Myers LLP, your counsel, during which conferences and conversations the contents of the Registration Statement and the Prospectus and related matters were discussed. Based on our participation in the above-mentioned conferences and conversations, our understanding of applicable law and the experience we have gained in our practice thereunder, we advise you that: (a) No facts have come to our attention which cause us to believe that the Registration Statement (excluding the financial statements or notes thereto, financial schedules and other financial or statistical data contained or incorporated by reference therein and the Trustee's Statement of Eligibility and Qualification on Form T-1 (the "T-1"), as to which we make no statement), at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (b) No facts have come to our attention which cause us to believe that the Prospectus (excluding the financial statements or notes thereto, financial schedules and other financial or statistical data contained or incorporated by reference therein and the T-1, as to which we make no statement), as of its date or the date hereof, contained or contains an 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 under which they were made, not misleading. A-5 This opinion is based upon currently existing statutes, rules and regulations and judicial decisions and is rendered as of the date hereof, and we disclaim any obligation to advise you of any change in any of the foregoing sources of law or subsequent developments in law or changes in facts or circumstances which might affect any matters or opinions set forth herein. A-6 EX-4.1 3 NOTE DUE 2007 EXHIBIT 4.1 THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE TRANSFERRED TO, OR REGISTERED OR EXCHANGED FOR SECURITIES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN THE DEPOSITORY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ITS NOMINEE TO A SUCCESSOR DEPOSITORY OR ITS NOMINEE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. AVALON PROPERTIES, INC. 6 7/8% NOTE DUE 2007 REGISTERED PRINCIPAL AMOUNT No.: R-001 $110,000,000 CUSIP No.: 053469 AC 6 AVALON PROPERTIES, INC., a corporation organized and existing under the laws of the State of Maryland (hereinafter called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., or registered assigns, upon presentation, the principal sum of One Hundred Ten Million Dollars ($110,000,000) on December 15, 2007 at the office or agency of the Company referred to below, and to pay interest thereon from December 15, 1997, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on June 15 and December 15 in each year, commencing June 15, 1998, at the rate of 6 7/8% per annum, until the entire principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for on any Interest Payment Date will, as provided for in the Indenture, be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest which shall be the May 31 or November 30 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not more than 15 days and not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this Series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payment of the principal of, or Make-Whole Amount, if any, and interest on, the Securities will be made to The Depository Trust Company or its nominee in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by (i) check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer of funds to an account of the Person entitled thereto maintained within the United States. The Company is not required to maintain an office or agency for such payment in the City of New York. Securities of this series may be redeemed at any time at the option of the Company, in whole or in part, upon notice of not more than 60 nor less than 30 days prior to the Redemption Date, at a redemption price equal to the sum of (i) the principal amount of the Securities being redeemed plus accrued interest thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with respect to such Securities. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. Unless the Certificate of Authentication hereon has been executed by or on behalf of the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. AVALON PROPERTIES, INC. Dated: December 16, 1997 By: /s/ Richard L. Michaux ------------------------------- Name: Richard L. Michaux Title: Chairman of the Board and Chief Executive Officer Attest: By: /s/ Thomas J. Sargeant -------------------------- Name: Thomas J. Sargeant Title: Secretary [SEAL] TRUSTEE'S CERTIFICATE OF AUTHENTICATION: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By: /s/ Frederick W. Clark Dated: December 16, 1997 ------------------------ Authorized Officer 3 AVALON PROPERTIES, INC. 6 7/8% NOTE DUE 2007 This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of September 18, 1995, as supplemented by the First Supplemental Indenture, dated as of September 18, 1995, each between the Company and Signet Trust Company, and the Second Supplemental Indenture, dated as of December 16, 1997, (as so supplemented, herein called the "Indenture") between the Company and The Bank of New York, a banking association organized under the laws of the State of New York, as successor trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture with respect to the series of which this Security is a part), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the first page hereof, limited in aggregate principal amount to $110,000,000. "Make-Whole Amount" means, in connection with any optional redemption or accelerated payment of any Security, the excess, if any, of (i) the aggregate present value as of the date of such redemption or accelerated payment of each dollar of principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption or accelerated payment) that would have been payable in respect of such dollar if such redemption or accelerated payment had not been made, determined by discounting, on a semi-annual basis, such principal and interest at the Reinvestment Rate (determined on the third Business Day preceding the date such notice of redemption is given or declaration of acceleration is made) from the respective dates on which such principal and interest would have been payable if such redemption or accelerated payment had not been made, over (ii) the aggregate principal amount of the Securities being redeemed or paid. "Reinvestment Rate" means .25% (twenty-five one hundredths of one percent) plus the arithmetic mean of the yields under the respective headings "This Week" and "Last Week" published in the Statistical Release under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity, as of the payment date of the principal being redeemed or paid. If no maturity exactly corresponds to such maturity, yields for the two published maturities most closely corresponding to such maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month. For purposes of calculating the Reinvestment Rate, the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used. 4 "Statistical Release" means the statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities or, if such statistical release is not published at the time of any determination under the Indenture, then such other reasonably comparable index which shall be designated by the Company. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default applicable to the Company, in each case, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Security. If any Event of Default with respect to Securities of this series shall occur and be continuing, the principal of, and the Make-Whole Amount, if any, on, the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee, offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and the Trustee shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof (and premium or Make-Whole Amount, if any) or any interest on and any Additional Amounts in respect thereof on or after the respective due dates expressed herein. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Securities of each series at the time Outstanding affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all 5 future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, Make-Whole Amount, if any, on, and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any Place of Payment where the principal of, Make-Whole Amount, if any, on, and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in this Security, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such or, against any past, present or future stockholder, officer or director, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Security by the Holder thereof and as part of the consideration for the issue of the Securities of this series. 6 All terms used in this security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused "CUSIP" numbers to be printed on the Securities of this series as convenience to the Holders of such Securities. No representation is made as to the correctness or accuracy of such CUSIP numbers as printed on the Securities, and reliance may be placed only on the other identification numbers printed hereon. [REMAINDER OF PAGE INTENTIONALLY BLANK] 7 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COMM -- as tenants in common UNIF GIFT MIN ACT -- TEN ENT -- as tenants by the entireties ________ Custodian ________ JT TEN -- as joint tenants with (Cust) (Minor) right of survivorship Under Uniform Gifts to Minors Act and not as tenants in common _________________________________ (State) Additional abbreviations may also be used though not in the above list. --------------------------------- Social Security or taxpayer I.D. or other identifying number of assignee - ----------------------------------------------- FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (name and address of assignee) the within Note and all rights thereunder, hereby irrevocably constituting and appointing , attorney to transfer said Note on the ------------------------- books kept for registration thereof, with full power of substitution in the premises. Dated: --------------------------------- 8 EX-4.4 4 SECOND SUPPLEMENTAL INDENTURE DATED 12-16-1997 EXHIBIT 4.4 AVALON PROPERTIES, INC. AND THE BANK OF NEW YORK --------------------------- Second Supplemental Indenture Dated as of December 16, 1997 --------------------------- Supplemental to Indenture dated as of September 18, 1995 SECOND SUPPLEMENTAL INDENTURE SECOND SUPPLEMENTAL INDENTURE, dated as of December 16, 1997, between Avalon Properties, Inc., a Maryland corporation (hereinafter called the "Company"), having its principal office at 15 River Road, Wilton, Connecticut 06897, and The Bank of New York, a banking association organized under the laws of the State of New York, as successor to Signet Trust Company (hereinafter called the "Trustee"), having a Corporate Trust Office at 101 Barclay Street, New York, New York 10286, as Trustee under the Indenture (as hereinafter defined). RECITALS The Company and Signet Trust Company, as trustee, have heretofore entered into an Indenture and First Supplemental Indenture, each dated as of September 18, 1995 (hereinafter called the "Indenture"), providing for the issuance by the Company from time to time of its senior debt securities evidencing its unsecured and unsubordinated indebtedness (the "Securities"); The Company desires to issue senior debt securities under the Indenture in the form of, and having the terms set forth in, Exhibit A to this Second Supplemental Indenture, the terms of which are incorporated herein and made a part hereof, and has duly authorized the execution and delivery of this Second Supplemental Indenture to modify the Indenture and provide certain additional provisions and definitions as hereinafter described. NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises, the Company and the Trustee covenant and agree, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE Section 1.01. Section 101 of the Indenture is amended as follows: The following definitions supplement, and, to the extent inconsistent with, replace the definitions in Section 101 of the Indenture: "Person" means any individual, corporation, limited liability company, ------ partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Subsidiary" means, with respect to any Person, any corporation or other ---------- entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests of which are owned, directly or indirectly, by such Person. For the purposes of this definition, "voting equity securities" means equity securities having voting power for the election of directors, whether at all times or only so long as no senior class of security has such voting power by reason of any contingency. ARTICLE TWO Section 2.01. All capitalized terms which are used herein and not otherwise defined herein are defined in the Indenture and are used herein with the same meanings as in the Indenture. Section 2.02. This Second Supplemental Indenture shall be effective as of the date first above written and upon the execution and delivery hereof by each of the parties hereto. Section 2.03. This Second Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York. Section 2.04. This Second Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. [Remainder of Page Intentionally Left Blank] 2 IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed by their respective officers hereunto duly authorized, all as of the day and year first above written. AVALON PROPERTIES, INC. By: /s/ Thomas J. Sargeant Dated: December 16, 1997 ------------------------ Name: Thomas J. Sargeant Title: Chief Financial Officer and Treasurer Attest: /s/ Miguel Azua THE BANK OF NEW YORK, as Trustee By: /s/ MaryBeth Lewicki Dated: December 16, 1997 ---------------------- Name: MaryBeth Lewicki Title: Assistant Vice President ACKNOWLEDGMENT COMMONWEALTH OF VIRGINIA) ) ss: COUNTY OF ALEXANDRIA) On December 16, 1997, before me personally came Thomas J. Sargeant, to me known, who, being by me duly sworn, did depose and say that he is the Chief Financial Officer and Treasurer of AVALON PROPERTIES, INC., one of the parties described in and which executed the foregoing instrument, and that he signed his name thereto by authority of the Board of Directors. [Notarial Seal] /s/ Keebra N. Wright - ---------------------------------------- Notary Public - Keebra N. Wright Commission Expires: June 30, 2000 EXHIBIT A --------- [Form of Face of Note] THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE TRANSFERRED TO, OR REGISTERED OR EXCHANGED FOR SECURITIES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN THE DEPOSITORY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ITS NOMINEE TO A SUCCESSOR DEPOSITORY OR ITS NOMINEE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. AVALON PROPERTIES, INC. 6 7/8% NOTE DUE 2007 REGISTERED PRINCIPAL AMOUNT No.: R-001 $110,000,000 CUSIP No.: 053469 AC 6 AVALON PROPERTIES, INC., a corporation organized and existing under the laws of the State of Maryland (hereinafter called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., or registered assigns, upon presentation, the principal sum of One Hundred Ten Million Dollars ($110,000,000) on December 15, 2007 at the office or agency of the Company referred to below, and to pay interest thereon from December 15, 1997, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on June 15 and December 15 in each year, commencing June 15, 1998, at the rate of 6 7/8% per annum, until the entire principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for on any Interest Payment Date will, as provided for in the Indenture, be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest which shall be the May 31 or November 30 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not more than 15 days and not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this Series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payment of the principal of, or Make-Whole Amount, if any, and interest on, the Securities will be made to The Depository Trust Company or its nominee in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by (i) check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer of funds to an account of the Person entitled thereto maintained within the United States. The Company is not required to maintain an office or agency for such payment in the City of New York. Securities of this series may be redeemed at any time at the option of the Company, in whole or in part, upon notice of not more than 60 nor less than 30 days prior to the Redemption Date, at a redemption price equal to the sum of (i) the principal amount of the Securities being redeemed plus accrued interest thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with respect to such Securities. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. 2 Unless the Certificate of Authentication hereon has been executed by or on behalf of the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 3 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. AVALON PROPERTIES, INC. Dated: December 16, 1997 By: --------------------------------- Name: Richard L. Michaux Title: Chairman of the Board and Chief Executive Officer Attest: By: --------------------------------- Name: Thomas J. Sargeant Title: Secretary [SEAL] TRUSTEE'S CERTIFICATE OF AUTHENTICATION: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By: Dated: December 16, 1997 --------------------------------- Authorized Officer 4 [Form of Reverse of Note] AVALON PROPERTIES, INC. 6 7/8% NOTE DUE 2007 This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of September 18, 1995, as supplemented by the First Supplemental Indenture, dated as of September 18, 1995, each between the Company and Signet Trust Company, and the Second Supplemental Indenture, dated as of December 16, 1997, (as so supplemented, herein called the "Indenture") between the Company and The Bank of New York, a banking association organized under the laws of the State of New York, as successor trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture with respect to the series of which this Security is a part), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the first page hereof, limited in aggregate principal amount to $110,000,000. "Make-Whole Amount" means, in connection with any optional redemption or accelerated payment of any Security, the excess, if any, of (i) the aggregate present value as of the date of such redemption or accelerated payment of each dollar of principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption or accelerated payment) that would have been payable in respect of such dollar if such redemption or accelerated payment had not been made, determined by discounting, on a semi-annual basis, such principal and interest at the Reinvestment Rate (determined on the third Business Day preceding the date such notice of redemption is given or declaration of acceleration is made) from the respective dates on which such principal and interest would have been payable if such redemption or accelerated payment had not been made, over (ii) the aggregate principal amount of the Securities being redeemed or paid. "Reinvestment Rate" means .25% (twenty-five one hundredths of one percent) plus the arithmetic mean of the yields under the respective headings "This Week" and "Last Week" published in the Statistical Release under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity, as of the payment date of the principal being redeemed or paid. If no maturity exactly corresponds to such maturity, yields for the two published maturities most closely corresponding to such maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line 5 basis, rounding in each of such relevant periods to the nearest month. For purposes of calculating the Reinvestment Rate, the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used. "Statistical Release" means the statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities or, if such statistical release is not published at the time of any determination under the Indenture, then such other reasonably comparable index which shall be designated by the Company. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default applicable to the Company, in each case, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Security. If any Event of Default with respect to Securities of this series shall occur and be continuing, the principal of, and the Make-Whole Amount, if any, on, the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee, offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and the Trustee shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof (and premium or Make-Whole Amount, if any) or any interest on and any Additional Amounts in respect thereof on or after the respective due dates expressed herein. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the 6 Securities of each series at the time Outstanding affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, Make-Whole Amount, if any, on, and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any Place of Payment where the principal of, Make-Whole Amount, if any, on, and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in this Security, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such or, against any past, present or future stockholder, officer or director, as such, of the Company or of any successor, either directly or through the Company 7 or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Security by the Holder thereof and as part of the consideration for the issue of the Securities of this series. All terms used in this security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused "CUSIP" numbers to be printed on the Securities of this series as convenience to the Holders of such Securities. No representation is made as to the correctness or accuracy of such CUSIP numbers as printed on the Securities, and reliance may be placed only on the other identification numbers printed hereon. [REMAINDER OF PAGE INTENTIONALLY BLANK] 8 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COMM -- as tenants in common UNIF GIFT MIN ACT -- TEN ENT -- as tenants by the entireties ________ Custodian ________ JT TEN -- as joint tenants with (Cust) (Minor) right of survivorship Under Uniform Gifts to Minors Act and not as tenants in common _________________________________ (State) Additional abbreviations may also be used though not in the above list. --------------------------------- Social Security or taxpayer I.D. or other identifying number of assignee - --------------------------------- FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (name and address of assignee) the within Note and all rights thereunder, hereby irrevocably constituting and appointing , attorney to transfer said Note on the books ----------------------- kept for registration thereof, with full power of substitution in the premises. Dated: --------------------------------- --------------------------------- EX-5.1 5 OPINION AS TO THE LEGALITY OF THE NOTE EXHIBIT 5.1 [Letterhead of Goodwin, Procter & Hoar LLP] December 16, 1997 Avalon Properties, Inc. 15 River Road Wilton, Connecticut 06897 Re: Legality of $110,000,000 Aggregate Principal Amount of 6 7/8% Notes due 2007 registered pursuant to Registration Statement on Form S-3 (File No. 333-22281) ------------------------------------------------------- Ladies and Gentlemen: This opinion is delivered in our capacity as counsel to Avalon Properties, Inc., a Maryland corporation (the "Company"), in connection with the Company's registration statement on Form S-3, as amended (the "Registration Statement"), filed with the Securities and Exchange Commission under the Securities Act of 1933 (the "Securities Act"), relating to an indeterminate amount of Debt Securities, Preferred Shares, Common Shares and Warrants (as such terms are defined in the Registration Statement, and collectively, the "Securities") authorized for issuance under the Company's Amended and Restated Articles of Incorporation, with an aggregate public offering price of up to $371,000,000 (including $21,000,000 of Securities registered pursuant to a post-effective amendment registered pursuant to Rule 462(b) promulgated under the Securities Act). The Company has filed a Prospectus Supplement dated December 11, 1997 to the Prospectus dated March 5, 1997 contained in the Registration Statement with respect to the issuance and sale of $110,000,000 aggregate principal amount of its 6 7/8% Notes due 2007 (the "Notes"). In connection with rendering this opinion, we have examined the Amended and Restated Articles of Incorporation of the Company, as amended to the date hereof and on file with the Maryland State Department of Assessments and Taxation; the Amended and Restated Bylaws of the Company; such records of corporate proceedings of the Company as we deem appropriate for the purposes of this opinion; the Indenture and the First Supplemental Indenture, each dated as of September 18, 1995, between the Company and Signet Trust Company, as trustee, and the Second Supplemental Indenture, dated as of December 16, 1997, between the Company and The Bank of New York, as successor trustee (collectively, the "Indenture"); and the Registration Statement and the Prospectus contained therein, the Prospectus Supplement and the exhibits to the Registration Statement. Avalon Properties, Inc. December 16, 1997 Page 2 The opinions expressed below are qualified to the extent that (i) the validity or enforceability of any provision of the Notes and the Indenture or any rights granted thereunder may be subject to or affected by any bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar law relating to or affecting the rights of creditors generally, (ii) the remedy of specific performance or any other equitable remedy may be unavailable in any jurisdiction or may be withheld as a matter of judicial discretion, and (iii) general principles of equity, including without limitation, concepts of materiality, reasonableness, good faith and fair dealing, may applied in the exercise of judicial discretion in construing or enforcing the provisions of any instrument or document (regardless of whether enforcement is sought in a proceeding in equity or at law). 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 Notes have been duly authorized, executed and delivered by the Company and, assuming the due authentication of the Notes in accordance with the terms of the Indenture, when delivered to and paid for by the several underwriters, will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms. The foregoing assumes that all requisite steps will be taken to comply with applicable requirements of state laws regulating the offer and sale of securities. We hereby consent to the inclusion of this opinion as an exhibit to the Company's Current Report on Form 8-K, which is incorporated by reference into the Registration Statement. Very truly yours, /s/ Goodwin, Procter & Hoar LLP GOODWIN, PROCTER & HOAR LLP -----END PRIVACY-ENHANCED MESSAGE-----